📺 Ethereum vs the STABLE Act

if you want to live a bankless life you need to get a hardware wallet there is no alternative for storing your crypto in a self-sovereign fashion that's why i have four ledgers that i use to manage my different crypto assets using the ledger live account as well ledger live is like your home base for managing your ethereum defy and crypto accounts it does a really good job of aggregating all of your different ethereum wallets if you are the type of person that uses more than one but you can also add other

cryptocurrencies like bitcoin or cosmos or whatever your preferred blockchain is and then it will display an aggregate portfolio of all your accounts at the main page one thing that ledger is doing a really good job of is enabling all the money verbs that me and ryan talk about with the bankless skill cube enabled in the ledger live app so right now in the ledger live app you can buy sell lend swap and stake your crypto assets which is doing a really good job of fulfilling all of the money verbs in the bankless skill cube something that's new to ledger live is ledger swap where you can

swap assets one for another directly inside the ledger live application ensuring trustlessness in your financial activity on ethereum and on bitcoin if you want to learn more about what you can do with a ledger go to the blog post the power of ledger live on the ledger website where they share some of the more advanced things that you can do with your ledger that you might not have known about there's a link in the show notes that will take you to the ledger shop where you can get your preferred ledger hardware wallet i personally like the ledger nano x but i also have both

they're both great options when you own a ledger you own your own assets in the way that they have been designed to be held by the user and the user alone so go get your ledger today to make sure that you are as self sovereign as possible the bankless state in the nations are brought to you by wiring wiring is defy's first self building community run project which i just get really really excited about wiring is a system that seeks out yield in d5 and it does that in a number of different ways a very aggressive way is

with the vaults where you can deposit your preferred asset of choice and different defy experts will come in and generate a strategy for what to do with your deposited token right and so it'll go find ways to get yield in that deposited token in d5 for those who want to just earn yield on their stable coins the urn system is for you where you can deposit your preferred stablecoin and wiring will go and figure out which money market on defy and defy is producing the best interest rate whether it's dydx it's compound or ave

it looks around d5 to see where the yield is coming from and it directs stable coins automatically so you don't have to check them out at y earn.finance to get started and also check out the stats page to see what other people are doing as well bankless nation we are super excited to have rowan gray here he is the assistant professor of law at willamette university he's the president of the modern money network he's an advisor to politicians including rashida taleb and he's one of the authors of the stable act we've recently had a state of the nation show with coin center where

we brought this up and they said why don't you bring rowan on the show so he can speak for himself so that's what we're doing we're bringing rowan on the show to talk a little bit about the stable act and some of his core beliefs rowan welcome bankless it's great to have you how are you doing sir thanks for having me well i'm still alive so you know that's a bit of a joke but appreciate you having me on surviving the tsunami of twitter dms and yeah you know terrible comments i'm not sure yeah flaming bags of dog on my uh on my lawn notwithstanding everything yeah metaphorically speaking well um who was

it was it bellagi recently david who who who talked about um or or was it um one of our guests talked recently about like twitter being sort of like the like the french revolution right where there's the entire time that's very much been my experience i'm sure it's yours lately as well but we are not here to do that what we want to find out rowan is what some of your um maybe maybe we'll start there at your first principle so david and i the bankless nation the bankless program has a variety of first principles

reasons why we are in this space we we describe it in various ways one of course is like um more self-sovereignty to the people more power to the people away from the institutions that have historically controlled our lives for us it's very much about a public good a public infrastructure that we are creating a public money system that's accessible to the world and that is credibly neutral these are some of the principles that undergird the bankless movements we would call it in crypto and d5 a subset of that

movement but let's talk about you first what are some of your first principles why are you doing what you do why do you care so much what is the foundation of your belief system yeah i mean well thanks it's a good question i mean the first thing is um that i'm you know i'm a leftist i'm a progressive so the people who don't want to take any value in that can sort of tune out here but um i i believe pretty deeply in individual sort of freedom and individual empowerment um and i think there's a role for monetary systems to play in empowering individuals and in

sort of allocating social resources and and structuring the social provisioning process um a lot of what i focus on are the ways in which public institutions undergird markets undergird systems of of production and to sort of trace back or or peel back the layers of what may seem to be sort of neutral or decentralized or sort of you know a free market processes to look at the

structures that underpin them and that govern them where there is some sort of actor who is exercising some sort of power and to try to look at how we can make those systems more democratic and more accountable to average people not just people who are born into privilege and wealth and access to means and things like that i'm an australian as you can probably tell by my accent i moved to united states in part because i am pretty acutely aware of how imperialism works in the modern age and and there's not really much attempt to much use in trying to change the world from

australia um at least in public policy when the united states can pretty much exercise a veto in anything that we do um so you know if you were living in in ancient rome and you wanted to make change probably going to rome was the starting point and i moved to to a point where i was about 15 minutes away from wall street after living in dc so you can sort of take what you will from that in terms of where i see the power line um not because i have any love for bankers or anything like that but because that's sort of where in in the modern global economy the sort of power lies um i think probably where we disagree it

may be a good starting point uh is just i think i have a very different theory of where money comes from and what it's where its value derives from i don't think that it comes from sort of markets i don't think it comes from some sort of technology of a medium of exchange or some sort of commodity that solves barter and a double coincidence of wants those were certainly ideas that i was introduced to as at a young age and through sort of standard economics education and the more i looked into it the more i looked into the history the anthropology um the legal history and and the sort of

legal institutions behind those systems it became clear to me that that was a myth and largely propaganda and once i started looking at where money sort of actually comes from and how it actually operates throughout history and large advanced societies it led me to the kind of understanding of money that i have today and and the kinds of attempts to make change that i do today so i care about you know things like private anonymous cash for example i care very deeply about and i care very deeply about how to make sure in a digital world those kinds of features get retained but i think where i would

disagree with a lot of people in your community perhaps is the idea that uh we can achieve that without it being a fiat instrument without it being a tool of public money and i think that that's probably why i think that a lot of the work that's going on in the crypto world is a distraction and a sort of wasted energy and that the real fight the real struggle will be over anonymous digital public cash which is where i think we should all be focusing so so we we want to get to that we want to talk uh about that a little bit um even including kind of your description of like the history of money and where

it came from i wouldn't say that david and i are necessarily of the of cut of the cloth uh of like hardcore austrians like you might see many in the crypto space so i would say that we are like also very open to the idea that the money is not just um like from a barter system that it is kind of a debt type instrument it's definitely a social construct very open to that idea so you might actually find less divergence of opinion there but we did an entire podcast on on that concept is actually one of our very

first podcasts where we kind of went through as like uh the barter myth and instead the how money was created by a community where they created a depository institution right like i in the in the podcast i called it a granary right a place where you know farmers come and deposit their food right and then their deposits were given credits and that's basically the formation of money by a social system that when you scale that up you create a nation state with it with a with a fiat right and i think

that's kind of how where you're coming from rowan where that's kind of more or less how money is made but before we even get there david you know like i i definitely want to get there but i actually want to hear more about rowan uh on kind of the problem statement today right so so so before we get to that um let's talk about rowan what do you think the problems actually are with today's money system because we have a nation-state controlled money system we have fiat like fiat one that is the reserve

of uh the world what's wrong with it today why like does it need to be changed what's not working for the people that's a great question as well i mean i think the first thing is that um we haven't sort of created a democratic society and then created money out of that as a democratic system we had systems of empire of warlords of white supremacy of slavery based economies of feudalism and we fought sort of tooth and nail to carve out pockets of public accountability democratic institutions

that are very fragile i think we're seeing that right now around the world with the rise of strongmen authoritarians i think we're seeing that right now even the united states with things going on that if we don't keep actively fighting for those in expanding them they're going to contract again and that the default throughout history is that most of these sort of governing institutions have not been democratically accountable it's not that we start with sort of public democracy and then wonder what happened um and so what i think we saw after the post-war era was a a kind of moment where the the

energy pushed towards more democratic accountability with some notable kind of exceptions particularly including things like race in the united states there was a very kind of white bent to the new deal kind of compromise um but and and of course an imperial event outside of the us with the marshall plan but if you if you look at what happened probably from about the 1970s onwards there was a kind of empire strikes back and and you know historians of political economy and others will call that the kind of neoliberal era but what it was was an attempt to re-naturalize money and the economy as something that

exists as a product of markets and quote-unquote private enterprise and that was a very successful propagandistic effort people have sort of documented the the big money from from rich people and companies that went into constructing that to buying up university departments to building narratives in the media and the narrative that we have today is that money is not a public good it is something that comes from markets that the the sort of dominant metaphor in public finance is the taxpayer because where does money come from it comes from someone who pays taxes well that kind of

begs the question of where did the money to pay taxes come from right it had to actually been created before it could be paid in taxes but if you start with the idea that money grows on taxpayers or grows on on people then you end up with sort of margaret thatcher's world where there is no such thing as public money there's only taxpayer money and i think that's the world in which we live today where public policy is being constructed on the basis that money is scarce that investment has to rob peter to pay paul that

yes in theory there is sort of a productivity gain from from efficiency or from full employment but real you know in most contexts uh zero-sum game no free lunch thinking is the dominant way of thinking uh and that you know private investment it can do things that public investment can't um so i think that's the dominant starting point and the other big narrative i would say which is a little bit away from from what we sort of think about in this conversation with money but not that far away is the fight over full employment

the fight over what it means to be a worker in the in the economy and to add value where we had debates in the 1940s and then again in the 1970s about guaranteeing everyone a right to participate in the economy and to labor to add value through their labor and we're still fighting that fight today we have millions of people unemployed who would love to earn money who would love to contribute to some collective common good who can't do it because we have not got a full employment economy where there's more work to be done than people to do it i mean there is work to be done but we're not paying people to do it so i think

the failure of full employment the neoliberalization of finance and money and the kind of dominance of private interest in collective governance is where i would see the problem today on that last point the dominance of like private interests like what what we would what we would talk about is is probably the dominance of uh banker interests right um whether that's commercial banks whether that's other forms of of plutocrats plutocracy even you know kleptocrats uh we might say um

but but also central banks so one of the like the thesis and bankless and in the crypto um world writ large is that um like the cantillian effect uh or the cantalon effect as some uh call it is basically positions the kleptocrats and the plutocrats and those in charge closest to the money spigot and so when they start printing money uh like buying back bonds or purchasing stocks or

quantitative easing injecting it into the economy the recipients of those funds are those who hold assets so if you hold stocks if you hold real estate uh you know if you hold crypto even you are a recipient of that inflation and that issuance it's not necessarily going to the people and that has led to massive wealth inequality among a number of other factors over the past couple of decades and is continuing to increase um is that a problem that you see as

well because for us in crypto and in bangladesh right like that's the state doing something that is not good for the people that's the state implementing um monetary policy decisions that are actually benefiting the wealthy and the bankers and excluding the people is that a criticism that you see as well uh yeah so there's one little technical quibble which we don't have to go into which is i don't think quantitative

easing is necessarily or kind of monetizing government debt is the moment where a lot of this necessarily happens because i think if you look at government debt as a form of money then there's actually a separate layer going on there and the reason i start with that is because i think where i look at this and see a problem is that central banks are one institution in the public system and that institution is built and constructed in a certain way to give bankers basically direct access and to put their interest in the interest of what we might call free enterprise above other democratic considerations and so i

spent a lot of time you can search my twitter record and things complaining about the 1951 treasury fed accord where up until that point the expectation was that the treasury that is to say the secretary directly accountable to an elected president would be able to determine interest rates and to to basically sort of have dominance over the fed and there was an institutional fight between the treasury and the fed at that point where the fed representing certain free enterprise interests aggressively pushed to take that power

back and it came down to literally somebody being sick in hospital on one side of that fight and the other guy double crossing them basically like it was a it was a knife edge historical turning point and now if you read macroeconomic theory you read central banker reports they'll say central bank independence the ability to set interest rates according to how we think things should be done over elected representatives is a critical bull walk against government spending run amok so the entire edifice of central banking today is built on a

fundamental distrust of elected officials and people representing the interests of the public now you can take that lesson that the government is corrupt and that any kind of public governance is corrupt or you can take that lesson that the private banking interests want a critical fight against democracy and that we've gone on a bad direction there and i i take that second view so i completely agree with you that central banks today are a reactionary tool of class interest against the public but i think the lesson there is we shouldn't cede you know public governance to those

actors in the same way as we shouldn't have ceded it to the feudalists or to the slave owners right that there needs to be a a re-litigation of central bank supremacy within public finance and if you look at for example bills we worked on with rashida talib we proposed minting a trillion dollar coin which caused some people's heads to explode which was kind of but the point there was the treasury would issue that you can again look at look at all the resources that we put out about that we called it fiscal money for fiscal policy we don't need to come with our hand out to the central bank we

don't need to ask them for permission we don't need to issue treasury securities which people are going to misunderstand and think as debt as something different from money i don't think it is different for money but it's it's easy for people to get confused because they think of it like their own debt but we don't need any of that if the government wants to spend on emergency cash relief to every single person which was the first bill i worked on with congresswoman to leave then the way to do that is issue the money and give it to people and do that through elected officials and through their representatives and leave these central bankers to their and don't let them be

gatekeepers to good public macroeconomic policymaking so i i think i probably agree on the diagnosis but i'm not sure we'd agree on the solution that's probably true and by the way i i do think there's a third option there right so you've got creptical corruptable bankers and corruptable uh politicians and you said you had to pick one or the others we kind of think both become corrupted over time through the the money system but i'll let david uh jump in with a follow-up here we'll get more to that later yeah i think this is actually where we could start to tease

like the more concrete components of this conversation with regards specifically with the stable act but also rowan with the problems that you are trying to solve with like you know your your life's work you know when you wake up in the morning and and try and get things done or or things specifically with the stable act like who who are the people that are um being like who are the losers that are trying that you are trying to protect right who who are the disenfranchised that the current system is set up to that doesn't uh include right like what are the main fundamental

issues that you see that uh things like legislation like the staple acts can help protect like what are the really big problems that that you are uh concretely trying to go after yeah and i think i probably should have mentioned one other thing at the beginning to clarify here which is in addition to sort of financial interest there's also technological interests right there are also and i think we can go back to the early history of governance here like the 5 000 year history of debt and things and it was not just financiers it was also the scribes and the lawyers basically

anybody that had control over the complex tools of administration of governance who exercised power from their position with those tools and so today obviously finance is crucial right how are you going to pay for it who's got money who doesn't is a critical like layer of power but there's also who runs the technology right every computer around us in our pockets etc and i think we're seeing now a realignment of power around that in the same way as we saw with the railroad in the same way as we saw with oil and and steel and other

forms of technology at different points in history that there's a new power structure emerging around digital computing technology and there are going to be people who are going to be the new scribes the new governance architects of the future that's being built right now whether that's mark zuckerberg and eric schmidt or it's a tribe of very you know white male technologically savvy free-market-oriented people who distrust any form of collective governance you know whether whatever the group is they are positioning themselves to be the new

elite in in whatever kind of occurrency comes after the one that we've emerged out of right now and so to go to your question with this bill there's a couple of things one is there's a history of um financial interests playing cat and mouse with banking regulation the minute you regulate banknotes they switch to deposits the minute you regulate deposits they switch to another kind of instrument and there's a constant game of pushing out to whatever margins and when those actors eventually need public support

and we can talk about why but inevitably they do in moments of crisis they then come and ask to be bailed out in the name of the average person or in the name of the entire economy and the lesson i think of banking history of shadow banking history is the way to deal with that is to regulate it on the upswing is to acknowledge that they're engaging in activities that you know while they've tried to put a different face on it put a different label on it are still fundamentally the same activities that we've regulated in the past and to minimize how systemically important they

are so with this bill there's a couple of things one is if these kinds of stable coins become successful in the way that they hope you know whether it's mark zuckerberg with dm or circle and tether or die if it becomes successful that it's mass adopted there will be millions of people who aren't you know bankless nerds who who follow the podcast or you know people who are deep in in in the community right capital c it'll be people who just expect to be able to use this as another paypal right who don't want to think about it who get a wallet it's it's been

made super easy to download on their phone or whatever else and one day they wake up and the whole thing is suddenly their money's gone right that's the kind of risk if this if this kind of energy succeeds in its wildest dreams at the same time if it doesn't succeed like that what i think is going to happen is the same kinds of financial institutions and big money investors that have played this shadow banking game at every other stage in history we'll get in we'll eventually turn around and get some sort of regulation

just like usdc is trying to do now partnering with visa just like others are trying to get bank licenses or money transmitter licenses they will glom back on to the official system they'll start complying with the patriot act and everything else but they'll do so with just a little bit more power than they did before just that little bit less accountability we'll we'll forget some of the lessons about democratic oversight that we had last time and we can see this already with money transmitters money transmitters get to do things that banks wouldn't be allowed to do and the reason we have money transmitters is because

there was a hole in the banking regulations at a certain point and they exploited it right paypal is doing things today that it wouldn't be allowed to do if it got a banking license and it didn't get that banking license because it managed to find that loophole and so i think on one hand it's about protecting the consumers who will be using these systems on the other hand it's about realizing that there's a power realignment between tech industry telecom and and banking and to try to address the new lords before they they start doing the next thing that they do

because once upon a time you know jeff bezos and and uh you know zuckerberg and others were just young punks with a startup right and now they're super super kind of you know oligarchs who don't really give a about any accountability to any public at all i think what you're saying is like the the new boss is going to be the same as the old boss unless something but they're going to know how to code right that's going to be fast you were recently on dimitri's podcast and dimitri on an even earlier podcast with somebody from the defy ecosystem

the decentralized finance ecosystem van spencer dimitri uh gave the opinion that like the reason why he thinks the world of defy and to me when i hear defy it's almost synonymous with with ethereum he saw that defy is cool and valuable explicitly because of regulatory arbitrage right like the d5 ecosystem is unregulated therefore we can do cool new things in this new ecosystem what you are worried about is that these cool new things becoming really really big and then starting to represent systemic risk

and things like circle and and usdc are just leveraging new rails but that are unregulated to do new things uh and i would totally agree i do i do agree that like there is like the centralized actors like usdc like paxos like any like tether that are definitely uh skirting regulations in order to establish their businesses and establish their own native currencies to be a part of this ecosystem now i i do want to draw a line and this is where i think a lot of the crypto folk get really um

upset about some of this regulation is is that there doesn't seem to be room for what me and ryan are really bullish on which is protocols money issued protocols and we can definitely debate about like the decentralization of something like die like i feel you are fully aware about uh veils of decentralization or decentralization theater and and die is definitely not as like decentralized as like bitcoin is or tcp ip is and so there are central there is a centralized

team there are centralized beneficiaries but it's still more decentralized than than circle right it's still more decentralized than tether and what what i'm hoping to get out of this conversation with you rowan is is for you to include room in your mental models for what's going on in this industry that does allow for a fully decentralized currency to exist that doesn't that it would be outside of the stable act right i do believe that there is uh the possibility for protocol driven money

that is that wouldn't that just wouldn't necessarily be doesn't cause the some of the existential risks that you are worried about i i don't see wh in your previous conversations i don't see you including room for completely computerized completely protocolized completely humanless monies and me and ryan are bullish on these possibilities coming out of our industry so yeah i think there's two things there the first thing is and i know i appreciate you guys taking the time to

listen to other conversations and things i hope you've seen this bill isn't targeting private currencies bitcoin has its own unit of account ethereum is its own unit of account are not actually a stable coin under the definition in this bill right the instruments that qualify as a stable coin under this bill are instruments explicitly designed to function as public money by which i mean denominated in the fiat unit of account and to circulate in ways that public money is trying to do and just to get it out of the way the first instance because i'm a big believer in

decentralized anonymous digital fiat cash my goal is to build a system where if you want to do peer-to-peer cash transactions in us dollars with nobody able to see it you can my view on that as a as a theory of money is that the only way to do that in a safe secure and and stable way long term is for the government to issue it itself that doesn't say the government issues all money right but it is to say the us dollar issues issued by the government has unique properties

relative to a us dollar denominated token issued by anyone else and so we can try to play the game of my token is safe just trust me and i think we've played that game throughout history with bank deposits with bank notes and the the time and time against story is the only actual thing that can be guaranteed is when you issue the dollar yourself to ensure that the dollar convertibility so the first thing is no ethereum no bitcoin if you want to issue a private currency more power to you the second thing is about the technology i i don't have a problem with people

developing technology the problem here is the systemic risk that comes with its wide scale adoption in day-to-day transactions and so when it comes to what you might call sort of computerized money i think the reality is that the economy is not built on human-less transactions the economy is built around human beings if you and i transact with a piece of paper or a paper dollar bill the paper dollar bill is is computerized in the sense there's nobody involved in it right but if you and i have a dispute there we go to a

court and the court adjudicates that the court doesn't say the piece of paper has decided right and and my my old uh advisor at cornell james grimmerman who's a coder wrote a great piece called all smart contracts are inherently ambiguous and there have been others who've talked about this in the context of code you know going back to larry lessig and others that code itself is not a substitute for law it can automate certain physical processes but the the economy and commerce is built on legal institutions or property rights of contract dispute resolution of

accounting principles of limited liability for entities and corporations for taught law even in instances where you didn't explicitly contract all of those things continue to apply regardless of what technology you're using to interface with another human being and so i could have a a perfectly written code and then we could disagree about how to interpret that code in light of an existing arrangement and that disagreement is going to come down to a court and a judge looking at two human beings on either side of a dispute whether or not

the judge chooses to agree with the code or not will be a question for the judge and so i think that this you know to me it's sort of like saying the trench ball in matilda well i'd love a school without children how easy would it be to run a school if there were no messy children involved right having an economy where there's a money that doesn't involve people is in my opinion not a coherent concept because the economy is made up out of people just like the internet is there's icann there's isp providers there's people running individuals servers in their