Now is the former head of the cftc chris giancarlo. He was responsible for putting together crypto derivatives as well as futures on derivative exchanges. Hes got a new book coming out october 26 called crypto dad the fight for future for the future of money. Chris welcome to the program thanks so much for joining me, jennifer its great to be with you. Thank you for doing this. What do you think are the biggest issues facing crypto right now? Well, its its actually, the same issue thats been uh facing it for a while is what is the right regulatory uh envelope for it to fit into and what is the the american public policy? With regard to crypto and then whats the best way to realize those public policy goals in the crypto landscape, uh, as as, as i explained in my book, i believe that the emergence of crypto is is very big. This is a a multi generational change in the nature of finance and the nature of money. This, the the the internet is going to do the finance and money itself, what its done to retail shopping, what its done to information, what its done to journalism, what its done to so many walks of life and now its said that that amazing, uh multi generational Century long evolution called the internet is doing its magic to finance yeah. I want to get back to you on the innovation and the potential economic ripple effects, but before that lets drill down on the regulatory piece um, like you said, we keep hearing the space needs to be regulated, but what does that tangibly look like to you? What is it that agencies and congress need to do now? Well, so lets lets start with the landscape.

Pre crypto weve got statutes that were written in the 1930s 90 year old statues that were written for an analog face to face financial world and weve been re. Purposing them utilizing them for a lot of innovation, but now weve got something thats, fundamentally different than what weve had before, and we need to think about whether those regulatory schemes without any further amendment are fit for purpose or whether we do need to make some adjustments To them to better accommodate this technology, but it all starts with deciding. Do we want to use this technology to modernize, as i think we should to modernize whats, really a pretty antiquated financial system? You know our financial system uh is, is durable and venerable, but its old and its creaky and its showing its age, its under inclusive, a good portion of our fellow citizens. Dont have access to a full range of financial services, its slow, i mean you know, cashing it taking three days to cash, a check and and for uh small businesses to wait 30 days for payment is a burden on the economy and its expensive. The cost of transactions cost americans five or six percent a year of gdp. Okay. So how do we apply? You say the current financial regulations are too antiquated, so it sounds like we need a whole new set of regulations that dont stifle regulation um. You know what what could that look like? Well, i think its a combination, i think, its a combination of using what we have, as we did at the cftc to uh to to further innovation, but its also.

We also need some changes to them that that that take those innova that take those regulatory structures and make them more adaptable to a new world. Okay, so do you think crypto exchanges like coinbase should be required to be registered with the sec, so we have long had a regulatory structure for exchanges to be regulated with if theyre commodities exchanges uh doing derivatives on commodities to be regulated. The cftc for securities exchanges to be regulated with the sec thats, our current structure. What we dont have is a regulatory mandate for whats called spot physical delivery exchanges of non securities, uh crypto, which is basically bitcoin and ethereum, so i believe, thats a gap in our 90 year old structure. So one of the first steps i think congress should do is have a regulatory regime for non securities crypto and, and it should be one that recognizes the the um. The difference of this innovation focuses on investor protection uh, as our regulation of exchanges does but gives it a holistic approach. That is not trying to stifle this innovation but allows it to flourish, but in a safe and in a well regulated manner. All right, you mentioned uh digital currencies, uh, the u.s federal reserve, considering a central bank, digital currency, theyre, doing due diligence on the pros and cons. Uh. China has already launched its own uh for the us to remain a global economic uh dominating power. Do we need to adopt a central bank uh digital currency, to ensure our competitiveness, to ensure that we continue to lead the economic race uh is: is this the new space race if you will uh well so so i wrote an op ed in the wall street Journal two years ago, in which uh two years ago, this month, in fact, which i said uh, it is the new space race, the chinas launching of its e c and y.

Its digital currency is the equivalent of russia. Launching sputnik and the rest of the world. Is experimenting with digital currency? I i dont know if the united states absolutely needs to adopt a central bank digital currency this year or next year, but the united states absolutely needs to be at the leadership table in developing this innovation. You know we have the worlds strongest currency, the most important currency right now, but technological modernization of any infrastructure is always a good thing. You know in the united states weve taken for granted our physical infrastructure for way too long, our bridges and our tunnels and our airports, which were once state of the art, have all fallen behind the times and are no longer global standards. Are we going to allow our money as well to fall behind the times when the rest of the world is moving rapidly forward and creating digital tokenized based money? Yeah to your point, do we need to be thinking about you know the digital currency and and the technology that underpins all of this, as not just you know, a new payment system and a new way to ring out costs and, as you said, uh perhaps help With financial inclusion, but as a new way to drive economic growth for so long weve had low productivity here in the united states. You know: could this be the go? Go 90s? The internet next phase that weve been waiting for jennifer. You are so right.

This is much more than about digital currency. This and, and china sees this much more than about digital currency. They see this as a way to create the the worlds. First, fully integrated fully networked digital economy, all transactions in their economy, whether it be securities transactions, future transactions, commercial lending, commercial payments, retail payments will be fully networked with their digital currency, as almost the software operating system for a digital economy, and that will ring huge amounts Of percentage points out of cost and latency and their economy, it will drive the worlds fastest growing economy into hyper drive in terms of speed and efficiency, and – and you know we talk about uh currency zones. We talk about the dollar zone in north and south america. We talk about the eurozone, those are zones of informal influence theres. There are zones of sort of analog importance of one currency compared to another theyre, not fully network digital uh, uh zones of of networking, and what chinas gon na build is a fully networked currency zone were gon na talk about currency zones in the future as fully Digital networks and the united states needs to be thinking about the role of the dollar in worlds where you have fully networked currency zones and thats. What we need to be exploring this in the united states as well um. Do you think we ever get to the point uh where were using cryptocurrencies like uh bitcoin, to purchase shampoo, um or exchange dollars for crypto um? The co founder of of coinbase says that at some point in the future, uh kids are not going to have bank accounts anymore theyre just going to have digital wallets.

Certainly, you saw el salvador adopt bitcoin as its legal tender. Do we ever see anything as pervasive as that in the united states, whether it is bitcoin or something else, or maybe its the form of the digital dollar, central bank, digital currency, yeah? So, im a big believer in bitcoin, perhaps not so much as a retail payment for its pay, a potential as a retail payment system, but for maybe its potential to be the digital equivalent of gold, a hedge against uh, a decline in value of sovereign money through Inflation and proficiency by nation states, so i think, i think, a bitcoin in that area. I think that nation states are going to move forward, including the united states, with creating sovereign digital currency, and i think, because that will be used useful in paying taxes and other government obligations. It will be the dominant form of payment systems in most economies. However, as i as i say in my book, i think money is far it just as as it said that war is too important to be left to generals. I think that money is too important to be left to central bankers. I think society has a big role to play in what digital money looks like, including in the in the absolutely critical area of privacy and censorship resistance. If governments use digital money to both invade peoples, privacy and to censor their transactions, then people will go to other forms of non sovereign money and in fact, if governments are profligate in their issuance of digital currency, then it will make only itll only make bitcoin stronger.

As as, in a sense, the same the same relationship that physical gold has to fiat money, i think you could see bitcoin having to sovereign money issued by governments um. You say that financial market infrastructure for payment systems is archaic, um its not well prepared to uh whether this next wave of financial innovation um unless its also modernized but whats the risk that crypto, even with its innovation, that could fill the gaps on the flip side. Could lead to a financial crisis without proper oversight, because its still very much in the shadow making system yeah, so i i dont think its either or right. You know when the when the first wave of the internet came along, we didnt put up resistance to it. The resistance to it we harnessed it. What weve got to do is harness this innovation with thoughtful regulation. Remember i am a former senior regulator. I believe in regulation. Weve got to get regulation, but we got to get it right. Chris.

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