1
00:00:00,950 --> 00:00:03,320
The following content is
provided under a Creative

2
00:00:03,320 --> 00:00:04,710
Commons license.

3
00:00:04,710 --> 00:00:06,920
Your support will help
MIT OpenCourseWare

4
00:00:06,920 --> 00:00:11,010
continue to offer high quality
educational resources for free.

5
00:00:11,010 --> 00:00:13,580
To make a donation, or to
view additional materials

6
00:00:13,580 --> 00:00:17,540
from hundreds of MIT courses,
visit MIT OpenCourseWare

7
00:00:17,540 --> 00:00:18,426
at ocw.mit.edu.

8
00:00:22,950 --> 00:00:25,290
GARY GENSLER: So we're
going to sort of come back

9
00:00:25,290 --> 00:00:27,790
to central banking.

10
00:00:27,790 --> 00:00:32,820
I thought it was appropriate
to have two classes on this

11
00:00:32,820 --> 00:00:36,120
when I was laying out the whole
semester in August, thinking

12
00:00:36,120 --> 00:00:39,250
about how to build the class.

13
00:00:39,250 --> 00:00:43,350
In part because central banks
play such a significant role

14
00:00:43,350 --> 00:00:46,470
to the world of
finance, but it's really

15
00:00:46,470 --> 00:00:48,250
about their role in money.

16
00:00:48,250 --> 00:00:50,550
I mean, money and
central banking

17
00:00:50,550 --> 00:00:54,090
have been so intertwined
for 300 or 400 years,

18
00:00:54,090 --> 00:01:00,480
and they are the custodians, the
essence of what Fiat money is.

19
00:01:00,480 --> 00:01:04,830
And of course, this course
is blockchain and money.

20
00:01:04,830 --> 00:01:07,710
And many of the things we're
talking about here actually

21
00:01:07,710 --> 00:01:10,640
do relate to Bitcoin
and crypto finance,

22
00:01:10,640 --> 00:01:13,590
even though a central bank
digital currency doesn't

23
00:01:13,590 --> 00:01:20,820
have to be tied to a
blockchain technology.

24
00:01:20,820 --> 00:01:24,120
So I'm going to do
a little bit back

25
00:01:24,120 --> 00:01:29,520
to what we talked about Tuesday,
partly because Robleh Ali was

26
00:01:29,520 --> 00:01:34,080
with us on Tuesday, I moved up
some of the content from today

27
00:01:34,080 --> 00:01:40,080
to then as well just
to go through that.

28
00:01:40,080 --> 00:01:42,630
And of course if we do end up--

29
00:01:42,630 --> 00:01:45,132
end early, we can always talk
about Tuesday's election too.

30
00:01:45,132 --> 00:01:45,840
That's all right.

31
00:01:48,510 --> 00:01:51,630
So we're going to, as always,
sort of touch on the readings.

32
00:01:51,630 --> 00:01:54,480
I'm going to be asking you all a
bunch of questions about things

33
00:01:54,480 --> 00:01:58,590
like Ecuador and
Senegal and Sweden

34
00:01:58,590 --> 00:02:01,500
and maybe the Philippines
that were in the readings

35
00:02:01,500 --> 00:02:02,970
and so forth.

36
00:02:02,970 --> 00:02:08,190
But it's all experimentation
by those four countries

37
00:02:08,190 --> 00:02:08,699
and others.

38
00:02:11,600 --> 00:02:13,350
We're going to talk
a little bit about--

39
00:02:13,350 --> 00:02:14,850
I'm just going to
try to come back

40
00:02:14,850 --> 00:02:16,470
to what we were
talking about Tuesday

41
00:02:16,470 --> 00:02:19,500
and why, again, I think
it's relevant to any course

42
00:02:19,500 --> 00:02:22,050
in blockchain technology,
and particularly

43
00:02:22,050 --> 00:02:24,795
if you're interested in
Bitcoin and crypto finance.

44
00:02:28,940 --> 00:02:30,830
Introduce a new
subject, really, which

45
00:02:30,830 --> 00:02:33,800
is stable value
tokens, which are

46
00:02:33,800 --> 00:02:36,050
a significant part
of experimentation

47
00:02:36,050 --> 00:02:39,440
right now, again, in the
world of crypto finance,

48
00:02:39,440 --> 00:02:43,190
but relate them back to the
world of private banknotes.

49
00:02:43,190 --> 00:02:47,390
Because I see in the current
approach to stable value

50
00:02:47,390 --> 00:02:52,520
tokens something similar
that we saw in the past.

51
00:02:52,520 --> 00:02:57,050
Central bank digital currency,
which we introduced on Tuesday,

52
00:02:57,050 --> 00:02:59,600
and that's going to be the bulk
of what we talk about today,

53
00:02:59,600 --> 00:03:00,560
and you're going to--

54
00:03:00,560 --> 00:03:02,480
hopefully we'll have
a nice discussion

55
00:03:02,480 --> 00:03:07,130
to see what all of you think of
these Sweden, Senegal, Ecuador

56
00:03:07,130 --> 00:03:09,790
and the Philippines a bit.

57
00:03:09,790 --> 00:03:14,290
And so that's what we're
going to try to do.

58
00:03:14,290 --> 00:03:18,430
And again, we're going to sort
of dive into these questions

59
00:03:18,430 --> 00:03:22,900
as we go through
those four countries.

60
00:03:22,900 --> 00:03:25,780
We talked a little
bit about MasterCard

61
00:03:25,780 --> 00:03:29,090
when Sriham was with us--

62
00:03:29,090 --> 00:03:29,790
right?

63
00:03:29,790 --> 00:03:32,440
Priya's husband was with us
because he was with MasterCard,

64
00:03:32,440 --> 00:03:33,580
but we can touch back.

65
00:03:33,580 --> 00:03:35,880
That was really a
reading for today,

66
00:03:35,880 --> 00:03:42,990
and MasterCard took a out of a
patent on fractional banking.

67
00:03:46,940 --> 00:03:49,280
So central bank,
goals and functions.

68
00:03:49,280 --> 00:03:51,170
Anybody remember we
talked about Tuesday

69
00:03:51,170 --> 00:03:53,150
as to what are
central banks about

70
00:03:53,150 --> 00:03:56,620
and what their main goals
are and their functions?

71
00:03:56,620 --> 00:03:58,410
Anybody want to--

72
00:03:58,410 --> 00:04:02,350
STUDENT: Maximum employment
[INAUDIBLE] stability and also

73
00:04:02,350 --> 00:04:04,777
the moderate long
term interest rates.

74
00:04:04,777 --> 00:04:06,360
GARY GENSLER: Wow,
that's pretty good.

75
00:04:06,360 --> 00:04:07,880
You've got the three--

76
00:04:07,880 --> 00:04:10,050
the three things that go
into the US dual mandate.

77
00:04:10,050 --> 00:04:12,600
So there's an economic
function, that central banks

78
00:04:12,600 --> 00:04:15,900
in almost every country
have taken on some role

79
00:04:15,900 --> 00:04:17,100
to promote the economy.

80
00:04:17,100 --> 00:04:22,190
But dominantly, it's
about price stability.

81
00:04:22,190 --> 00:04:24,170
And how does price
stability relate to money?

82
00:04:26,912 --> 00:04:27,720
Anybody?

83
00:04:27,720 --> 00:04:28,220
James.

84
00:04:28,220 --> 00:04:29,720
Is that a hand up?

85
00:04:29,720 --> 00:04:31,740
STUDENT: No, but I
can give a guess.

86
00:04:31,740 --> 00:04:32,477
Inflation?

87
00:04:32,477 --> 00:04:33,935
GARY GENSLER: All
right, inflation.

88
00:04:33,935 --> 00:04:35,760
STUDENT: Inflation,
making sure--

89
00:04:35,760 --> 00:04:38,750
STUDENT: I would
add [INAUDIBLE]..

90
00:04:38,750 --> 00:04:40,480
GARY GENSLER: So
that's cost of money.

91
00:04:40,480 --> 00:04:41,000
Right.

92
00:04:41,000 --> 00:04:47,660
So price stability and
money relate because, what's

93
00:04:47,660 --> 00:04:50,540
the three functions of money?

94
00:04:50,540 --> 00:04:52,040
STUDENT: Dependable
unit of account.

95
00:04:52,040 --> 00:04:53,957
GARY GENSLER: So a
dependable unit of account.

96
00:04:53,957 --> 00:04:54,830
It's right in that.

97
00:04:54,830 --> 00:04:56,870
So the third function of money--

98
00:04:56,870 --> 00:05:01,520
store value, medium of
exchange, a unit of account.

99
00:05:01,520 --> 00:05:03,710
So stable pricing
is about making sure

100
00:05:03,710 --> 00:05:07,880
that unit of accounting,
that unit of pricing,

101
00:05:07,880 --> 00:05:08,990
has some stability.

102
00:05:12,040 --> 00:05:16,930
So price stability is
really about money.

103
00:05:16,930 --> 00:05:20,810
And it also promotes an economy.

104
00:05:20,810 --> 00:05:24,390
They sit at the center of the
money system, central banks.

105
00:05:24,390 --> 00:05:27,080
At first a check on
the king to make sure

106
00:05:27,080 --> 00:05:28,790
that the king didn't
overspend when

107
00:05:28,790 --> 00:05:31,745
he was at war with another
king in another country.

108
00:05:34,640 --> 00:05:38,900
That's where it all
started, but they sit right

109
00:05:38,900 --> 00:05:40,760
at the center of money.

110
00:05:40,760 --> 00:05:42,980
So the four things
we talked about,

111
00:05:42,980 --> 00:05:50,510
they managed the nation's
Fiat money in every country--

112
00:05:50,510 --> 00:05:53,540
the supply, the price,
the payment systems.

113
00:05:53,540 --> 00:05:58,000
Payment systems are how
we move money around.

114
00:05:58,000 --> 00:06:00,933
So if you really want
to just boil it down,

115
00:06:00,933 --> 00:06:02,100
you can take a whole course.

116
00:06:02,100 --> 00:06:03,505
There's wonderful
professors here

117
00:06:03,505 --> 00:06:04,630
that teach central banking.

118
00:06:04,630 --> 00:06:09,750
But I'd say manage the
nation's Fiat money.

119
00:06:09,750 --> 00:06:12,540
Oversee the banking system,
because the banking system

120
00:06:12,540 --> 00:06:17,370
is a way to basically move
money around the system

121
00:06:17,370 --> 00:06:19,290
and provides credit--

122
00:06:19,290 --> 00:06:22,200
Tom, what does a bank do
when it provides credit?

123
00:06:22,200 --> 00:06:26,892
Just use the word "money"
somewhere in your definition.

124
00:06:26,892 --> 00:06:29,607
STUDENT: It expands
the quantity of money.

125
00:06:29,607 --> 00:06:31,440
GARY GENSLER: Expands
the quantity of money.

126
00:06:31,440 --> 00:06:34,472
And how does it do that?

127
00:06:34,472 --> 00:06:35,430
STUDENT: Lending money.

128
00:06:35,430 --> 00:06:37,260
GARY GENSLER: Lending money.

129
00:06:37,260 --> 00:06:41,430
So banks stand in between
investors or savers.

130
00:06:41,430 --> 00:06:43,530
We can call them depositors.

131
00:06:43,530 --> 00:06:46,050
So on the one hand, you have
depositors or investors.

132
00:06:46,050 --> 00:06:48,300
On the other hand,
you have borrowers.

133
00:06:48,300 --> 00:06:50,590
And banks are just
in the middle.

134
00:06:50,590 --> 00:06:53,640
And that's why it's called
financial intermediation--

135
00:06:53,640 --> 00:06:56,863
intermediates, they're
just in the middle.

136
00:06:56,863 --> 00:06:58,530
It's more than just
being in the middle.

137
00:06:58,530 --> 00:07:01,260
I mean, it's a big role, but--

138
00:07:01,260 --> 00:07:05,790
So the banks in the middle
are all about money.

139
00:07:05,790 --> 00:07:08,690
And so central banks
want to get involved

140
00:07:08,690 --> 00:07:11,660
to manage those institutions.

141
00:07:11,660 --> 00:07:17,610
Initially, commercial banks
came before central banks.

142
00:07:17,610 --> 00:07:19,770
Commercial banks
were around, and they

143
00:07:19,770 --> 00:07:28,130
kept failing, even in a time
of the small Italian states.

144
00:07:28,130 --> 00:07:31,760
They would fail, and there
were some family usually,

145
00:07:31,760 --> 00:07:34,370
or central authority
that helped out.

146
00:07:34,370 --> 00:07:36,740
And ultimately, the
central banks seem to--

147
00:07:36,740 --> 00:07:39,140
today, it seems like the
central banks came first.

148
00:07:39,140 --> 00:07:41,450
But the commercial
banks kind of came first

149
00:07:41,450 --> 00:07:45,700
and then there was a central
way to protect the system.

150
00:07:45,700 --> 00:07:50,410
Central banks are bankers
to their own governments.

151
00:07:50,410 --> 00:07:54,340
Paul Tucker, who now teaches
over at the Harvard Kennedy

152
00:07:54,340 --> 00:07:56,720
School, but Paul Tucker
just came out with a book--

153
00:07:56,720 --> 00:07:59,140
he was the deputy governor
of the Bank of England--

154
00:07:59,140 --> 00:08:03,250
about the unelected power.

155
00:08:03,250 --> 00:08:05,200
Central banks are
unelected usually.

156
00:08:05,200 --> 00:08:08,420
They're don't stand
before the voters,

157
00:08:08,420 --> 00:08:12,910
but they have a tremendous
amount of authority.

158
00:08:12,910 --> 00:08:16,480
So the four types of
buckets of things they do.

159
00:08:16,480 --> 00:08:17,800
So we talked about--

160
00:08:17,800 --> 00:08:19,870
I used this chart the
other day a little bit,

161
00:08:19,870 --> 00:08:23,520
but the three different
types of money.

162
00:08:23,520 --> 00:08:24,240
Please.

163
00:08:24,240 --> 00:08:27,430
STUDENT: In the
context of currencies,

164
00:08:27,430 --> 00:08:29,800
I would add also that
the central bank have

165
00:08:29,800 --> 00:08:32,650
a key role in
international payments

166
00:08:32,650 --> 00:08:34,470
and international reserves.

167
00:08:34,470 --> 00:08:36,010
GARY GENSLER: Well,
so the question

168
00:08:36,010 --> 00:08:38,409
is, will the central
banks have a similar role

169
00:08:38,409 --> 00:08:40,770
for cryptocurrencies?

170
00:08:40,770 --> 00:08:44,380
Anybody want to take one
side or the other about it?

171
00:08:44,380 --> 00:08:46,090
Eileen, you think
it's going to go to 0.

172
00:08:46,090 --> 00:08:48,160
So you would probably say
central banks will not

173
00:08:48,160 --> 00:08:51,075
have any role if
cryptocurrencies go to 0.

174
00:08:51,075 --> 00:08:52,450
STUDENT: I'm trying
to understand

175
00:08:52,450 --> 00:08:54,117
the question, what
do central banks have

176
00:08:54,117 --> 00:08:55,583
to do with cryptocurrencies?

177
00:08:55,583 --> 00:08:58,000
GARY GENSLER: All right, so
Alin just took the other side.

178
00:08:58,000 --> 00:08:59,458
He said, what do
central banks have

179
00:08:59,458 --> 00:09:00,970
to do with cryptocurrencies?

180
00:09:00,970 --> 00:09:02,470
STUDENT: I mean,
there's going to be

181
00:09:02,470 --> 00:09:04,010
a currency for one country.

182
00:09:04,010 --> 00:09:07,500
They will still need to
manage international reserves

183
00:09:07,500 --> 00:09:11,610
and manage international
cross-border payments.

184
00:09:11,610 --> 00:09:14,170
If it's going to be
a global currency,

185
00:09:14,170 --> 00:09:15,862
they need to [INAUDIBLE].

186
00:09:15,862 --> 00:09:19,010
GARY GENSLER: So
it's a hypothetical.

187
00:09:19,010 --> 00:09:20,430
STUDENT: But it's
a choice, right?

188
00:09:20,430 --> 00:09:21,888
It's whether you
want your currency

189
00:09:21,888 --> 00:09:23,650
to float versus
Bitcoin, or whether you

190
00:09:23,650 --> 00:09:26,980
want to defensively buy Bitcoin
and hedge your currency.

191
00:09:26,980 --> 00:09:31,460
I think the central bank has a
choice to pursue [INAUDIBLE]..

192
00:09:31,460 --> 00:09:34,600
GARY GENSLER: So any other
views on whether central banks

193
00:09:34,600 --> 00:09:40,470
will get steeply involved in
Bitcoin and cryptocurrencies?

194
00:09:40,470 --> 00:09:42,480
Brotish.

195
00:09:42,480 --> 00:09:47,060
STUDENT: I think if your
currency can [INAUDIBLE]

196
00:09:47,060 --> 00:09:50,910
of its own [INAUDIBLE] where it
does not interact with the Fiat

197
00:09:50,910 --> 00:09:54,210
currencies, then the
role of central banks

198
00:09:54,210 --> 00:09:58,257
would be completely restricted
to the governance of activities

199
00:09:58,257 --> 00:10:01,520
[INAUDIBLE],, whatever it
takes to get involved in that

200
00:10:01,520 --> 00:10:06,060
[INAUDIBLE] attracting the
Fiat currency at any level,

201
00:10:06,060 --> 00:10:09,080
then the central banks' role
becomes more involved in that.

202
00:10:09,080 --> 00:10:10,580
GARY GENSLER: The
more [INAUDIBLE],,

203
00:10:10,580 --> 00:10:11,910
the more it's more central.

204
00:10:11,910 --> 00:10:14,040
So isn't it possible that--

205
00:10:14,040 --> 00:10:16,920
I mean, we don't know what
the future will bring.

206
00:10:16,920 --> 00:10:18,030
And Alin might be right.

207
00:10:18,030 --> 00:10:19,980
If cryptocurrency
doesn't take off,

208
00:10:19,980 --> 00:10:22,740
then central banks
can kind of just

209
00:10:22,740 --> 00:10:26,820
wave it away as some experiment
on the side of finance.

210
00:10:26,820 --> 00:10:29,430
But if it starts to
take off, I think--

211
00:10:29,430 --> 00:10:31,960
do you pronounce it Guillermo?

212
00:10:31,960 --> 00:10:37,650
Guillermo says that if it
becomes somewhat central,

213
00:10:37,650 --> 00:10:40,590
as Brotish and
others have said, I

214
00:10:40,590 --> 00:10:43,020
think that there would be
a role for central banks.

215
00:10:43,020 --> 00:10:45,360
If a country actually
was going to use it

216
00:10:45,360 --> 00:10:47,970
as its medium of exchange,
a unit of account,

217
00:10:47,970 --> 00:10:49,610
a store of value--

218
00:10:49,610 --> 00:10:54,240
and particularly if there became
fractional crypto banking.

219
00:10:54,240 --> 00:10:56,820
This Mastercard patent.

220
00:10:56,820 --> 00:11:03,300
Like if you actually saw
somebody taking crypto deposits

221
00:11:03,300 --> 00:11:07,620
and making crypto loans,
and you had credit facility

222
00:11:07,620 --> 00:11:08,970
through crypto--

223
00:11:08,970 --> 00:11:10,720
we're a far way away from that.

224
00:11:10,720 --> 00:11:11,430
We're not there.

225
00:11:11,430 --> 00:11:13,690
But I'm saying,
if that happened.

226
00:11:13,690 --> 00:11:14,488
Sean?

227
00:11:14,488 --> 00:11:15,780
STUDENT: So I was just curious.

228
00:11:15,780 --> 00:11:17,690
A follow up on that,
if that happened,

229
00:11:17,690 --> 00:11:22,710
and it becomes a fraction
of the monetary supply,

230
00:11:22,710 --> 00:11:26,640
in order for the central bank
to carry out its functionality,

231
00:11:26,640 --> 00:11:30,000
just like [INAUDIBLE]
operations,

232
00:11:30,000 --> 00:11:31,710
does that also apply to--

233
00:11:31,710 --> 00:11:34,020
kind of if the
cryptocurrency plays a role,

234
00:11:34,020 --> 00:11:36,960
does that also
apply to [INAUDIBLE]

235
00:11:36,960 --> 00:11:38,848
to the crytpocurrency project?

236
00:11:38,848 --> 00:11:40,890
GARY GENSLER: Well so
Sean's asking, if we really

237
00:11:40,890 --> 00:11:43,930
were in this world
we're not yet in,

238
00:11:43,930 --> 00:11:49,650
and cryptocurrency was a
dominant form of finance,

239
00:11:49,650 --> 00:11:52,980
banking and so forth,
would you envision

240
00:11:52,980 --> 00:11:57,972
the central bank trying to
do an open market operation?

241
00:11:57,972 --> 00:11:59,430
Anybody want to
tell the class what

242
00:11:59,430 --> 00:12:01,140
open market-- it's
not in the readings,

243
00:12:01,140 --> 00:12:04,250
but what open market
operations are used for?

244
00:12:04,250 --> 00:12:07,710
GARY GENSLER: Is it increasing
or decreasing the money supply?

245
00:12:07,710 --> 00:12:10,940
So yes the central bank
can buy some of the money

246
00:12:10,940 --> 00:12:14,570
or sell some of the money
which affects the supply

247
00:12:14,570 --> 00:12:16,820
and thus affects the price.

248
00:12:16,820 --> 00:12:20,660
So open market operations
effectively affects

249
00:12:20,660 --> 00:12:22,190
the interest rate.

250
00:12:22,190 --> 00:12:25,190
You have often probably read
the interest rate targets.

251
00:12:25,190 --> 00:12:27,170
The Federal Reserve
has a target.

252
00:12:27,170 --> 00:12:29,330
But what they're doing in
an open market operation

253
00:12:29,330 --> 00:12:32,950
is really buying and
selling supply of money.

254
00:12:32,950 --> 00:12:35,000
And when you influence
the supply of something,

255
00:12:35,000 --> 00:12:36,270
you change the price.

256
00:12:36,270 --> 00:12:39,050
And the price of money is
measured in interest rates

257
00:12:39,050 --> 00:12:41,700
or foreign exchange rates.

258
00:12:41,700 --> 00:12:43,520
So Sean, I would say
that if it becomes

259
00:12:43,520 --> 00:12:47,700
a dominant part of an economy,
then some central authority

260
00:12:47,700 --> 00:12:50,340
might want to try to
influence its price.

261
00:12:50,340 --> 00:12:52,320
But there's a challenge.

262
00:12:52,320 --> 00:12:56,955
Does anybody want to guess
what challenge I'm thinking

263
00:12:56,955 --> 00:12:58,780
about why cryptocurrency--

264
00:12:58,780 --> 00:13:02,880
let's say Venezuela was adopting
Bitcoin as a central means

265
00:13:02,880 --> 00:13:04,530
in that country.

266
00:13:04,530 --> 00:13:06,750
What would be their
challenge of trying

267
00:13:06,750 --> 00:13:09,900
to influence the price
of Bitcoin in Venezuela?

268
00:13:16,400 --> 00:13:17,220
Alin.

269
00:13:17,220 --> 00:13:19,600
STUDENT: Well if the other
economies outside Venezuela

270
00:13:19,600 --> 00:13:20,620
are using Bitcoin--

271
00:13:20,620 --> 00:13:23,170
GARY GENSLER:
[INAUDIBLE] so Venezuela

272
00:13:23,170 --> 00:13:26,800
might be only a small portion
of the overall Bitcoin

273
00:13:26,800 --> 00:13:29,460
usage around the globe.

274
00:13:29,460 --> 00:13:33,350
So it's one thing if you're
one country and trying

275
00:13:33,350 --> 00:13:36,050
to influence the price
of the currency that's

276
00:13:36,050 --> 00:13:37,940
in use in that country.

277
00:13:37,940 --> 00:13:42,680
If Sweden wants to influence the
price of the krona, or Israel

278
00:13:42,680 --> 00:13:43,185
the--

279
00:13:43,185 --> 00:13:43,685
Shekel?

280
00:13:48,310 --> 00:13:53,710
But it's far more problematic
if it's a worldwide currency.

281
00:13:53,710 --> 00:13:55,480
Hugo and then Tom.

282
00:13:55,480 --> 00:13:57,790
STUDENT: I mean, I could
see that being kind

283
00:13:57,790 --> 00:13:59,940
of like what we saw
earlier this year

284
00:13:59,940 --> 00:14:03,080
or last year when there
was like a Korean--

285
00:14:03,080 --> 00:14:04,455
the price of
Bitcoin in Korea was

286
00:14:04,455 --> 00:14:06,830
higher than the price of
bitcoin in the rest of the world

287
00:14:06,830 --> 00:14:08,570
because there was so
much demand there.

288
00:14:08,570 --> 00:14:11,650
So if you get like the Central
bank of a certain country

289
00:14:11,650 --> 00:14:13,780
buying Bitcoin in
their currency,

290
00:14:13,780 --> 00:14:16,270
they're basically devaluing
their currency in relation

291
00:14:16,270 --> 00:14:19,100
to Bitcoin and it might not--

292
00:14:19,100 --> 00:14:21,648
like it might not affect
the world market in the way

293
00:14:21,648 --> 00:14:22,690
that they think it would.

294
00:14:22,690 --> 00:14:23,230
Right?

295
00:14:23,230 --> 00:14:25,960
Unless they're effectively
buying Bitcoin on all

296
00:14:25,960 --> 00:14:27,687
open markets around the world.

297
00:14:27,687 --> 00:14:28,520
GARY GENSLER: Right.

298
00:14:28,520 --> 00:14:33,070
And do you have a view as
to why the pricing went up

299
00:14:33,070 --> 00:14:35,050
in Korea versus elsewhere?

300
00:14:35,050 --> 00:14:38,020
It's called the kimchi premium.

301
00:14:38,020 --> 00:14:39,880
Literally, I don't make this up.

302
00:14:39,880 --> 00:14:44,640
But that was what it was called
in Bitcoin, the kimchi premium,

303
00:14:44,640 --> 00:14:47,760
which was that Bitcoin
was valued at a higher

304
00:14:47,760 --> 00:14:49,890
price in Korea than elsewhere.

305
00:14:49,890 --> 00:14:53,377
Hugo, do you have a-- you had
one reason you said it's just

306
00:14:53,377 --> 00:14:55,710
thought that the Koreans were
trying to buy a lot of it,

307
00:14:55,710 --> 00:14:57,240
so there was a kimchi premium.

308
00:14:57,240 --> 00:14:57,770
Other?

309
00:14:57,770 --> 00:15:00,455
Tom, we're going to get to you.

310
00:15:00,455 --> 00:15:02,830
STUDENT: In order to open an
account on a Korean exchange

311
00:15:02,830 --> 00:15:04,090
and [INAUDIBLE].

312
00:15:04,090 --> 00:15:06,120
So you weren't really
able to arbitrage very--

313
00:15:06,120 --> 00:15:07,120
GARY GENSLER: All right.

314
00:15:07,120 --> 00:15:09,000
So Hugo, you're on to something.

315
00:15:09,000 --> 00:15:10,100
You're saying arbitrage.

316
00:15:10,100 --> 00:15:10,645
Ben?

317
00:15:10,645 --> 00:15:13,800
STUDENT: [INAUDIBLE] it
was difficult to arbitrage

318
00:15:13,800 --> 00:15:16,710
because of the capital
controls in Korea.

319
00:15:16,710 --> 00:15:17,502
Is that something--

320
00:15:17,502 --> 00:15:18,502
GARY GENSLER: All right.

321
00:15:18,502 --> 00:15:20,120
So it was difficult
to arbitrage.

322
00:15:20,120 --> 00:15:21,853
So the basics of finance--

323
00:15:21,853 --> 00:15:23,520
we're moving a little
away from Bitcoin.

324
00:15:23,520 --> 00:15:26,340
But the basis of
finance is arbitrage

325
00:15:26,340 --> 00:15:30,180
has been a part of finance
for, again, thousands of years.

326
00:15:30,180 --> 00:15:33,360
If I can buy something
in France and sell it

327
00:15:33,360 --> 00:15:36,310
for a different
price in Switzerland,

328
00:15:36,310 --> 00:15:39,720
and it doesn't cost too much to
travel the roads between France

329
00:15:39,720 --> 00:15:42,120
and Switzerland, I might
buy it in one country,

330
00:15:42,120 --> 00:15:43,720
sell it in another.

331
00:15:43,720 --> 00:15:47,370
And that's called locational
or geographic arbitrage.

332
00:15:47,370 --> 00:15:51,390
In a modern digital
age, digital assets

333
00:15:51,390 --> 00:15:55,390
don't have much
locational arbitrage.

334
00:15:55,390 --> 00:15:57,450
Oil still has
locational arbitrage

335
00:15:57,450 --> 00:16:00,570
because you might be
buying it in the Gulf Coast

336
00:16:00,570 --> 00:16:02,910
and selling it in Africa.

337
00:16:02,910 --> 00:16:05,100
Or, you know, there might
be locational arbitrage

338
00:16:05,100 --> 00:16:06,390
in physical commodities.

339
00:16:06,390 --> 00:16:08,850
But in digital financial
assets, there's

340
00:16:08,850 --> 00:16:11,160
far little locational arbitrage.

341
00:16:11,160 --> 00:16:12,870
And it's interesting,
in Korea's case,

342
00:16:12,870 --> 00:16:15,120
there was a
locational arbitrage.

343
00:16:15,120 --> 00:16:16,860
What was this about?

344
00:16:16,860 --> 00:16:20,880
And it was because it was
hard for regulatory reasons.

345
00:16:20,880 --> 00:16:22,950
So there was a kimchi
premium, literally,

346
00:16:22,950 --> 00:16:26,820
for quite some
time, because it was

347
00:16:26,820 --> 00:16:29,880
hard to move Bitcoin
across the borders

348
00:16:29,880 --> 00:16:33,330
for regulatory
constraints and so forth.

349
00:16:33,330 --> 00:16:34,450
But now, we've got--

350
00:16:34,450 --> 00:16:35,520
Tom, you [INAUDIBLE].

351
00:16:35,520 --> 00:16:38,040
STUDENT: Yeah, when we
talk about bank capital

352
00:16:38,040 --> 00:16:41,430
requirements, does
US Federal Reserve

353
00:16:41,430 --> 00:16:43,860
require banks to hold dollars?

354
00:16:43,860 --> 00:16:50,210
Or are banks allowed to hold
any currency [INAUDIBLE]??

355
00:16:50,210 --> 00:16:51,960
GARY GENSLER: Has
anybody been in banking?

356
00:16:51,960 --> 00:16:53,210
Want to answer Tom's question?

357
00:16:56,690 --> 00:17:00,530
STUDENT: Whether or not
bank capital, bank reserves,

358
00:17:00,530 --> 00:17:02,510
have to be held in
dollar denominated--

359
00:17:05,900 --> 00:17:09,960
GARY GENSLER: Josh, you've spent
a lifetime in banking, right?

360
00:17:09,960 --> 00:17:11,900
STUDENT: Yeah, so
there's a lot of rules.

361
00:17:11,900 --> 00:17:17,597
A lot of the rules are based
on the liquidity of the assets

362
00:17:17,597 --> 00:17:18,430
that you're holding.

363
00:17:18,430 --> 00:17:21,470
So if you're holding
capital, if you hold it

364
00:17:21,470 --> 00:17:23,569
in treasuries, which
are very liquid,

365
00:17:23,569 --> 00:17:26,780
and you could get out of them
in a certain amount of time,

366
00:17:26,780 --> 00:17:30,290
there's a big premium
to hold your capital

367
00:17:30,290 --> 00:17:32,360
in those types of assets.

368
00:17:32,360 --> 00:17:35,750
So I think the rules
don't necessarily

369
00:17:35,750 --> 00:17:39,650
specify whether it's
dollars or another currency,

370
00:17:39,650 --> 00:17:44,370
but they heavily
favor very liquid.

371
00:17:44,370 --> 00:17:45,920
GARY GENSLER: So Josh is right.

372
00:17:45,920 --> 00:17:48,260
It's basically--
it's all brought back

373
00:17:48,260 --> 00:17:52,010
to the home nation's
currency unit,

374
00:17:52,010 --> 00:17:54,910
dollars or euros or renminbi.

375
00:17:54,910 --> 00:17:58,200
In some accounting books
it's brought back into that,

376
00:17:58,200 --> 00:18:00,620
but there's different
haircuts or weights

377
00:18:00,620 --> 00:18:05,580
depending upon some
perceived model of liquidity.

378
00:18:05,580 --> 00:18:10,820
So a US treasury bond versus
a German government bond

379
00:18:10,820 --> 00:18:16,522
might have similar
liquidity and the regulators

380
00:18:16,522 --> 00:18:17,480
will count it the same.

381
00:18:17,480 --> 00:18:20,840
But you're, in a
very real time basis,

382
00:18:20,840 --> 00:18:23,990
using the foreign exchange
rate to bring it back

383
00:18:23,990 --> 00:18:25,447
to the unit of
your home country.

384
00:18:25,447 --> 00:18:26,030
STUDENT: Yeah.

385
00:18:26,030 --> 00:18:27,447
I'm jumping the
shark a little bit

386
00:18:27,447 --> 00:18:29,540
on my knowledge of finance
and central banking.

387
00:18:29,540 --> 00:18:31,490
But thinking about
whether or not

388
00:18:31,490 --> 00:18:34,500
Bitcoin becomes a
reserve currency,

389
00:18:34,500 --> 00:18:39,750
or whether or not banks hold
it, to Guillermo's point of--

390
00:18:39,750 --> 00:18:43,550
if central banks aren't
allowing financial institutions

391
00:18:43,550 --> 00:18:47,500
to get credit for holding
bitcoin [INAUDIBLE]..

392
00:18:47,500 --> 00:18:48,860
Why would they have to do it?

393
00:18:48,860 --> 00:18:50,693
GARY GENSLER: Well,
currently, central banks

394
00:18:50,693 --> 00:18:53,630
are not that favorable to
Bitcoin and cryptocurrencies,

395
00:18:53,630 --> 00:18:55,070
but they're probably right.

396
00:18:55,070 --> 00:18:58,100
There's not a deep history,
there's not a lot of liquidity,

397
00:18:58,100 --> 00:19:00,350
and there's high volatility.

398
00:19:00,350 --> 00:19:02,300
And the underlying
markets are highly

399
00:19:02,300 --> 00:19:05,150
susceptible to manipulation.

400
00:19:05,150 --> 00:19:08,900
We don't know for sure
what the real pricing

401
00:19:08,900 --> 00:19:10,610
is at any given time.

402
00:19:10,610 --> 00:19:12,620
But in the hypothetical
world, where

403
00:19:12,620 --> 00:19:15,350
it's be becoming
largely adopted,

404
00:19:15,350 --> 00:19:18,590
I would suspect that central
banks around the globe

405
00:19:18,590 --> 00:19:21,110
would have some capital
regime that would treat it

406
00:19:21,110 --> 00:19:23,810
more favorably than
it's treated today

407
00:19:23,810 --> 00:19:28,935
but less favorably than
government Fiat currency.

408
00:19:28,935 --> 00:19:29,560
STUDENT: Right.

409
00:19:29,560 --> 00:19:31,510
I mean, you trust
the German bond

410
00:19:31,510 --> 00:19:35,290
because you trust the German
government [INAUDIBLE]..

411
00:19:35,290 --> 00:19:36,740
GARY GENSLER:
Generally speaking.

412
00:19:36,740 --> 00:19:40,770
STUDENT: More so than you
do decentralized governance

413
00:19:40,770 --> 00:19:41,882
structure.

414
00:19:41,882 --> 00:19:43,840
GARY GENSLER: So there
are three types of money

415
00:19:43,840 --> 00:19:45,520
that central banks
are involved in.

416
00:19:45,520 --> 00:19:46,540
Does anybody remember?

417
00:19:46,540 --> 00:19:49,540
There's even a chart
up here you could see,

418
00:19:49,540 --> 00:19:50,740
you can grab it from.

419
00:19:53,570 --> 00:19:55,315
Akira?

420
00:19:55,315 --> 00:20:00,570
STUDENT: [INAUDIBLE] central
bank databases Fiat authorized?

421
00:20:00,570 --> 00:20:01,620
GARY GENSLER: Fiat what?

422
00:20:01,620 --> 00:20:02,730
STUDENT: Fiat collateralized.

423
00:20:02,730 --> 00:20:03,665
GARY GENSLER: Fiat
collateralized.

424
00:20:03,665 --> 00:20:05,350
No, we're going to get there.

425
00:20:05,350 --> 00:20:07,750
That's going to be about
stable value tokens.

426
00:20:07,750 --> 00:20:09,224
I'm talking about--

427
00:20:09,224 --> 00:20:10,960
STUDENT: M1 M2 and M3.

428
00:20:10,960 --> 00:20:13,660
GARY GENSLER: All right, so
we talk about M1, M2, M3.

429
00:20:13,660 --> 00:20:16,240
So what's the what's
the first thing

430
00:20:16,240 --> 00:20:19,550
that you might think about?

431
00:20:19,550 --> 00:20:20,260
What's that?

432
00:20:20,260 --> 00:20:23,830
I heard the word "cash," but--

433
00:20:23,830 --> 00:20:25,210
some deposits.

434
00:20:25,210 --> 00:20:28,010
But starting with
just cash is money.

435
00:20:28,010 --> 00:20:29,110
So did I make it green?

436
00:20:29,110 --> 00:20:30,080
Yes!

437
00:20:30,080 --> 00:20:31,100
There we go.

438
00:20:31,100 --> 00:20:31,600
Thank you.

439
00:20:31,600 --> 00:20:32,475
I got some help here.

440
00:20:32,475 --> 00:20:33,560
Cash.

441
00:20:33,560 --> 00:20:36,730
That's one form of money,
and we all have it or--

442
00:20:36,730 --> 00:20:38,890
actually, I've never asked.

443
00:20:38,890 --> 00:20:41,020
I always have cash in my pocket.

444
00:20:41,020 --> 00:20:43,780
How many people in this room
actually currently have cash

445
00:20:43,780 --> 00:20:47,510
of some country in their pocket?

446
00:20:47,510 --> 00:20:51,250
So we're down to
about 70%, but 30%

447
00:20:51,250 --> 00:20:53,947
have no cash in their pocket.

448
00:20:53,947 --> 00:20:55,030
You're putting yours away?

449
00:20:55,030 --> 00:20:55,750
STUDENT: $1.00.

450
00:20:55,750 --> 00:20:56,980
GARY GENSLER: $1.00.

451
00:20:56,980 --> 00:21:00,500
If we were in Japan, it would
probably be higher though.

452
00:21:00,500 --> 00:21:01,000
Right?

453
00:21:03,660 --> 00:21:06,000
So one form of money is cash.

454
00:21:06,000 --> 00:21:08,668
Another form of money
that the central banks--

455
00:21:08,668 --> 00:21:09,960
STUDENT: Central bank reserves.

456
00:21:09,960 --> 00:21:10,910
GARY GENSLER: Central
bank reserves.

457
00:21:10,910 --> 00:21:12,202
Let's see if I made that green.

458
00:21:12,202 --> 00:21:13,020
Yes!

459
00:21:13,020 --> 00:21:14,460
So central bank reserves.

460
00:21:14,460 --> 00:21:17,550
Again, I'm just going back
through this from Tuesday.

461
00:21:17,550 --> 00:21:21,660
Reserves started, but because
they were commercial banks--

462
00:21:21,660 --> 00:21:24,090
and when governments set up
central banks, they said,

463
00:21:24,090 --> 00:21:27,460
you have to save and
put some of your money--

464
00:21:27,460 --> 00:21:30,820
a reserve-- with
the central bank.

465
00:21:30,820 --> 00:21:33,450
So that we might give
you deposit insurance.

466
00:21:33,450 --> 00:21:38,670
We might give you
access to liquidity

467
00:21:38,670 --> 00:21:43,230
in hard times, which
is called opening up

468
00:21:43,230 --> 00:21:46,200
some liquidity or
lending facilities.

469
00:21:46,200 --> 00:21:48,160
So you have to keep
a reserve from us.

470
00:21:48,160 --> 00:21:49,950
That's where the word came from.

471
00:21:49,950 --> 00:21:51,813
But it's a form of money.

472
00:21:51,813 --> 00:21:53,730
And the third form of
money, the form of money

473
00:21:53,730 --> 00:21:57,570
that almost everybody in this
room uses on a daily basis?

474
00:21:57,570 --> 00:22:00,840
The real form of money that
we use almost all the time?

475
00:22:04,130 --> 00:22:04,910
So we had cash.

476
00:22:04,910 --> 00:22:06,590
We had central bank reserves.

477
00:22:06,590 --> 00:22:09,980
What do we actually
use almost every day?

478
00:22:09,980 --> 00:22:10,650
What's that?

479
00:22:10,650 --> 00:22:11,400
STUDENT: Deposits.

480
00:22:11,400 --> 00:22:12,720
GARY GENSLER: Deposits.

481
00:22:12,720 --> 00:22:15,020
So our bank deposits,
we are actually

482
00:22:15,020 --> 00:22:17,120
transacting-- when
we go into Starbucks,

483
00:22:17,120 --> 00:22:20,030
I know it doesn't feel this
way, but you're actually

484
00:22:20,030 --> 00:22:22,190
moving some of
your bank deposits

485
00:22:22,190 --> 00:22:23,285
to their bank deposits.

486
00:22:26,050 --> 00:22:29,807
That's how we're
really moving money.

487
00:22:29,807 --> 00:22:31,390
So those are the
three forms of money.

488
00:22:31,390 --> 00:22:37,480
We never see Federal Reserve
or central bank reserves,

489
00:22:37,480 --> 00:22:40,810
we just see the cash
in the bank deposits.

490
00:22:40,810 --> 00:22:41,310
Kelly?

491
00:22:41,310 --> 00:22:46,010
STUDENT: You talked about being
able to facilitate lending

492
00:22:46,010 --> 00:22:47,390
when times are tough.

493
00:22:47,390 --> 00:22:53,150
So we go back a decade, how
have the rules sort of change

494
00:22:53,150 --> 00:22:57,890
to prepare for that
scenario where banks--

495
00:22:57,890 --> 00:23:00,320
were the central bank
would need the ability

496
00:23:00,320 --> 00:23:02,330
to have a lot [INAUDIBLE]?

497
00:23:02,330 --> 00:23:04,190
GARY GENSLER: So Kelly's
asking, you know,

498
00:23:04,190 --> 00:23:07,340
we all lived through
the financial crisis.

499
00:23:07,340 --> 00:23:10,280
How many of you in
2008 were in banking?

500
00:23:10,280 --> 00:23:12,290
In any way?

501
00:23:12,290 --> 00:23:14,990
All right.

502
00:23:14,990 --> 00:23:16,110
Oh Josh, you--

503
00:23:20,590 --> 00:23:23,410
Alpha, where were
you working in 2008?

504
00:23:23,410 --> 00:23:24,830
You were at Goldman Sachs.

505
00:23:24,830 --> 00:23:26,890
Yeah, I've heard of them.

506
00:23:26,890 --> 00:23:29,060
The other people that
raised their hands?

507
00:23:29,060 --> 00:23:30,670
Who else raised their hand?

508
00:23:30,670 --> 00:23:32,500
Where were you working?

509
00:23:32,500 --> 00:23:35,445
STUDENT: I was working for
Bank of Tokyo Mitsubishi.

510
00:23:35,445 --> 00:23:37,070
GARY GENSLER: Bank
of Tokyo Mitsubishi.

511
00:23:37,070 --> 00:23:37,737
I've heard them.

512
00:23:37,737 --> 00:23:38,380
Very big bank.

513
00:23:38,380 --> 00:23:39,850
Josh?

514
00:23:39,850 --> 00:23:41,178
A hedge fund, right?

515
00:23:41,178 --> 00:23:42,470
STUDENT: A mortgage hedge fund.

516
00:23:42,470 --> 00:23:46,000
GARY GENSLER: A
mortgage hedge fund.

517
00:23:46,000 --> 00:23:46,670
Yeah.

518
00:23:46,670 --> 00:23:48,330
Yeah, uh-huh.

519
00:23:48,330 --> 00:23:51,780
We thank you, Josh.

520
00:23:51,780 --> 00:23:55,980
So the question is, how
would Josh, Alfa or Kira

521
00:23:55,980 --> 00:23:59,360
get money today?

522
00:23:59,360 --> 00:24:02,480
Who-- did anybody work
in central banking?

523
00:24:02,480 --> 00:24:04,780
No.

524
00:24:04,780 --> 00:24:10,620
So the 2008 crisis came along,
and Josh, we let him fail.

525
00:24:10,620 --> 00:24:12,243
He was a mortgage hedge fund?

526
00:24:12,243 --> 00:24:13,410
STUDENT: We did pretty good.

527
00:24:17,010 --> 00:24:17,940
GARY GENSLER: OK.

528
00:24:17,940 --> 00:24:19,210
What's that?

529
00:24:19,210 --> 00:24:20,550
STUDENT: He let us fail.

530
00:24:20,550 --> 00:24:21,900
GARY GENSLER: He let us fail.

531
00:24:21,900 --> 00:24:24,810
Goldman Sachs got a bit
of government support.

532
00:24:28,050 --> 00:24:32,460
Bank of Tokyo Mitsubishi, did
you get any government support?

533
00:24:32,460 --> 00:24:32,970
STUDENT: No.

534
00:24:32,970 --> 00:24:39,110
We had some [INAUDIBLE],, but
not critical [INAUDIBLE]..

535
00:24:39,110 --> 00:24:40,720
GARY GENSLER: It
was not critical.

536
00:24:40,720 --> 00:24:43,260
But the central banks
around the globe,

537
00:24:43,260 --> 00:24:48,120
particularly here in the
US, provided liquidity

538
00:24:48,120 --> 00:24:49,290
in multiple ways.

539
00:24:49,290 --> 00:24:50,970
But it wasn't
going to be enough.

540
00:24:50,970 --> 00:24:53,490
They were providing
liquidity, one,

541
00:24:53,490 --> 00:24:57,540
for some banks that were
failing, Bear Stearns in 2007

542
00:24:57,540 --> 00:24:58,500
failed.

543
00:24:58,500 --> 00:25:00,330
And through a legal
authority they

544
00:25:00,330 --> 00:25:03,540
had from Congress
from the 1930s,

545
00:25:03,540 --> 00:25:06,810
where you could actually lend
to a financial institution--

546
00:25:06,810 --> 00:25:10,790
actually, you could lend
to any company in society.

547
00:25:10,790 --> 00:25:15,060
But they had never
used the authority.

548
00:25:15,060 --> 00:25:16,560
But they used the
authority that you

549
00:25:16,560 --> 00:25:19,860
could lend versus collateral.

550
00:25:19,860 --> 00:25:23,400
And that was done with
Bear Stearns in 2007,

551
00:25:23,400 --> 00:25:26,480
and then it was done
again in 2008 for others.

552
00:25:26,480 --> 00:25:28,230
And what did they do
with Lehman Brothers?

553
00:25:28,230 --> 00:25:30,510
On the fateful weekend that
Lehman Brothers failed,

554
00:25:30,510 --> 00:25:32,800
what did the Federal Reserve
say to Lehman Brothers?

555
00:25:32,800 --> 00:25:33,960
STUDENT: Let them go bust.

556
00:25:33,960 --> 00:25:35,918
GARY GENSLER: James said
they let them go bust.

557
00:25:35,918 --> 00:25:36,810
That is correct.

558
00:25:36,810 --> 00:25:39,060
They said, we can't
use this authority.

559
00:25:39,060 --> 00:25:44,060
And then we all know
in the history books

560
00:25:44,060 --> 00:25:47,910
it's written how that fateful
week in September of 2008,

561
00:25:47,910 --> 00:25:49,940
then everything falls bust.

562
00:25:49,940 --> 00:25:54,840
Because there was uncertainty
in the marketplace.

563
00:25:54,840 --> 00:25:56,480
And so what they
did next, Kelly--

564
00:25:56,480 --> 00:25:58,827
so they were using
traditional authorities.

565
00:25:58,827 --> 00:26:00,410
And what they did
next is they started

566
00:26:00,410 --> 00:26:03,397
to test the limits of
their legal authority,

567
00:26:03,397 --> 00:26:05,480
along with the Treasury
Department and the Federal

568
00:26:05,480 --> 00:26:08,210
Deposit Insurance
Corporation, and they put

569
00:26:08,210 --> 00:26:10,400
a series of other things in.

570
00:26:10,400 --> 00:26:14,030
And under an old authority of
the Federal Deposit Insurance

571
00:26:14,030 --> 00:26:16,280
Corporation, they
actually guaranteed

572
00:26:16,280 --> 00:26:22,610
all debts of the banking system
in the US for a period of time.

573
00:26:22,610 --> 00:26:24,410
Under other authorities,
they figured out

574
00:26:24,410 --> 00:26:29,300
how to put a guarantee
on money market funds.

575
00:26:29,300 --> 00:26:32,450
It was about $2 trillion
in money market funds.

576
00:26:32,450 --> 00:26:36,110
All of these almost
extra legal authorities.

577
00:26:36,110 --> 00:26:41,180
I mean, they were not written
right into congressional law,

578
00:26:41,180 --> 00:26:43,070
but they pushed the
outer boundaries.

579
00:26:43,070 --> 00:26:45,680
And we knew when
Larry Lessig was here

580
00:26:45,680 --> 00:26:48,170
he said that every contract
has some ambiguity.

581
00:26:48,170 --> 00:26:50,450
Every law has some ambiguity.

582
00:26:50,450 --> 00:26:52,760
And the best lawyers at the
Federal Reserve, the best

583
00:26:52,760 --> 00:26:55,430
lawyers at the US Department
of Treasury and elsewhere

584
00:26:55,430 --> 00:26:58,020
were thinking, where
is the ambiguity?

585
00:26:58,020 --> 00:27:04,520
And can we use that uncertainty
in the law to save the system?

586
00:27:04,520 --> 00:27:06,080
And then they went to Congress.

587
00:27:06,080 --> 00:27:08,750
They went to Congress and
asked for $700 billion.

588
00:27:08,750 --> 00:27:13,830
When Hank Paulson Treasury
Secretary went to Congress,

589
00:27:13,830 --> 00:27:15,390
they sent a four
page, but it might

590
00:27:15,390 --> 00:27:19,320
have been three page legislative
request for $700 billion.

591
00:27:19,320 --> 00:27:24,970
I remember I first read
that three or four page

592
00:27:24,970 --> 00:27:29,650
request, because then a senator
from New York, Hillary Clinton,

593
00:27:29,650 --> 00:27:31,450
asked me, this thing's come up.

594
00:27:31,450 --> 00:27:33,760
Will you read it and
give me your advice?

595
00:27:33,760 --> 00:27:35,830
It didn't take me long
to read three pages.

596
00:27:35,830 --> 00:27:38,260
It was an outright
request for $700 billion.

597
00:27:38,260 --> 00:27:40,480
It finally did pass.

598
00:27:40,480 --> 00:27:43,120
It first failed in the
House of Representatives.

599
00:27:43,120 --> 00:27:48,730
It became, I think, a couple
hundred page document.

600
00:27:48,730 --> 00:27:53,110
But $700 billion of US taxpayer
money went to the treasury,

601
00:27:53,110 --> 00:27:56,510
and the treasury then
lended out and so forth.

602
00:27:56,510 --> 00:27:57,690
So it was multiple things.

603
00:27:57,690 --> 00:27:59,260
10 years later--

604
00:27:59,260 --> 00:28:01,570
10 years later, a
law here, Dodd-Frank,

605
00:28:01,570 --> 00:28:04,720
limits some of what the
federal government can do.

606
00:28:04,720 --> 00:28:09,470
It tightened the ability
to be the fire department

607
00:28:09,470 --> 00:28:13,400
in the midst of a raging fire.

608
00:28:13,400 --> 00:28:16,562
And there's lively
public debate recently.

609
00:28:16,562 --> 00:28:18,770
Tim Geithner, who was Treasury
Secretary at the time,

610
00:28:18,770 --> 00:28:20,720
has come out publicly,
and Ben Bernanke,

611
00:28:20,720 --> 00:28:23,178
I think, and they've written
an Op-Ed and some other pieces

612
00:28:23,178 --> 00:28:26,150
saying, it would be good to
loosen some of those Dodd-Frank

613
00:28:26,150 --> 00:28:27,710
restrictions.

614
00:28:27,710 --> 00:28:29,210
But there's others
on the other side

615
00:28:29,210 --> 00:28:32,720
who have said, no, we need to
keep those restrictions tight.

616
00:28:32,720 --> 00:28:35,900
Because if the restrictions are
loose, then we have something

617
00:28:35,900 --> 00:28:37,510
called moral hazard.

618
00:28:37,510 --> 00:28:40,590
Does anybody know what
moral hazard might be?

619
00:28:43,650 --> 00:28:47,800
STUDENT: I think it's
you run a risk that

620
00:28:47,800 --> 00:28:50,860
is not commensurate
with what you can do.

621
00:28:50,860 --> 00:28:55,043
But if you're confident
because [INAUDIBLE]..

622
00:28:55,043 --> 00:28:56,710
GARY GENSLER: And who
will run the risk?

623
00:28:56,710 --> 00:28:59,560
STUDENT: It could be a
bank or it could be--

624
00:28:59,560 --> 00:29:01,860
GARY GENSLER: So the banks
or financial institutions,

625
00:29:01,860 --> 00:29:03,610
if you know you're
going to be bailed out,

626
00:29:03,610 --> 00:29:04,660
will take more risk.

627
00:29:04,660 --> 00:29:10,600
It's human-- it's who we are.

628
00:29:10,600 --> 00:29:13,330
So my father had a small
business in Baltimore.

629
00:29:13,330 --> 00:29:15,580
He never had more
than 30 employees.

630
00:29:15,580 --> 00:29:20,890
It was a cigarette and candy
and pinball machine business.

631
00:29:20,890 --> 00:29:23,680
If he couldn't make payroll on
Friday, the city of Baltimore

632
00:29:23,680 --> 00:29:26,670
was not going to help
him out on Monday.

633
00:29:26,670 --> 00:29:29,930
His employees might give him
another week or two-- hey, Sam!

634
00:29:29,930 --> 00:29:32,370
My dad's name is Sam.

635
00:29:32,370 --> 00:29:34,440
We'll give Mr. Sam another week.

636
00:29:34,440 --> 00:29:38,390
But two or three weeks later,
they would have all quit.

637
00:29:38,390 --> 00:29:44,570
But the banks, so large, so
tied into their economies--

638
00:29:44,570 --> 00:29:46,760
for many decades.

639
00:29:46,760 --> 00:29:49,460
2008 wasn't the only time.

640
00:29:49,460 --> 00:29:51,110
The sovereign steps in.

641
00:29:51,110 --> 00:29:53,030
The central bank steps in.

642
00:29:53,030 --> 00:29:54,590
So Kelly, the answer
to your question

643
00:29:54,590 --> 00:29:58,760
is, there's probably less
ability for the central bank

644
00:29:58,760 --> 00:30:00,770
in the US to step in.

645
00:30:00,770 --> 00:30:03,410
They still have very
real tools to be

646
00:30:03,410 --> 00:30:05,780
the firefighter in the
middle of a raging fire,

647
00:30:05,780 --> 00:30:08,870
but they're a little
bit more constrained.

648
00:30:08,870 --> 00:30:11,390
We as a society spoke through
our Congress and said,

649
00:30:11,390 --> 00:30:14,490
we don't want bailouts.

650
00:30:14,490 --> 00:30:17,430
But in the midst of the
next crisis, some Treasury

651
00:30:17,430 --> 00:30:19,710
Secretary, and some
Federal Reserve chair,

652
00:30:19,710 --> 00:30:23,280
and maybe some president,
will be testing the limits

653
00:30:23,280 --> 00:30:25,760
of those statutory authorities.

654
00:30:25,760 --> 00:30:28,287
And they might be knocking on
the doors of Congress again.

655
00:30:28,287 --> 00:30:30,120
STUDENT: I guess my
question is more testing

656
00:30:30,120 --> 00:30:33,190
out the implications
of if we were to have--

657
00:30:33,190 --> 00:30:37,980
for example, if Bitcoin were to
be backed by central banks what

658
00:30:37,980 --> 00:30:42,875
those implications would be that
say, all of a sudden, instead

659
00:30:42,875 --> 00:30:44,920
of a ton of Bitcoin
had to be issued,

660
00:30:44,920 --> 00:30:47,490
we probably all know there's
a restriction on the supply

661
00:30:47,490 --> 00:30:48,510
there.

662
00:30:48,510 --> 00:30:49,430
So--

663
00:30:49,430 --> 00:30:49,710
GARY GENSLER: All right.

664
00:30:49,710 --> 00:30:52,150
Anybody want to take the other
side of Kelly's question?

665
00:30:52,150 --> 00:30:56,190
Bitcoin's now the
currency that's--

666
00:30:56,190 --> 00:31:00,830
hypothetically, the
Bitcoin or some crypto.

667
00:31:00,830 --> 00:31:03,870
Alin would tell us it
would be some other crypto.

668
00:31:03,870 --> 00:31:07,470
Maybe it's Algorand
or something.

669
00:31:07,470 --> 00:31:08,190
What happens?

670
00:31:08,190 --> 00:31:11,850
What's going to happen to the
flexibility of a central bank

671
00:31:11,850 --> 00:31:15,390
and a government to bail
out their economy if it

672
00:31:15,390 --> 00:31:16,745
was a crypto?

673
00:31:16,745 --> 00:31:17,850
STUDENT: It goes down.

674
00:31:17,850 --> 00:31:19,550
Kind of like the
example of the EU.

675
00:31:20,773 --> 00:31:22,440
GARY GENSLER: Remind
me your first name?

676
00:31:22,440 --> 00:31:23,070
STUDENT: Isaac.

677
00:31:23,070 --> 00:31:23,903
GARY GENSLER: Isaac.

678
00:31:23,903 --> 00:31:25,210
So Isaac says it goes down.

679
00:31:25,210 --> 00:31:25,940
What do you mean?

680
00:31:25,940 --> 00:31:27,510
It means their
flexibility goes down?

681
00:31:30,780 --> 00:31:31,350
Tom?

682
00:31:31,350 --> 00:31:33,142
STUDENT: I mean, if
it's a crypto currency,

683
00:31:33,142 --> 00:31:36,580
like we know from
today, it's impossible.

684
00:31:36,580 --> 00:31:37,080
Right?

685
00:31:37,080 --> 00:31:41,430
I mean, there has to be
a finite set of coins,

686
00:31:41,430 --> 00:31:43,180
tokens, whatever they are.

687
00:31:43,180 --> 00:31:48,228
And there has to be consensus
protocols. it has to be--

688
00:31:48,228 --> 00:31:49,020
GARY GENSLER: Eric?

689
00:31:49,020 --> 00:31:51,270
So Tom contends--

690
00:31:51,270 --> 00:31:53,310
Isaac says it gets a lot harder.

691
00:31:53,310 --> 00:31:55,510
Tom says it's not just
harder, it's impossible.

692
00:31:55,510 --> 00:31:56,010
Eric?

693
00:31:56,010 --> 00:31:57,600
STUDENT: It depends
on the design

694
00:31:57,600 --> 00:31:59,850
of the cryptocurrency
platform that underlines

695
00:31:59,850 --> 00:32:01,230
the crypto that's being used.

696
00:32:01,230 --> 00:32:06,900
Because we will see
maybe later in this class

697
00:32:06,900 --> 00:32:11,280
there are some known
collateralized stable coins

698
00:32:11,280 --> 00:32:13,740
that actually have
smart contracts that

699
00:32:13,740 --> 00:32:18,210
enforce money supply policies
to keep [INAUDIBLE] stable,

700
00:32:18,210 --> 00:32:20,910
which is really similar
to handling money

701
00:32:20,910 --> 00:32:23,740
supply in an automatic way.

702
00:32:23,740 --> 00:32:25,900
GARY GENSLER: So
Eric is saying--

703
00:32:25,900 --> 00:32:26,780
we'll take one more.

704
00:32:26,780 --> 00:32:27,820
STUDENT: Well in the
case of Bitcoin rates--

705
00:32:27,820 --> 00:32:28,525
GARY GENSLER: Remind
me your first name.

706
00:32:28,525 --> 00:32:29,300
STUDENT: I'm Santosh.

707
00:32:29,300 --> 00:32:30,010
GARY GENSLER: What's that?

708
00:32:30,010 --> 00:32:30,580
STUDENT: Santosh.

709
00:32:30,580 --> 00:32:31,405
GARY GENSLER: Santosh.

710
00:32:31,405 --> 00:32:33,197
STUDENT: [INAUDIBLE]
like the mining system

711
00:32:33,197 --> 00:32:34,370
contains protocol.

712
00:32:34,370 --> 00:32:35,845
[INAUDIBLE]

713
00:32:35,845 --> 00:32:38,160
GARY GENSLER: So what Eric
and Santosh are saying

714
00:32:38,160 --> 00:32:41,640
is there's some flexibility--
either flexibility written

715
00:32:41,640 --> 00:32:44,610
into the algorithm,
or flexibility

716
00:32:44,610 --> 00:32:50,490
in that the 51%, if there's
a consensus or a hard fork,

717
00:32:50,490 --> 00:32:53,170
you might be able to adjust.

718
00:32:53,170 --> 00:32:55,570
But at its core, it's probably--

719
00:32:55,570 --> 00:32:58,130
as Isaac introduced
it, it's harder.

720
00:32:58,130 --> 00:33:02,120
I don't know if it's impossible,
but I think it's a lot harder.

721
00:33:02,120 --> 00:33:05,630
Just like the European Union has
a lot harder time helping out

722
00:33:05,630 --> 00:33:09,680
Greece because you now have
multiple countries involved

723
00:33:09,680 --> 00:33:10,820
in the decision making.

724
00:33:10,820 --> 00:33:15,530
The consensus-- what
satisfies German economics

725
00:33:15,530 --> 00:33:17,660
and German politics
is different than what

726
00:33:17,660 --> 00:33:21,390
might satisfy Greek
economics and Greek politics.

727
00:33:21,390 --> 00:33:22,442
[INAUDIBLE]

728
00:33:22,442 --> 00:33:24,400
STUDENT: So I'm a bit
confused, because I guess

729
00:33:24,400 --> 00:33:25,820
we're switching terminology.

730
00:33:25,820 --> 00:33:28,070
So when you say central
banks and cryptocurrency,

731
00:33:28,070 --> 00:33:30,500
you don't mean central
banks and CBDCs?

732
00:33:30,500 --> 00:33:32,150
You mean something else?

733
00:33:32,150 --> 00:33:33,808
It's not-- [INAUDIBLE].

734
00:33:33,808 --> 00:33:34,850
GARY GENSLER: Yeah, yeah.

735
00:33:34,850 --> 00:33:38,570
I think we're dealing in
a hypothetical discussion.

736
00:33:38,570 --> 00:33:43,640
What if a cryptocurrency
were to actually take hold,

737
00:33:43,640 --> 00:33:45,600
like a Bitcoin, in the future?

738
00:33:45,600 --> 00:33:48,360
I think that's what your
questions were about.

739
00:33:48,360 --> 00:33:48,860
Eric?

740
00:33:48,860 --> 00:33:51,282
STUDENT: [INAUDIBLE]
popular enough and used.

741
00:33:51,282 --> 00:33:52,490
GARY GENSLER: Popular enough.

742
00:33:52,490 --> 00:33:55,100
Used enough as a store
of value, used enough as

743
00:33:55,100 --> 00:33:56,920
a medium of exchange.

744
00:33:56,920 --> 00:33:59,990
And then there was a crisis.

745
00:33:59,990 --> 00:34:03,660
Very different than a central
bank digital currency.

746
00:34:03,660 --> 00:34:06,120
Yes.

747
00:34:06,120 --> 00:34:06,940
[INAUDIBLE]

748
00:34:06,940 --> 00:34:10,139
STUDENT: [INAUDIBLE] sort
of like an old days stat

749
00:34:10,139 --> 00:34:11,739
specialist on the
foreign exchange.

750
00:34:11,739 --> 00:34:14,340
Would they make markets
know that there was--

751
00:34:14,340 --> 00:34:18,250
if there was hard selling, then
they could actually come in,

752
00:34:18,250 --> 00:34:21,310
be a backstop or [INAUDIBLE].

753
00:34:21,310 --> 00:34:24,460
GARY GENSLER: Andrew's asking,
could the private sector be--

754
00:34:24,460 --> 00:34:26,070
STUDENT: [INAUDIBLE]
the central bank

755
00:34:26,070 --> 00:34:29,920
serve sort of like a
private sector really works.

756
00:34:29,920 --> 00:34:32,199
GARY GENSLER: So could a
central bank in essence

757
00:34:32,199 --> 00:34:36,489
come in and support
a cryptocurrency?

758
00:34:36,489 --> 00:34:38,409
To some extent, for sure.

759
00:34:38,409 --> 00:34:40,480
Depends on what
their reserves are.

760
00:34:40,480 --> 00:34:42,040
And they also, of
course, are part

761
00:34:42,040 --> 00:34:44,350
of a government that has
a taxing authority, has

762
00:34:44,350 --> 00:34:45,570
a military.

763
00:34:45,570 --> 00:34:47,860
I mean, there's a
lot of extra might

764
00:34:47,860 --> 00:34:51,350
that comes with being
part of a government.

765
00:34:51,350 --> 00:34:53,230
So I think the answer is yes.

766
00:34:53,230 --> 00:34:55,900
But multi-jurisdictional
currencies

767
00:34:55,900 --> 00:34:58,600
usually fail on some level.

768
00:34:58,600 --> 00:35:01,390
The euro is still an experiment.

769
00:35:01,390 --> 00:35:04,850
It may still fail some
decades in the future.

770
00:35:04,850 --> 00:35:06,440
It's been tested.

771
00:35:06,440 --> 00:35:09,040
But multi-jurisdictional
currencies

772
00:35:09,040 --> 00:35:14,720
in the past, high probability
is they usually fail.

773
00:35:14,720 --> 00:35:18,830
Because you don't have one
political system, one unified

774
00:35:18,830 --> 00:35:22,500
set of government accounts,
one taxing authority.

775
00:35:22,500 --> 00:35:24,970
You know, there's a
bunch of challenges.

776
00:35:24,970 --> 00:35:27,740
But let's move on and try to
hit some of the things on--

777
00:35:27,740 --> 00:35:30,890
so that's kind of a review a
little bit of the other day.

778
00:35:30,890 --> 00:35:32,540
We said, what's Fiat currency?

779
00:35:32,540 --> 00:35:34,070
We've talked about it of course.

780
00:35:34,070 --> 00:35:37,760
Fiat currency then
represents all three forms--

781
00:35:37,760 --> 00:35:41,840
bank deposits and notes
and reserves, and it's

782
00:35:41,840 --> 00:35:44,930
accepted for taxes
and it's legal tender.

783
00:35:44,930 --> 00:35:46,910
In this hypothetical
case, we hadn't even

784
00:35:46,910 --> 00:35:49,010
gotten to whether would
Bitcoin be accepted

785
00:35:49,010 --> 00:35:51,250
for taxes with
Bitcoin, or crypto

786
00:35:51,250 --> 00:35:54,440
be accepted as legal tender.

787
00:35:54,440 --> 00:36:00,690
But I would remind everybody,
whatever the future holds,

788
00:36:00,690 --> 00:36:05,040
I think wide adoption in any
country you'd have to address,

789
00:36:05,040 --> 00:36:07,860
will the government
accept it for taxes?

790
00:36:07,860 --> 00:36:11,175
Will the government say it's
accepted as legal tender?

791
00:36:11,175 --> 00:36:16,370
And until and
unless that happens,

792
00:36:16,370 --> 00:36:18,440
usually it wouldn't
have wide adoption,

793
00:36:18,440 --> 00:36:20,390
even in a country
that's in distress.

794
00:36:20,390 --> 00:36:23,125
Again, we're not talking about
central bank digital currency,

795
00:36:23,125 --> 00:36:25,250
but you could say the same
thing about central bank

796
00:36:25,250 --> 00:36:26,270
digital currency.

797
00:36:26,270 --> 00:36:30,980
Unless it's accepted for taxes,
which it probably would be,

798
00:36:30,980 --> 00:36:32,650
or accepted as legal tender.

799
00:36:36,770 --> 00:36:42,800
So I wanted to go back
to private banknotes.

800
00:36:42,800 --> 00:36:46,770
So commercial banks have
issued notes in the past.

801
00:36:46,770 --> 00:36:48,980
Think of this as
basically a piece of paper

802
00:36:48,980 --> 00:36:51,530
that represents a bank deposit.

803
00:36:51,530 --> 00:36:55,340
The same way that we might
be moving mobile money now,

804
00:36:55,340 --> 00:36:56,510
think of it--

805
00:36:56,510 --> 00:36:58,580
but most of this was
done before there

806
00:36:58,580 --> 00:37:01,440
was a time of central banks.

807
00:37:01,440 --> 00:37:05,230
And in the US, it was called
the free banking area.

808
00:37:05,230 --> 00:37:08,110
Andrew Jackson was the seventh
president of the United States,

809
00:37:08,110 --> 00:37:11,385
and he really didn't
like a central bank.

810
00:37:11,385 --> 00:37:13,900
It was called the second
bank of the United States,

811
00:37:13,900 --> 00:37:18,810
but he let it
expire in the 1830s.

812
00:37:18,810 --> 00:37:20,730
Andrew Jackson--
does anybody know

813
00:37:20,730 --> 00:37:23,970
what piece of currency
Andrew Jackson is on?

814
00:37:23,970 --> 00:37:26,630
Where is his portrait?

815
00:37:26,630 --> 00:37:27,650
$20 bill.

816
00:37:27,650 --> 00:37:31,500
The one that we keep passing
around and everything.

817
00:37:31,500 --> 00:37:33,900
Andrew Jackson also was
president in a period of time

818
00:37:33,900 --> 00:37:37,150
that it paid off
the national debt.

819
00:37:37,150 --> 00:37:39,110
Paid it off to zero.

820
00:37:39,110 --> 00:37:44,810
He was a Tennesseean that had
a strong view about finance.

821
00:37:44,810 --> 00:37:46,930
We had a very tough
time in the 1840s,

822
00:37:46,930 --> 00:37:49,430
so I'm not sure we should have
paid off the debt completely.

823
00:37:49,430 --> 00:37:53,970
But the free banking
era, the notes

824
00:37:53,970 --> 00:37:56,880
that went around in the
US for 20 to 30 years,

825
00:37:56,880 --> 00:37:59,490
were all banknotes.

826
00:38:02,110 --> 00:38:04,810
And then the Civil
War came along,

827
00:38:04,810 --> 00:38:08,860
and the US government
needed to finance a war.

828
00:38:08,860 --> 00:38:13,590
And the word "greenback"
comes from 1863,

829
00:38:13,590 --> 00:38:18,540
when the North, the union,
wanted to raise some money.

830
00:38:18,540 --> 00:38:22,450
And they literally started
printing greenbacks.

831
00:38:22,450 --> 00:38:25,450
And also the first
National Bank Act

832
00:38:25,450 --> 00:38:27,540
passed during the Civil War.

833
00:38:27,540 --> 00:38:29,500
And the National Bank
Act set up something

834
00:38:29,500 --> 00:38:32,230
called the Comptroller
of the Currency.

835
00:38:32,230 --> 00:38:34,660
And the Comptroller of the
Currency-- those two words,

836
00:38:34,660 --> 00:38:37,090
they confused me a lot
when I was on Wall Street.

837
00:38:37,090 --> 00:38:39,670
Why was the bank regulator
called the Comptroller

838
00:38:39,670 --> 00:38:41,350
of the Currency?

839
00:38:41,350 --> 00:38:45,520
But in the 1860s, it was to
control all these banknotes

840
00:38:45,520 --> 00:38:50,290
that were being issued by a
bunch of commercial banks, most

841
00:38:50,290 --> 00:38:51,730
of which that failed.

842
00:38:51,730 --> 00:38:53,560
Hundreds failed.

843
00:38:53,560 --> 00:38:55,570
Many of the pieces
of paper would

844
00:38:55,570 --> 00:38:59,590
trade at different values,
discounts to each other

845
00:38:59,590 --> 00:39:02,140
and so forth.

846
00:39:02,140 --> 00:39:03,640
And some say that
the world we're

847
00:39:03,640 --> 00:39:05,620
living in now with
cryptocurrency,

848
00:39:05,620 --> 00:39:10,400
this new market, is a little bit
like the private note period.

849
00:39:10,400 --> 00:39:13,120
Interestingly, there's two
countries or two areas that

850
00:39:13,120 --> 00:39:14,410
still use private banknotes.

851
00:39:14,410 --> 00:39:16,180
Anybody from Hong Kong?

852
00:39:16,180 --> 00:39:19,620
James and Anton.

853
00:39:19,620 --> 00:39:23,410
So who issues your
currency, your cash?

854
00:39:23,410 --> 00:39:25,350
STUDENT: There are three banks.

855
00:39:25,350 --> 00:39:29,490
GARY GENSLER: Bank of China,
HSBC and Standard Chartered.

856
00:39:29,490 --> 00:39:33,630
Bank of China represents the
People's Republic of China.

857
00:39:33,630 --> 00:39:37,140
HSBC represents local
Hong Kong and Standard

858
00:39:37,140 --> 00:39:39,690
Chartered represents Britain.

859
00:39:39,690 --> 00:39:41,330
STUDENT: Actually,
we should also

860
00:39:41,330 --> 00:39:43,890
add the monetary authority.

861
00:39:43,890 --> 00:39:46,080
Because they issue
[INAUDIBLE] $10.

862
00:39:46,080 --> 00:39:49,340
GARY GENSLER: They do, but it's
not really a private bank note.

863
00:39:49,340 --> 00:39:50,250
STUDENT: [INAUDIBLE]

864
00:39:50,250 --> 00:39:51,690
GARY GENSLER: No.

865
00:39:51,690 --> 00:39:54,270
So in Hong Kong, the notes--

866
00:39:54,270 --> 00:39:56,455
the dominant notes, am I right?

867
00:39:56,455 --> 00:39:57,580
STUDENT: Anything over $10.

868
00:39:57,580 --> 00:40:02,710
GARY GENSLER: Anything
over $10 is by a bank.

869
00:40:02,710 --> 00:40:05,530
They have to follow the
rules of the central bank.

870
00:40:05,530 --> 00:40:07,420
And anybody from
Scotland or Ireland?

871
00:40:10,940 --> 00:40:12,950
Is that too far north?

872
00:40:12,950 --> 00:40:14,900
But similarly, in
the United Kingdom,

873
00:40:14,900 --> 00:40:17,300
there's Sterling Bank notes.

874
00:40:17,300 --> 00:40:19,130
So we still do
have some of this.

875
00:40:19,130 --> 00:40:21,350
There's still a little
legacy of it left--

876
00:40:21,350 --> 00:40:24,380
a tightly, highly
constrained legacy

877
00:40:24,380 --> 00:40:27,050
because it's-- the
monetary authority,

878
00:40:27,050 --> 00:40:29,090
it's called in Hong Kong?

879
00:40:29,090 --> 00:40:30,560
STUDENT: Actually, no.

880
00:40:30,560 --> 00:40:32,310
GARY GENSLER: Is it
called a central bank?

881
00:40:32,310 --> 00:40:34,227
STUDENT: It's not called
central [INAUDIBLE]..

882
00:40:34,227 --> 00:40:36,770
STUDENT: It's called
[INAUDIBLE] financial authority.

883
00:40:36,770 --> 00:40:38,728
GARY GENSLER: Monetary
and financial authority.

884
00:40:38,728 --> 00:40:40,650
So the word "monetary"
is right in there.

885
00:40:40,650 --> 00:40:42,545
Just like in the
1860s in the US,

886
00:40:42,545 --> 00:40:44,420
the bank authority was
called the Comptroller

887
00:40:44,420 --> 00:40:45,650
of the Currency.

888
00:40:45,650 --> 00:40:49,140
And it still is called the
Comptroller of the Currency.

889
00:40:49,140 --> 00:40:50,005
James?

890
00:40:50,005 --> 00:40:51,290
STUDENT: [INAUDIBLE] UK.

891
00:40:51,290 --> 00:40:54,110
If anyone ever travels to the UK
and gets a Scottish bank note,

892
00:40:54,110 --> 00:40:55,693
give it back to the
person who gave it

893
00:40:55,693 --> 00:40:59,750
to you, because you [INAUDIBLE]
in England, everyone panics.

894
00:40:59,750 --> 00:41:01,070
It's like, what is this?

895
00:41:01,070 --> 00:41:03,290
This does not look
like a usual banknote.

896
00:41:03,290 --> 00:41:04,940
It is technically legal tender.

897
00:41:04,940 --> 00:41:06,000
But people go, ah!

898
00:41:06,000 --> 00:41:07,615
Don't want it.

899
00:41:07,615 --> 00:41:09,740
GARY GENSLER: So it's not
good north of a certain--

900
00:41:09,740 --> 00:41:11,060
STUDENT: It's not good south--

901
00:41:11,060 --> 00:41:12,950
GARY GENSLER: [INAUDIBLE]
south of something.

902
00:41:13,450 --> 00:41:17,360
STUDENT: I read that it's
not legal tender in South--

903
00:41:17,360 --> 00:41:20,960
but it's also not legal
tender in Scotland.

904
00:41:20,960 --> 00:41:24,560
So you can use them in
Scotland, as a matter of custom.

905
00:41:24,560 --> 00:41:26,210
That's a question I had.

906
00:41:26,210 --> 00:41:29,690
But as a technical legal
matter, it's actually not--

907
00:41:29,690 --> 00:41:33,680
it doesn't extinguish the debt,
but somebody won't sue you.

908
00:41:33,680 --> 00:41:36,040
GARY GENSLER: I
believe Ross is right.

909
00:41:36,040 --> 00:41:38,720
But for those who
don't know, Ross

910
00:41:38,720 --> 00:41:42,440
spent a career as a bankruptcy
lawyer, as a partner of a firm,

911
00:41:42,440 --> 00:41:44,840
before he came back
for a Sloan MBA.

912
00:41:44,840 --> 00:41:47,142
So I'll go with
Ross on this one.

913
00:41:47,142 --> 00:41:48,412
[LAUGHTER]

914
00:41:48,412 --> 00:41:50,120
STUDENT: Moral of the
story is, if you've

915
00:41:50,120 --> 00:41:52,300
got a Scottish banknote,
just give it back.

916
00:41:52,300 --> 00:41:53,770
Because I don't want this.

917
00:41:53,770 --> 00:41:55,130
GARY GENSLER: There you go.

918
00:41:55,130 --> 00:41:58,220
So stable value tokens.

919
00:41:58,220 --> 00:41:59,810
What's the moral on this, James?

920
00:41:59,810 --> 00:42:03,560
If you've got a stable value
token, do you give it back?

921
00:42:03,560 --> 00:42:06,100
STUDENT: Well, in theory,
it's stable value.

922
00:42:06,100 --> 00:42:08,690
So you can exchange it for
whatever it's tethered to.

923
00:42:08,690 --> 00:42:10,300
STUDENT: [INAUDIBLE]

924
00:42:10,300 --> 00:42:12,320
GARY GENSLER: So what
are stable value tokens,

925
00:42:12,320 --> 00:42:15,530
and what value might they have?

926
00:42:15,530 --> 00:42:18,620
What pain point in
the crypto space?

927
00:42:18,620 --> 00:42:21,440
Why did they come about?

928
00:42:21,440 --> 00:42:25,136
There was a reading on
it, so maybe it was just--

929
00:42:25,136 --> 00:42:28,400
STUDENT: [INAUDIBLE]
off the volatility

930
00:42:28,400 --> 00:42:34,590
of the cryptocurrency in a
way that it's backed by--

931
00:42:34,590 --> 00:42:39,000
[INAUDIBLE] currency so that
the [INAUDIBLE] volatility.

932
00:42:39,000 --> 00:42:40,320
GARY GENSLER: Volatility.

933
00:42:40,320 --> 00:42:44,420
So ease to dampen
the volatility.

934
00:42:44,420 --> 00:42:51,100
Why would somebody want a crypto
asset but ease the volatility?

935
00:42:51,100 --> 00:42:54,060
What are the use cases for
crypto without volatility?

936
00:42:56,527 --> 00:42:58,360
STUDENT: Well they just
mentioned like loans

937
00:42:58,360 --> 00:43:00,555
and savings accounts
as an example.

938
00:43:00,555 --> 00:43:01,930
But the thing with
the volatility

939
00:43:01,930 --> 00:43:04,880
is that it struggled
as a store of value,

940
00:43:04,880 --> 00:43:08,600
because it's not stable and it
just goes all over the place.

941
00:43:08,600 --> 00:43:09,510
GARY GENSLER: So--

942
00:43:09,510 --> 00:43:11,753
STUDENT: They use it
a lot for trading.

943
00:43:11,753 --> 00:43:12,670
GARY GENSLER: Trading.

944
00:43:12,670 --> 00:43:13,170
What type?

945
00:43:13,170 --> 00:43:14,950
STUDENT: Different
cryptocurrencies.

946
00:43:14,950 --> 00:43:15,790
GARY GENSLER:
Cryptocurrency trading.

947
00:43:15,790 --> 00:43:16,990
STUDENT: You want to sell--

948
00:43:16,990 --> 00:43:19,630
you're going back
to the stable one,

949
00:43:19,630 --> 00:43:21,760
then going back to
another cryptocurrency.

950
00:43:21,760 --> 00:43:24,240
You don't have to go
into the banking system.

951
00:43:24,240 --> 00:43:25,240
GARY GENSLER: All right.

952
00:43:25,240 --> 00:43:27,700
So maybe it's also
being used for trading.

953
00:43:27,700 --> 00:43:29,710
So I've heard that it
dampens volatility.

954
00:43:29,710 --> 00:43:31,030
I agree.

955
00:43:31,030 --> 00:43:32,980
It could be used for trading.

956
00:43:32,980 --> 00:43:36,160
Because you might go
crypto to crypto to crypto,

957
00:43:36,160 --> 00:43:39,040
but you want to keep a
better store of value

958
00:43:39,040 --> 00:43:44,260
and a stable token as well.

959
00:43:44,260 --> 00:43:47,130
And that's what it's been.

960
00:43:47,130 --> 00:43:50,200
I list four different
approaches to it.

961
00:43:50,200 --> 00:43:51,870
These are design features.

962
00:43:51,870 --> 00:43:54,300
They are trying to
do the same thing--

963
00:43:54,300 --> 00:43:57,900
have a cryptocurrency
that's not centralized,

964
00:43:57,900 --> 00:44:00,120
or at least not backed
by a government.

965
00:44:00,120 --> 00:44:02,040
Not centralized that way--

966
00:44:02,040 --> 00:44:05,130
it might be centralized that
the algorithm in the software

967
00:44:05,130 --> 00:44:07,500
is centralized--

968
00:44:07,500 --> 00:44:10,930
and four different
design features.

969
00:44:10,930 --> 00:44:13,920
And I think there was a
reading on this if I remember.

970
00:44:13,920 --> 00:44:17,340
Does anybody want to say
anything about tether?

971
00:44:17,340 --> 00:44:21,470
What-- basically
backed by US dollars?

972
00:44:25,460 --> 00:44:27,380
STUDENT: I think one
of the big issues

973
00:44:27,380 --> 00:44:30,360
with it is that, if it
were to be really adopted,

974
00:44:30,360 --> 00:44:32,210
you would need to have
a ton of collateral

975
00:44:32,210 --> 00:44:34,760
to make it useful to people.

976
00:44:34,760 --> 00:44:37,010
And then the other issue
is that you'd also probably

977
00:44:37,010 --> 00:44:40,570
need a central bank
like the Fed to actually

978
00:44:40,570 --> 00:44:41,690
be there intervening.

979
00:44:41,690 --> 00:44:43,695
And that kind of goes
against the purpose.

980
00:44:43,695 --> 00:44:46,070
GARY GENSLER: Stephanie is
saying, if it really took off,

981
00:44:46,070 --> 00:44:47,410
you'd need a ton of collateral.

982
00:44:47,410 --> 00:44:52,550
What if tether, or any Fiat
collateralized currency,

983
00:44:52,550 --> 00:44:54,470
was not just a couple
billion dollars

984
00:44:54,470 --> 00:44:58,520
but it was a trillion dollars
or a couple of trillion?

985
00:44:58,520 --> 00:45:01,685
The whole US banking system
is about $16 trillion.

986
00:45:04,270 --> 00:45:08,800
There's $13-ish
trillion of deposits.

987
00:45:08,800 --> 00:45:13,070
What if you had a coin
that's 1 trillion of that?

988
00:45:13,070 --> 00:45:17,470
STUDENT: If it's supposedly
backed by-- if it's that large

989
00:45:17,470 --> 00:45:21,040
and it's supposedly backed by US
dollars, you have two choices--

990
00:45:21,040 --> 00:45:22,060
three choices, right?

991
00:45:22,060 --> 00:45:25,570
You either have a stack of
$100s for a trillion dollars.

992
00:45:25,570 --> 00:45:26,110
Physical--

993
00:45:26,110 --> 00:45:26,735
GARY GENSLER: Paper.

994
00:45:26,735 --> 00:45:27,250
Linen.

995
00:45:27,250 --> 00:45:28,240
STUDENT: Paper.

996
00:45:28,240 --> 00:45:31,060
Or you have bank
deposits, which is what

997
00:45:31,060 --> 00:45:32,370
you're trying to get out of.

998
00:45:32,370 --> 00:45:35,710
Or you've got the money with the
Federal Reserve, which you're

999
00:45:35,710 --> 00:45:36,990
also trying to get out of.

1000
00:45:36,990 --> 00:45:39,220
So those are your only
three choices for,

1001
00:45:39,220 --> 00:45:40,920
where actually is
the collateral?

1002
00:45:40,920 --> 00:45:43,150
It has to be somewhere.

1003
00:45:43,150 --> 00:45:45,400
GARY GENSLER: But the reason
to drill into this, this

1004
00:45:45,400 --> 00:45:48,040
is part of the motivation
of why central banks are

1005
00:45:48,040 --> 00:45:50,860
looking at central
bank digital currency.

1006
00:45:50,860 --> 00:45:53,710
They've been watching not just
Bitcoin and the whole crypto

1007
00:45:53,710 --> 00:45:56,980
space, but then they've
watched stable value tokens

1008
00:45:56,980 --> 00:45:57,880
come along--

1009
00:45:57,880 --> 00:45:59,980
stable value tokens
that are generally

1010
00:45:59,980 --> 00:46:03,610
backed by some blockchain
technology and blockchain

1011
00:46:03,610 --> 00:46:07,450
initiative that, frankly, they
don't have to be blockchain.

1012
00:46:07,450 --> 00:46:11,050
I think you could build
something without it.

1013
00:46:11,050 --> 00:46:14,190
STUDENT: Something-- if you have
a Fiat collateralized stable

1014
00:46:14,190 --> 00:46:17,630
coin like Heather, I can
understand why there's

1015
00:46:17,630 --> 00:46:19,090
a technological use case.

1016
00:46:19,090 --> 00:46:21,090
Maybe you want to use it
as [INAUDIBLE] trading,

1017
00:46:21,090 --> 00:46:25,700
or you want to lock value on a
blockchain that's not volatile.

1018
00:46:25,700 --> 00:46:27,400
And there's also a
business case where,

1019
00:46:27,400 --> 00:46:29,550
if it does go above a dollar--

1020
00:46:29,550 --> 00:46:31,860
the coin goes above
$1 or below $1,

1021
00:46:31,860 --> 00:46:34,150
you can either issue more
and keep the difference

1022
00:46:34,150 --> 00:46:36,600
or buy that coin and
keep the difference.

1023
00:46:36,600 --> 00:46:39,250
And you can potentially--
if it's small enough,

1024
00:46:39,250 --> 00:46:43,890
you can invest that in a
bank and you can get interest

1025
00:46:43,890 --> 00:46:46,410
on the collateral.

1026
00:46:46,410 --> 00:46:48,870
But I do agree with you.

1027
00:46:48,870 --> 00:46:51,300
The problem comes
along when you have

1028
00:46:51,300 --> 00:46:53,730
this huge scale of a trillion.

1029
00:46:53,730 --> 00:46:55,180
Then at that point--

1030
00:46:55,180 --> 00:46:58,230
I don't know if it's a
trillion, the $10 trillion,

1031
00:46:58,230 --> 00:47:00,100
a couple billion or whatever.

1032
00:47:00,100 --> 00:47:04,650
But when you run into
the same type of scenario

1033
00:47:04,650 --> 00:47:09,180
where the US dollar went off the
gold reserve or we just became

1034
00:47:09,180 --> 00:47:12,600
untethered to the
reserves of the coin.

1035
00:47:12,600 --> 00:47:15,360
Because it's so
widespread and ubiquitous,

1036
00:47:15,360 --> 00:47:17,737
that stability is now--

1037
00:47:17,737 --> 00:47:19,320
GARY GENSLER: So is
your thought being

1038
00:47:19,320 --> 00:47:22,680
that if it really grew
and it was accepted

1039
00:47:22,680 --> 00:47:26,250
in commerce that
maybe it wouldn't

1040
00:47:26,250 --> 00:47:28,830
have to be tethered
to the Fiat currency,

1041
00:47:28,830 --> 00:47:30,960
it would then become--

1042
00:47:30,960 --> 00:47:32,280
trust the trusted?

1043
00:47:32,280 --> 00:47:35,970
The way that the paper
currency became trusted.

1044
00:47:35,970 --> 00:47:39,910
And Richard Nixon
in 1971 could say,

1045
00:47:39,910 --> 00:47:43,400
we're no longer going
to follow Bretton Woods.

1046
00:47:43,400 --> 00:47:47,210
Or in 1933 when FDR
and our country said,

1047
00:47:47,210 --> 00:47:49,110
we're going off
the gold standard.

1048
00:47:49,110 --> 00:47:50,693
STUDENT: With that,
you would probably

1049
00:47:50,693 --> 00:47:54,770
need to create some kind of
central authority that manages

1050
00:47:54,770 --> 00:47:57,092
monetary policy [INAUDIBLE].

1051
00:47:57,092 --> 00:47:59,300
GARY GENSLER: I think you
raise an interesting point.

1052
00:47:59,300 --> 00:48:04,610
I think we're well,
well before that.

1053
00:48:04,610 --> 00:48:07,010
I think right now, though,
the interesting thing

1054
00:48:07,010 --> 00:48:11,060
is there's a lot of
entrepreneurial activity

1055
00:48:11,060 --> 00:48:14,740
in stable value tokens.

1056
00:48:14,740 --> 00:48:17,710
My observation is one
of the leading reasons

1057
00:48:17,710 --> 00:48:19,540
was stated right here.

1058
00:48:19,540 --> 00:48:21,970
In the crypto exchange
markets, which

1059
00:48:21,970 --> 00:48:24,820
we'll talk about next Tuesday,
in the crypto exchange markets,

1060
00:48:24,820 --> 00:48:27,280
a lot of people
want to go and trade

1061
00:48:27,280 --> 00:48:31,380
crypto to crypto and
not crypto to Fiat.

1062
00:48:31,380 --> 00:48:34,120
And what are some of the
regulatory or economic reasons

1063
00:48:34,120 --> 00:48:37,220
they don't want to
trade crypto to Fiat?

1064
00:48:37,220 --> 00:48:38,380
Tom?

1065
00:48:38,380 --> 00:48:39,160
Taxes?

1066
00:48:39,160 --> 00:48:39,850
Anything else?

1067
00:48:42,349 --> 00:48:44,266
That's another big thing
that the government--

1068
00:48:44,266 --> 00:48:45,943
STUDENT: It could
potentially be traced.

1069
00:48:45,943 --> 00:48:47,360
GARY GENSLER: It
could potentially

1070
00:48:47,360 --> 00:48:50,740
be maybe more readily traced.

1071
00:48:50,740 --> 00:48:52,360
STUDENT: KYC and AML.

1072
00:48:52,360 --> 00:48:53,480
GARY GENSLER: So KYC.

1073
00:48:53,480 --> 00:48:55,865
You want to remind the class
what those letters mean?

1074
00:48:55,865 --> 00:48:58,308
STUDENT: Know Your Customer
and Anti Money Laundering.

1075
00:48:58,308 --> 00:49:02,710
GARY GENSLER: So there's a
whole regime around the world--

1076
00:49:02,710 --> 00:49:04,750
in the US, it's called
the Bank Secrecy Act--

1077
00:49:04,750 --> 00:49:06,550
but around the
world about knowing

1078
00:49:06,550 --> 00:49:12,460
one's customer, tracking anti
money laundering and so forth.

1079
00:49:12,460 --> 00:49:16,440
One of the dominant things
in crypto that's going on--

1080
00:49:16,440 --> 00:49:20,160
maybe mistakenly, maybe just
because it's an early stage--

1081
00:49:20,160 --> 00:49:22,980
is that some people who
have crypto assets feel,

1082
00:49:22,980 --> 00:49:25,900
I don't want to trade
that for a Fiat asset.

1083
00:49:25,900 --> 00:49:29,130
I don't want to trade it
to euros or dollars or yen.

1084
00:49:29,130 --> 00:49:33,120
Because then, it's more
likely the official sector

1085
00:49:33,120 --> 00:49:34,695
can track me for taxes.

1086
00:49:37,250 --> 00:49:40,650
I think there is a false notion
that if I sell something crypto

1087
00:49:40,650 --> 00:49:42,740
and I buy something
else crypto, I

1088
00:49:42,740 --> 00:49:46,700
do not have to report my
gains or losses in my taxes.

1089
00:49:46,700 --> 00:49:49,625
Now the US has
clarified that you do.

1090
00:49:49,625 --> 00:49:51,500
But for a couple of
years, people were going,

1091
00:49:51,500 --> 00:49:55,868
well, maybe it's just what's
called a like kind exchange,

1092
00:49:55,868 --> 00:49:57,410
like selling one
piece of real estate

1093
00:49:57,410 --> 00:49:58,970
for another piece
of real estate.

1094
00:49:58,970 --> 00:50:02,750
By the way, if you sold
gold and bought silver--

1095
00:50:02,750 --> 00:50:06,980
gold for silver, that was not a
like kind exchange under US tax

1096
00:50:06,980 --> 00:50:08,060
law.

1097
00:50:08,060 --> 00:50:11,120
But they were tax advisors going
around saying, well, there's

1098
00:50:11,120 --> 00:50:12,935
some ambiguity.

1099
00:50:12,935 --> 00:50:14,810
Maybe you don't need to
pay your taxes if you

1100
00:50:14,810 --> 00:50:17,230
went from Bitcoin to ether.

1101
00:50:17,230 --> 00:50:20,590
The tax bill that was passed
in December, that's called

1102
00:50:20,590 --> 00:50:24,697
the Trump tax bill,
that closed that window.

1103
00:50:24,697 --> 00:50:26,030
One of the few things it closed.

1104
00:50:29,680 --> 00:50:34,170
But I think because of illicit
activity, because of taxes,

1105
00:50:34,170 --> 00:50:36,440
there's still a lot of
people that would say,

1106
00:50:36,440 --> 00:50:38,000
I'd just rather go
crypto to crypto.

1107
00:50:38,000 --> 00:50:40,220
But there's one other
thing, the reason

1108
00:50:40,220 --> 00:50:43,040
why people might want a stable
value token about the payment

1109
00:50:43,040 --> 00:50:43,550
system.

1110
00:50:43,550 --> 00:50:47,150
We talked about it last week.

1111
00:50:47,150 --> 00:50:47,960
Do I see a hand up?

1112
00:50:47,960 --> 00:50:49,035
Are you going to help me out?

1113
00:50:49,035 --> 00:50:50,660
STUDENT: I was going
to say, it's quick

1114
00:50:50,660 --> 00:50:52,222
and it's very cost efficient.

1115
00:50:52,222 --> 00:50:54,680
GARY GENSLER: So it's quick
and it might be cost efficient.

1116
00:50:54,680 --> 00:50:56,660
We talked about--
and I had a chart

1117
00:50:56,660 --> 00:50:59,420
about using crypto
as a bridge currency

1118
00:50:59,420 --> 00:51:02,120
to move cross-border payments.

1119
00:51:02,120 --> 00:51:05,720
If you're moving from US
dollars to Mexican peso,

1120
00:51:05,720 --> 00:51:09,410
that can take 2, 3, 4 days
in correspondent banking

1121
00:51:09,410 --> 00:51:11,120
systems and the like.

1122
00:51:11,120 --> 00:51:12,920
But what if you
use from US dollars

1123
00:51:12,920 --> 00:51:16,490
to crypto to Mexican peso?

1124
00:51:16,490 --> 00:51:19,520
Very legitimate
use case that can

1125
00:51:19,520 --> 00:51:22,310
lower your cross-border
payment down

1126
00:51:22,310 --> 00:51:25,040
to seconds rather than days.

1127
00:51:25,040 --> 00:51:28,340
Very legitimate use case that
may be stable value tokens

1128
00:51:28,340 --> 00:51:30,410
would be a good use case.

1129
00:51:30,410 --> 00:51:34,070
So again, if
anybody's interested

1130
00:51:34,070 --> 00:51:38,150
in the different
design characteristics,

1131
00:51:38,150 --> 00:51:41,390
it's interesting, there's
a professor over at Harvard

1132
00:51:41,390 --> 00:51:42,295
that came to see.

1133
00:51:42,295 --> 00:51:44,420
He teaches Harvard Business
School, came to see me,

1134
00:51:44,420 --> 00:51:47,930
that he's creating a non
collateralized seigniorage

1135
00:51:47,930 --> 00:51:50,030
based stable value token.

1136
00:51:50,030 --> 00:51:52,040
So just even here
in Cambridge there's

1137
00:51:52,040 --> 00:51:55,430
a bunch of people looking at
trying to create things and do

1138
00:51:55,430 --> 00:51:58,988
things, and a lot of energy.

1139
00:51:58,988 --> 00:52:01,280
They're always asking me,
what's a real blockchain use?

1140
00:52:01,280 --> 00:52:03,170
Some of it's just in this area.

1141
00:52:03,170 --> 00:52:04,820
Hugo, and then we'll move on.

1142
00:52:04,820 --> 00:52:06,110
STUDENT: One other
thing that with a couple

1143
00:52:06,110 --> 00:52:08,410
of the Fiat collateralized
ones that you don't have up

1144
00:52:08,410 --> 00:52:09,100
on there.

1145
00:52:09,100 --> 00:52:12,320
So like Gemini, the exchange
recently created one,

1146
00:52:12,320 --> 00:52:15,590
and Circle created one
that Coinbase adopted.

1147
00:52:15,590 --> 00:52:17,910
And those are both
on top of Ethereum.

1148
00:52:17,910 --> 00:52:20,000
And I think actually--
at least with Gemini.

1149
00:52:20,000 --> 00:52:22,670
I'm not positive
about that Circle one.

1150
00:52:22,670 --> 00:52:28,040
Coded into the smart contract
is the ability to freeze tokens.

1151
00:52:28,040 --> 00:52:32,690
So you could say that's an
AML type of thing, right?

1152
00:52:32,690 --> 00:52:38,600
If I see something weird
with transactions with GUSD,

1153
00:52:38,600 --> 00:52:41,945
then they could actually
stop and seize tokens.

1154
00:52:41,945 --> 00:52:43,820
GARY GENSLER: So what's
the mood of the class

1155
00:52:43,820 --> 00:52:47,180
around stable value tokens
that can be frozen right

1156
00:52:47,180 --> 00:52:48,440
in the smart contract?

1157
00:52:48,440 --> 00:52:52,220
Does that seem in the
spirit of Satoshi Nakamoto?

1158
00:52:52,220 --> 00:52:53,360
What's that Hugo?

1159
00:52:53,360 --> 00:52:53,920
No?

1160
00:52:53,920 --> 00:52:54,420
Ross?

1161
00:52:54,420 --> 00:52:55,760
STUDENT: I have a question.

1162
00:52:55,760 --> 00:52:56,290
Who's they?

1163
00:52:57,350 --> 00:53:00,650
STUDENT: Gemini, whoever
wrote the smart contract.

1164
00:53:00,650 --> 00:53:02,820
GARY GENSLER: Whoever
controls the smart contract.

1165
00:53:02,820 --> 00:53:05,780
In that case, that would
be a crypto exchange

1166
00:53:05,780 --> 00:53:07,912
run by-- who's Gemini run by?

1167
00:53:07,912 --> 00:53:09,120
STUDENT: Winklevoss brothers.

1168
00:53:09,120 --> 00:53:11,990
GARY GENSLER: A couple
of identical twins.

1169
00:53:11,990 --> 00:53:13,070
Not the Genslers.

1170
00:53:15,940 --> 00:53:18,290
Well, the Genslers
weren't in the movie

1171
00:53:18,290 --> 00:53:21,920
and didn't make a lot
of money on crypto.

1172
00:53:21,920 --> 00:53:24,835
The Winklevoss twins, by
the way, who were at the--

1173
00:53:24,835 --> 00:53:28,290
the wonderful story with
Mark Zuckerberg at Harvard,

1174
00:53:28,290 --> 00:53:29,990
if you remember the
Winklevoss twins,

1175
00:53:29,990 --> 00:53:33,200
and they're rowing,
part of a rowing elite,

1176
00:53:33,200 --> 00:53:37,070
too, have made a lot
of money in crypto.

1177
00:53:37,070 --> 00:53:41,460
And we'll talk a little bit
about them next Tuesday.

1178
00:53:41,460 --> 00:53:44,990
So then central banks
and cryptocurrencies.

1179
00:53:44,990 --> 00:53:47,390
There was-- we talked
about this the other day.

1180
00:53:47,390 --> 00:53:49,820
There's four things
they're really doing.

1181
00:53:49,820 --> 00:53:52,400
They're monitoring and studying.

1182
00:53:52,400 --> 00:53:56,060
Some are restricting the use,
like the Central Bank of China,

1183
00:53:56,060 --> 00:53:59,120
some are trying to do payment
system experimentation.

1184
00:53:59,120 --> 00:54:02,000
We talked about
Singapore and Canada.

1185
00:54:02,000 --> 00:54:04,430
Those are real
blockchain initiatives,

1186
00:54:04,430 --> 00:54:06,350
the payment systems.

1187
00:54:06,350 --> 00:54:09,950
School's still out as to whether
they need to use the blockchain

1188
00:54:09,950 --> 00:54:11,730
technology.

1189
00:54:11,730 --> 00:54:14,250
But they are seriously
leaning in, particularly

1190
00:54:14,250 --> 00:54:16,380
in Singapore and
Canada, saying there

1191
00:54:16,380 --> 00:54:18,270
might be a more
resilient payment

1192
00:54:18,270 --> 00:54:21,870
system if we use a decentralized
distributed blockchain

1193
00:54:21,870 --> 00:54:29,000
technology based on Quorum or
Quarta or Hyperledger Fabric.

1194
00:54:29,000 --> 00:54:32,310
I think we're a few years away
from them sort of coming--

1195
00:54:32,310 --> 00:54:33,670
is there enough there?

1196
00:54:33,670 --> 00:54:35,900
Enough there there
that it would be better

1197
00:54:35,900 --> 00:54:37,220
than traditional databases?

1198
00:54:37,220 --> 00:54:39,890
But they are definitely
putting a lot of energy--

1199
00:54:39,890 --> 00:54:43,880
and even the European Central
Bank, with the Bank of Japan,

1200
00:54:43,880 --> 00:54:47,000
has an initiative as well.

1201
00:54:47,000 --> 00:54:49,700
But in the fourth category,
central bank digital currency

1202
00:54:49,700 --> 00:54:51,350
initiatives, I
caution everybody.

1203
00:54:51,350 --> 00:54:54,120
You don't necessarily need
to use blockchain technology.

1204
00:54:54,120 --> 00:54:56,120
This is the part of
the course to say,

1205
00:54:56,120 --> 00:54:58,280
this is something
clearly inspired

1206
00:54:58,280 --> 00:55:03,380
by Satoshi Nakamoto's innovation
and inspired by stable value

1207
00:55:03,380 --> 00:55:05,730
tokens.

1208
00:55:05,730 --> 00:55:08,700
But when we talk about the
bank of Sweden's initiative

1209
00:55:08,700 --> 00:55:10,200
and some of these
other initiatives,

1210
00:55:10,200 --> 00:55:12,060
you'll find that,
to my knowledge,

1211
00:55:12,060 --> 00:55:15,478
they're not built on
blockchain technology.

1212
00:55:15,478 --> 00:55:17,520
That doesn't mean they
couldn't be in the future,

1213
00:55:17,520 --> 00:55:19,530
but I think they're
important, because they're

1214
00:55:19,530 --> 00:55:22,260
really important to
blockchain and money

1215
00:55:22,260 --> 00:55:26,070
and how central banks are
thinking about this area

1216
00:55:26,070 --> 00:55:28,780
right now,

1217
00:55:28,780 --> 00:55:32,750
We talked about this last week,
the first wave of payments

1218
00:55:32,750 --> 00:55:34,050
were all on Ethereum.

1219
00:55:34,050 --> 00:55:37,090
And as I said, they've
moved on from Ethereum.

1220
00:55:37,090 --> 00:55:40,540
And the second wave of the
payment system initiatives

1221
00:55:40,540 --> 00:55:43,060
are all permission blockchains.

1222
00:55:43,060 --> 00:55:45,850
And now they're looking
at a third wave.

1223
00:55:45,850 --> 00:55:48,670
If there's further questions
about how central banks are

1224
00:55:48,670 --> 00:55:51,100
looking, I'll take
them now, or we'll

1225
00:55:51,100 --> 00:55:55,510
go on to the central
bank digital currencies.

1226
00:55:55,510 --> 00:55:56,310
Please.

1227
00:55:56,310 --> 00:55:57,977
STUDENT: What do
central banks currently

1228
00:55:57,977 --> 00:55:59,668
use to manage whose
deposits are whose?

1229
00:55:59,668 --> 00:56:00,710
GARY GENSLER: Whose what?

1230
00:56:00,710 --> 00:56:03,300
STUDENT: Like if it's Morgan
Stanley's deposits or Goldman

1231
00:56:03,300 --> 00:56:05,800
Sachs' deposits, when
they exchange deposits

1232
00:56:05,800 --> 00:56:08,730
within the central bank, what do
they currently use to manage--

1233
00:56:08,730 --> 00:56:12,450
GARY GENSLER: They use various
forms of traditional databases,

1234
00:56:12,450 --> 00:56:15,240
and I'm not going to
pretend that I know exactly

1235
00:56:15,240 --> 00:56:16,740
each of those databases.

1236
00:56:16,740 --> 00:56:20,520
But usually, for
interbank money,

1237
00:56:20,520 --> 00:56:23,940
as you've talked about Morgan
Stanley or Goldman Sachs,

1238
00:56:23,940 --> 00:56:27,120
they would call it the Real
Time Gross Settlement System,

1239
00:56:27,120 --> 00:56:29,020
RTGS system.

1240
00:56:29,020 --> 00:56:32,670
But the actual underlying
database structure

1241
00:56:32,670 --> 00:56:35,520
frankly probably goes
back to batch processing.

1242
00:56:35,520 --> 00:56:37,560
Most of them are still
batch processing.

1243
00:56:37,560 --> 00:56:41,220
In the US, I think we'll
roll out a faster payment

1244
00:56:41,220 --> 00:56:45,530
structure in 2020.

1245
00:56:45,530 --> 00:56:48,410
And Sriham who was
visiting with us,

1246
00:56:48,410 --> 00:56:52,370
was on a whole big advisory
group to the Federal Reserve

1247
00:56:52,370 --> 00:56:53,430
to do that.

1248
00:56:53,430 --> 00:56:56,210
Does that help a little bit?

1249
00:56:56,210 --> 00:56:59,060
But the question really is,
could blockchain technology

1250
00:56:59,060 --> 00:57:02,180
inspire the next generation
for the mid 2020s

1251
00:57:02,180 --> 00:57:04,010
for any of these countries?

1252
00:57:04,010 --> 00:57:07,310
To have 24 hour,
seven days a week,

1253
00:57:07,310 --> 00:57:10,430
but also no one
central place where

1254
00:57:10,430 --> 00:57:13,820
the ledger is kept, with
multiple parties sharing

1255
00:57:13,820 --> 00:57:15,480
the ledger.

1256
00:57:15,480 --> 00:57:16,983
And as Alin said,
but wait a minute,

1257
00:57:16,983 --> 00:57:18,400
wouldn't a central
bank still want

1258
00:57:18,400 --> 00:57:21,440
to have authority
over the protocol?

1259
00:57:21,440 --> 00:57:24,730
The protocol amongst
20 or 50 banks.

1260
00:57:24,730 --> 00:57:27,970
And the answer is
probably yes, but they're

1261
00:57:27,970 --> 00:57:30,640
trying to explore what's
the most resilient system.

1262
00:57:33,170 --> 00:57:36,020
So central bank
digital currencies.

1263
00:57:36,020 --> 00:57:38,720
Central banks, of course,
already issue digital reserves.

1264
00:57:38,720 --> 00:57:40,550
So the real question is this.

1265
00:57:40,550 --> 00:57:43,550
Should access be
given to others?

1266
00:57:43,550 --> 00:57:47,400
Should it be expanded
to the retail public?

1267
00:57:47,400 --> 00:57:49,882
And so these were the
ones we chatted about.

1268
00:57:49,882 --> 00:57:51,840
And we're just going to
go through four of them

1269
00:57:51,840 --> 00:57:54,660
quickly just to say--

1270
00:57:54,660 --> 00:57:59,820
you had a little reading on
each of Ecuador, Senegal, Sweden

1271
00:57:59,820 --> 00:58:03,570
and the Philippines.

1272
00:58:03,570 --> 00:58:06,900
These are the opportunities
that the central bankers even

1273
00:58:06,900 --> 00:58:09,300
talk about.

1274
00:58:09,300 --> 00:58:11,460
Basically, in
Sweden's perspective,

1275
00:58:11,460 --> 00:58:13,860
they want to stay in the
business of providing

1276
00:58:13,860 --> 00:58:16,160
a means of payment.

1277
00:58:16,160 --> 00:58:19,520
And the krona is so barely used.

1278
00:58:19,520 --> 00:58:22,466
Nobody's here from Scandinavia?

1279
00:58:22,466 --> 00:58:24,440
No.

1280
00:58:24,440 --> 00:58:27,750
The krona is so barely
used they want to keep

1281
00:58:27,750 --> 00:58:31,690
it having some influence.

1282
00:58:31,690 --> 00:58:35,070
I'm trying to think if
I put that chart in.

1283
00:58:35,070 --> 00:58:37,110
I'm going to skip over
a couple of things.

1284
00:58:37,110 --> 00:58:40,080
No, I didn't put the
chart in, so I apologize.

1285
00:58:40,080 --> 00:58:43,140
So what challenges do you
think are really there

1286
00:58:43,140 --> 00:58:44,670
from our readings?

1287
00:58:44,670 --> 00:58:46,620
Which of these challenges
do you think scares

1288
00:58:46,620 --> 00:58:49,810
the central banks the most?

1289
00:58:49,810 --> 00:58:51,340
Is it financial stability?

1290
00:58:51,340 --> 00:58:55,630
Is it changing the credit
intermediation of banks?

1291
00:58:55,630 --> 00:58:56,905
Is it monetary policy?

1292
00:58:56,905 --> 00:58:59,750
Is it a payment structure?

1293
00:58:59,750 --> 00:59:01,370
Or is it all of the above?

1294
00:59:01,370 --> 00:59:02,452
Alin.

1295
00:59:02,452 --> 00:59:04,273
STUDENT: I guess
financial stability.

1296
00:59:04,273 --> 00:59:05,690
GARY GENSLER:
Financial stability.

1297
00:59:05,690 --> 00:59:07,400
Basically, a run on the banks.

1298
00:59:12,078 --> 00:59:12,620
I don't know.

1299
00:59:12,620 --> 00:59:14,660
I would say that in
my conversations--

1300
00:59:14,660 --> 00:59:16,520
and Robleh Ali has
many more of them.

1301
00:59:16,520 --> 00:59:19,340
But my conversations
with central bankers,

1302
00:59:19,340 --> 00:59:22,970
it's a mixture of the first
one-- the one Alin did say.

1303
00:59:22,970 --> 00:59:26,660
And then, basically
the third one.

1304
00:59:26,660 --> 00:59:28,340
Credit allocation.

1305
00:59:28,340 --> 00:59:32,360
That they feel like if we insert
the central bank more directly

1306
00:59:32,360 --> 00:59:36,250
into taking retail
deposits, are we

1307
00:59:36,250 --> 00:59:38,270
going to be inserting
the central bank more

1308
00:59:38,270 --> 00:59:40,820
into credit allocation?

1309
00:59:40,820 --> 00:59:45,580
Or in essence, if we shrink
the need for commercial banks,

1310
00:59:45,580 --> 00:59:48,650
are we somehow shrinking
the credit allocation

1311
00:59:48,650 --> 00:59:50,890
in the economy?

1312
00:59:50,890 --> 00:59:53,340
So in normal times,
they worry, in essence,

1313
00:59:53,340 --> 00:59:56,580
about credit and the
extension of credit.

1314
00:59:56,580 --> 00:59:59,340
And in crisis, they
worry about being--

1315
00:59:59,340 --> 01:00:03,310
that it would
destabilize the system.

1316
01:00:03,310 --> 01:00:07,000
That's been my experience
talking just in these eight

1317
01:00:07,000 --> 01:00:09,530
months to central bankers.

1318
01:00:09,530 --> 01:00:10,030
Isaac?

1319
01:00:10,030 --> 01:00:12,730
STUDENT: The central bank is
taking the deposits, rather

1320
01:00:12,730 --> 01:00:14,410
than the commercial bank.

1321
01:00:14,410 --> 01:00:17,020
Wouldn't that just be reflected
in a change of the interest

1322
01:00:17,020 --> 01:00:17,520
rate?

1323
01:00:17,520 --> 01:00:19,812
Because they would have
the underlying funds.

1324
01:00:19,812 --> 01:00:21,520
And so that might just
flow back through.

1325
01:00:21,520 --> 01:00:23,890
When the central bank is
determining the federal funds

1326
01:00:23,890 --> 01:00:25,093
rate, it would be adjusted.

1327
01:00:25,093 --> 01:00:27,760
And so corporate borrowers would
be able to borrow [INAUDIBLE]..

1328
01:00:27,760 --> 01:00:29,080
GARY GENSLER: So what
Isaac is saying is,

1329
01:00:29,080 --> 01:00:31,300
couldn't you just address
this as a central bank

1330
01:00:31,300 --> 01:00:34,930
through interest rate policy and
some differential interest rate

1331
01:00:34,930 --> 01:00:37,410
and the pricing of money?

1332
01:00:37,410 --> 01:00:40,700
And I think some would
contend you could.

1333
01:00:40,700 --> 01:00:41,920
But on the other side--

1334
01:00:41,920 --> 01:00:43,420
anybody want to
take the other side?

1335
01:00:46,150 --> 01:00:49,510
The question really is
is, does the central bank

1336
01:00:49,510 --> 01:00:50,695
want to start making loans?

1337
01:00:53,320 --> 01:00:55,780
Now the US central bank
has a $4.5 trillion

1338
01:00:55,780 --> 01:00:58,150
balance sheet, as we
talked about two days ago,

1339
01:00:58,150 --> 01:01:00,380
and owns about $2--

1340
01:01:00,380 --> 01:01:04,780
a little less than $2 trillion,
$1.5 trillion of mortgages.

1341
01:01:04,780 --> 01:01:06,820
So in a sense, the
central bank is already

1342
01:01:06,820 --> 01:01:09,070
making a credit decision.

1343
01:01:09,070 --> 01:01:11,840
They're lending to
the mortgage market.

1344
01:01:11,840 --> 01:01:14,340
But the question is, do you
want to go even further and have

1345
01:01:14,340 --> 01:01:18,060
the central bank picking
individual companies

1346
01:01:18,060 --> 01:01:21,180
or individual
homeowners to lend to?

1347
01:01:21,180 --> 01:01:26,040
And that's what-- if it
got to any scale or size,

1348
01:01:26,040 --> 01:01:27,050
they talk about.

1349
01:01:27,050 --> 01:01:29,780
Of course, they could just lend
to the commercial bank system,

1350
01:01:29,780 --> 01:01:32,708
and then the public would be
lending to the central bank,

1351
01:01:32,708 --> 01:01:34,250
and the central bank
would be lending

1352
01:01:34,250 --> 01:01:37,180
to the commercial banks.

1353
01:01:37,180 --> 01:01:40,605
So the design considerations--
and we didn't talk about these.

1354
01:01:40,605 --> 01:01:43,380
These eight design
considerations

1355
01:01:43,380 --> 01:01:45,000
are all in the loop.

1356
01:01:45,000 --> 01:01:46,140
Does everybody get it?

1357
01:01:46,140 --> 01:01:47,280
Only a few people get it.

1358
01:01:47,280 --> 01:01:52,080
It's a token or
account and so forth.

1359
01:01:52,080 --> 01:01:54,390
This little money
flower that Garrett

1360
01:01:54,390 --> 01:01:56,700
has put out there--
and central banks

1361
01:01:56,700 --> 01:01:58,025
talk about the money flower.

1362
01:02:00,980 --> 01:02:03,180
Where is Bitcoin on this?

1363
01:02:03,180 --> 01:02:04,843
Who wants to tell
me where Bitcoin is?

1364
01:02:04,843 --> 01:02:06,260
We'll bring it
back to blockchain.

1365
01:02:09,960 --> 01:02:11,460
Eilon.

1366
01:02:11,460 --> 01:02:13,988
STUDENT: Private digital
tokens, wholesale only.

1367
01:02:13,988 --> 01:02:15,030
GARY GENSLER: Wait, wait.

1368
01:02:15,030 --> 01:02:16,690
So where am I pointing?

1369
01:02:16,690 --> 01:02:18,040
STUDENT: Blue and orange.

1370
01:02:18,040 --> 01:02:19,450
GARY GENSLER: Blue and orange.

1371
01:02:19,450 --> 01:02:20,790
Oh, it's written there.

1372
01:02:20,790 --> 01:02:22,690
You mean right there.

1373
01:02:22,690 --> 01:02:25,045
STUDENT: [INAUDIBLE]
without the red.

1374
01:02:25,045 --> 01:02:26,860
GARY GENSLER: Without
the red, right here.

1375
01:02:26,860 --> 01:02:29,680
Private digital
tokens, wholesale only?

1376
01:02:29,680 --> 01:02:31,010
No.

1377
01:02:31,010 --> 01:02:35,200
[INTERPOSING VOICES]

1378
01:02:35,200 --> 01:02:37,610
GARY GENSLER: Tell me
where you want me to point.

1379
01:02:37,610 --> 01:02:41,760
So you're saying
it's orange and what?

1380
01:02:41,760 --> 01:02:43,192
And blue.

1381
01:02:43,192 --> 01:02:45,530
[INTERPOSING VOICES]

1382
01:02:48,990 --> 01:02:51,530
GARY GENSLER: It is
widely acceptable.

1383
01:02:51,530 --> 01:02:56,870
Bitcoin's widely accessible,
meaning anybody can get it.

1384
01:02:56,870 --> 01:02:59,060
[INTERPOSING VOICES]

1385
01:03:01,095 --> 01:03:03,435
GARY GENSLER: I would say
you can put any form of money

1386
01:03:03,435 --> 01:03:04,810
into one of these
little blocks--

1387
01:03:08,030 --> 01:03:10,910
government backed and
not government backed.

1388
01:03:10,910 --> 01:03:12,380
Where is stable value tokens?

1389
01:03:14,808 --> 01:03:15,350
Look at this.

1390
01:03:15,350 --> 01:03:17,612
You're the closest, and I
can't remember your name.

1391
01:03:17,612 --> 01:03:18,320
STUDENT: Connery.

1392
01:03:18,320 --> 01:03:21,500
GARY GENSLER: Connery,
where's stable value tokens?

1393
01:03:21,500 --> 01:03:22,795
It's not central bank issued.

1394
01:03:22,795 --> 01:03:23,670
I'll give you a hint.

1395
01:03:23,670 --> 01:03:24,780
So it's not in the green.

1396
01:03:30,040 --> 01:03:31,966
STUDENT: [INAUDIBLE]
private digital?

1397
01:03:31,966 --> 01:03:32,758
GARY GENSLER: Yeah.

1398
01:03:32,758 --> 01:03:34,110
It's private digital tokens.

1399
01:03:34,110 --> 01:03:35,610
You could make it
wholesale only,

1400
01:03:35,610 --> 01:03:40,460
or you can make it widely
accessible like this.

1401
01:03:40,460 --> 01:03:43,470
STUDENT: [INAUDIBLE] but they
can be, and most of them are,

1402
01:03:43,470 --> 01:03:48,280
central issued even if
it's not central bank.

1403
01:03:48,280 --> 01:03:52,603
I mean, I guess it depends on
how you define central bank.

1404
01:03:52,603 --> 01:03:54,020
It's not a sovereign
central bank,

1405
01:03:54,020 --> 01:03:57,840
but it's one entity that
issues a token that's

1406
01:03:57,840 --> 01:03:59,100
tethered to the US dollar.

1407
01:03:59,100 --> 01:04:01,300
It holds the US dollar.

1408
01:04:01,300 --> 01:04:04,100
GARY GENSLER: So I think
it's an excellent point.

1409
01:04:04,100 --> 01:04:10,220
A stable value token that
is backed by a Fiat currency

1410
01:04:10,220 --> 01:04:12,620
is not central bank issue.

1411
01:04:12,620 --> 01:04:15,170
I would say that it's
not in the light green.

1412
01:04:15,170 --> 01:04:20,750
But it's highly dependent
on the central bank.

1413
01:04:20,750 --> 01:04:24,290
It's highly dependent on putting
deposits in commercial banks.

1414
01:04:24,290 --> 01:04:28,910
Tether, which purports to
be a little over two $2,

1415
01:04:28,910 --> 01:04:33,110
$2.5 billion crypto which
is all backed by US dollars,

1416
01:04:33,110 --> 01:04:35,960
at one point in
time last year, they

1417
01:04:35,960 --> 01:04:39,050
lost some of their
commercial bank accounts.

1418
01:04:39,050 --> 01:04:42,650
Meaning the commercial banks
would not take their dollars.

1419
01:04:42,650 --> 01:04:45,350
The commercial banks in many
countries said, forget it,

1420
01:04:45,350 --> 01:04:48,110
I can't have you
as a customer, I

1421
01:04:48,110 --> 01:04:51,720
can't follow you for any money
laundering and otherwise.

1422
01:04:51,720 --> 01:04:55,550
And so in essence, you
are highly dependent,

1423
01:04:55,550 --> 01:04:59,570
if you're a custodial stable
value, on the central bank.

1424
01:04:59,570 --> 01:05:00,480
I agree with that.

1425
01:05:00,480 --> 01:05:03,110
But I think you're
not not central bank.

1426
01:05:03,110 --> 01:05:04,455
[INAUDIBLE] a little--

1427
01:05:04,955 --> 01:05:06,260
STUDENT: It's just central.

1428
01:05:06,260 --> 01:05:07,427
GARY GENSLER: It is central.

1429
01:05:07,427 --> 01:05:09,160
Right.

1430
01:05:09,160 --> 01:05:11,390
So there's a lot of
paradoxes and irony

1431
01:05:11,390 --> 01:05:14,600
in the blockchain crypto space
as to how centralized something

1432
01:05:14,600 --> 01:05:16,160
it is and how decentralized.

1433
01:05:16,160 --> 01:05:21,200
And from Satoshi Nakamoto
is a very decentralized way.

1434
01:05:21,200 --> 01:05:22,760
So we're going back to these.

1435
01:05:22,760 --> 01:05:23,495
And so Ecuador.

1436
01:05:26,870 --> 01:05:28,520
Anybody read the Ecuador thing?

1437
01:05:28,520 --> 01:05:31,240
Want to tell us a
little bit about--

1438
01:05:31,240 --> 01:05:33,040
Leonardo?

1439
01:05:33,040 --> 01:05:37,250
STUDENT: Well, I think it
was a story of failure.

1440
01:05:37,250 --> 01:05:39,462
GARY GENSLER: A
story of failure.

1441
01:05:39,462 --> 01:05:43,150
STUDENT: Because [INAUDIBLE]
issue the [INAUDIBLE] money.

1442
01:05:43,150 --> 01:05:46,030
It was backed by
the central bank.

1443
01:05:46,030 --> 01:05:48,460
But the central bank had
no credibility or trust

1444
01:05:48,460 --> 01:05:49,870
from the users.

1445
01:05:49,870 --> 01:05:51,760
So it never took off.

1446
01:05:51,760 --> 01:05:56,050
So the government of Ecuador
had just defaulted a few years

1447
01:05:56,050 --> 01:05:57,720
before they launched this.

1448
01:05:57,720 --> 01:05:59,740
The economy was [INAUDIBLE].

1449
01:05:59,740 --> 01:06:02,080
So they issued something
where people didn't really

1450
01:06:02,080 --> 01:06:06,840
know whether it would still
be there within a few years.

1451
01:06:06,840 --> 01:06:09,130
The usage was
extremely disappointing

1452
01:06:09,130 --> 01:06:12,030
compared with the
initial expectations.

1453
01:06:12,030 --> 01:06:14,440
STUDENT: But another interesting
point in that article

1454
01:06:14,440 --> 01:06:17,050
was that financial
institutions were not

1455
01:06:17,050 --> 01:06:19,420
obliged to use it whatsoever.

1456
01:06:19,420 --> 01:06:21,820
And I sort of
wonder if there had

1457
01:06:21,820 --> 01:06:27,010
been a minimum level of balance
sheets at these institutions,

1458
01:06:27,010 --> 01:06:29,500
where they were required
to have a minimum level

1459
01:06:29,500 --> 01:06:34,450
of the cryptocurrency,
could that

1460
01:06:34,450 --> 01:06:36,408
have helped it a little bit?

1461
01:06:36,408 --> 01:06:36,950
I don't know.

1462
01:06:39,508 --> 01:06:41,050
STUDENT: That's
[INAUDIBLE] they also

1463
01:06:41,050 --> 01:06:42,730
failed to manage expectations.

1464
01:06:42,730 --> 01:06:45,280
Because even in the
first year, what they

1465
01:06:45,280 --> 01:06:47,440
are saying, what
they are claiming is,

1466
01:06:47,440 --> 01:06:51,710
there are going to be
500,000 users or something.

1467
01:06:51,710 --> 01:06:57,310
[INAUDIBLE] turns out just
5,000 accounts or users came up.

1468
01:06:57,310 --> 01:07:02,650
So it's a great
story of failure.

1469
01:07:02,650 --> 01:07:03,760
[INAUDIBLE]

1470
01:07:03,760 --> 01:07:07,990
STUDENT: Bitcoin was also these
matching benefits and costs

1471
01:07:07,990 --> 01:07:09,650
that were associated
with the project.

1472
01:07:09,650 --> 01:07:14,360
They kind of [INAUDIBLE]
calculations were made.

1473
01:07:14,360 --> 01:07:16,540
The benefits were
less than $1 million

1474
01:07:16,540 --> 01:07:21,100
compared to almost $7
million [INAUDIBLE]

1475
01:07:21,100 --> 01:07:23,450
From the start, from
the outset, the design

1476
01:07:23,450 --> 01:07:26,112
wasn't conceived in
an appropriate manner.

1477
01:07:26,112 --> 01:07:27,820
GARY GENSLER: And
again, this is somewhat

1478
01:07:27,820 --> 01:07:32,610
inspired by crypto finance.

1479
01:07:32,610 --> 01:07:36,355
No blockchain technology
involved in it.

1480
01:07:36,355 --> 01:07:38,730
Which, by the way, is going
to be true for the next three

1481
01:07:38,730 --> 01:07:40,290
examples as well.

1482
01:07:40,290 --> 01:07:41,220
But it's relevant.

1483
01:07:41,220 --> 01:07:43,680
This is sort of also
inspired by initiatives

1484
01:07:43,680 --> 01:07:45,360
like [INAUDIBLE] and so forth.

1485
01:07:45,360 --> 01:07:48,052
It's like, how do we get more
inclusion and use dollars?

1486
01:07:48,052 --> 01:07:49,260
Kelly, and then we'll go to--

1487
01:07:49,760 --> 01:07:52,680
STUDENT: I just feel
like it was less of a--

1488
01:07:52,680 --> 01:07:54,330
I feel like it was
less of an attempt

1489
01:07:54,330 --> 01:07:57,300
to take some new digital
currency initiative

1490
01:07:57,300 --> 01:08:00,450
and more of an attempt
to make profits.

1491
01:08:00,450 --> 01:08:03,720
Because they said that
basically the state

1492
01:08:03,720 --> 01:08:05,430
had a monopoly on this.

1493
01:08:05,430 --> 01:08:10,260
And as Leonardo mentioned, there
was previously hyper inflation.

1494
01:08:10,260 --> 01:08:12,980
So once they discovered that
it wasn't really getting

1495
01:08:12,980 --> 01:08:15,308
them the profits they
wanted [INAUDIBLE]

1496
01:08:15,308 --> 01:08:16,350
GARY GENSLER: [INAUDIBLE]

1497
01:08:16,350 --> 01:08:16,975
STUDENT: Right.

1498
01:08:16,975 --> 01:08:19,260
So I'm sort of wondering--

1499
01:08:19,260 --> 01:08:20,819
the motivation I
don't really think

1500
01:08:20,819 --> 01:08:24,062
was to do a proper job
on the technology side.

1501
01:08:24,062 --> 01:08:27,502
GARY GENSLER: And you're
probably right about that.

1502
01:08:27,502 --> 01:08:28,960
One good thing that
came out of it,

1503
01:08:28,960 --> 01:08:31,470
they finally sort of admitted
that they shouldn't maybe

1504
01:08:31,470 --> 01:08:34,800
be in the monopoly, and they
let-- mobile phone payment

1505
01:08:34,800 --> 01:08:37,979
alternatives were authorized
for the phone companies.

1506
01:08:37,979 --> 01:08:39,779
But I'm not close enough
to Ecuador to know

1507
01:08:39,779 --> 01:08:42,210
whether that was really done.

1508
01:08:42,210 --> 01:08:44,250
Maybe it's now just
a duopoly of a couple

1509
01:08:44,250 --> 01:08:45,479
of phone companies doing it.

1510
01:08:45,479 --> 01:08:48,810
So they might have just
shifted some economic rents

1511
01:08:48,810 --> 01:08:51,990
from the government to a
couple of major companies

1512
01:08:51,990 --> 01:08:55,300
that are friends of the
government or something.

1513
01:08:55,300 --> 01:08:56,649
The Philippines.

1514
01:08:56,649 --> 01:08:58,120
I think there was a reading on--

1515
01:09:01,899 --> 01:09:03,910
anybody want to say
something about-- anybody

1516
01:09:03,910 --> 01:09:05,261
from the Philippines?

1517
01:09:05,261 --> 01:09:07,203
No.

1518
01:09:07,203 --> 01:09:08,870
Anybody want to say
something about what

1519
01:09:08,870 --> 01:09:10,743
happened in the Philippines?

1520
01:09:10,743 --> 01:09:12,410
And you're going to
see something that's

1521
01:09:12,410 --> 01:09:13,760
similar about this in Senegal.

1522
01:09:18,069 --> 01:09:20,125
There's a software
provider called eCurrency

1523
01:09:20,125 --> 01:09:24,729
Mint Limited in Ireland that
is marketing around the globe

1524
01:09:24,729 --> 01:09:28,578
to do digital Fiat currency.

1525
01:09:28,578 --> 01:09:30,120
I think they're
careful and they call

1526
01:09:30,120 --> 01:09:32,700
it digital Fiat currency
rather than the central bank

1527
01:09:32,700 --> 01:09:33,510
digital currency.

1528
01:09:33,510 --> 01:09:35,640
But nonetheless,
every time there's

1529
01:09:35,640 --> 01:09:38,520
a press release, whether from
the Philippines or Senegal

1530
01:09:38,520 --> 01:09:41,100
or elsewhere, somewhere
in the press release

1531
01:09:41,100 --> 01:09:45,600
you see blockchain
technology use for--

1532
01:09:45,600 --> 01:09:48,689
I've done my best to read
everything I can on these two

1533
01:09:48,689 --> 01:09:52,680
since last summer, when I
stumbled upon them in July.

1534
01:09:52,680 --> 01:09:56,610
I do not believe that either
are using blockchain technology.

1535
01:09:56,610 --> 01:09:59,740
But they're sort of using
the gloss of the terminology.

1536
01:09:59,740 --> 01:10:01,350
But it's still--

1537
01:10:01,350 --> 01:10:03,450
Senegal, more than
the Philippines,

1538
01:10:03,450 --> 01:10:08,160
is something that central
bankers are looking at.

1539
01:10:08,160 --> 01:10:10,290
Importantly, it's issued
by a commercial bank.

1540
01:10:10,290 --> 01:10:13,890
It's not technically
issued by the central bank.

1541
01:10:13,890 --> 01:10:18,120
The central bank has actually
put out a statement and saying,

1542
01:10:18,120 --> 01:10:19,890
this is a test, and
a learned thing,

1543
01:10:19,890 --> 01:10:21,570
and a regulatory sandbox.

1544
01:10:21,570 --> 01:10:24,000
The central bank is sort of
saying, all right, we'll let--

1545
01:10:24,000 --> 01:10:27,390
this is a little bit more
akin to private banknotes

1546
01:10:27,390 --> 01:10:29,220
in the 19th century in the US.

1547
01:10:30,190 --> 01:10:33,910
And I'll flip to
the Senegal one.

1548
01:10:33,910 --> 01:10:38,320
This is in the West African
economic and monetary union.

1549
01:10:38,320 --> 01:10:40,120
So there is a monetary
union, I think,

1550
01:10:40,120 --> 01:10:45,260
of 14 countries all
using a currency.

1551
01:10:45,260 --> 01:10:48,190
It's called the Franc, I think.

1552
01:10:48,190 --> 01:10:49,270
The F--

1553
01:10:49,270 --> 01:10:50,928
STUDENT: They call
it the [INAUDIBLE]..

1554
01:10:50,928 --> 01:10:51,970
GARY GENSLER: What is it?

1555
01:10:51,970 --> 01:10:53,860
STUDENT: [INAUDIBLE]
They use [INAUDIBLE]..

1556
01:10:53,860 --> 01:10:55,690
GARY GENSLER: [INAUDIBLE].

1557
01:10:55,690 --> 01:10:56,640
Have you ever used it?

1558
01:10:56,640 --> 01:10:57,470
Do you know it?

1559
01:10:57,470 --> 01:10:59,600
STUDENT: [INAUDIBLE]

1560
01:10:59,600 --> 01:11:02,810
GARY GENSLER: So one
country in a 14-nation block

1561
01:11:02,810 --> 01:11:06,340
said, we can maybe get
more financial inclusion.

1562
01:11:06,340 --> 01:11:06,923
Good.

1563
01:11:06,923 --> 01:11:08,590
I think there's a
good motivation there.

1564
01:11:08,590 --> 01:11:10,330
We can get more
financial inclusion.

1565
01:11:10,330 --> 01:11:13,690
We can put [INAUDIBLE]----
did I say it right?

1566
01:11:13,690 --> 01:11:15,940
[INAUDIBLE] on an
electronic platform.

1567
01:11:15,940 --> 01:11:17,830
We'll use this
software provider out

1568
01:11:17,830 --> 01:11:21,680
of Ireland that keeps
knocking on our door.

1569
01:11:21,680 --> 01:11:25,060
And we'll see if we can
push it out a little bit

1570
01:11:25,060 --> 01:11:26,860
under some e-money regulations.

1571
01:11:29,860 --> 01:11:35,440
Technically, it's e-money
under pre-existing regulations.

1572
01:11:35,440 --> 01:11:38,185
But I would say a lot of
central bankers are kind of--

1573
01:11:38,185 --> 01:11:40,810
elsewhere around the globe sort
of watching, what does that do?

1574
01:11:40,810 --> 01:11:42,220
What does that mean?

1575
01:11:42,220 --> 01:11:47,250
Does it increase
financial inclusion?

1576
01:11:47,250 --> 01:11:49,110
And probably the
most interesting one

1577
01:11:49,110 --> 01:11:51,450
really is in Sweden.

1578
01:11:51,450 --> 01:11:53,747
Sweden has said, these
are the benefits.

1579
01:11:53,747 --> 01:11:55,080
These are written in a document.

1580
01:11:55,080 --> 01:11:57,420
They've written now the
third document on this.

1581
01:11:57,420 --> 01:11:59,190
It came out a
couple of weeks ago.

1582
01:11:59,190 --> 01:12:01,690
It was not assigned reading
because it just came out,

1583
01:12:01,690 --> 01:12:03,780
and it's 50 or 60
pages, if anybody

1584
01:12:03,780 --> 01:12:07,500
wants to log through it.

1585
01:12:07,500 --> 01:12:10,380
They say, it's going to
continue the public access

1586
01:12:10,380 --> 01:12:12,810
to the risk free guaranteed
means of payment.

1587
01:12:12,810 --> 01:12:16,730
That's the key thing to them.

1588
01:12:16,730 --> 01:12:20,320
You have cash in your
pocket right now--

1589
01:12:20,320 --> 01:12:23,480
krona-- but very
few people have it.

1590
01:12:23,480 --> 01:12:27,590
So few people have it that
most retailers in Sweden

1591
01:12:27,590 --> 01:12:31,460
are now saying, I
will not accept krona.

1592
01:12:31,460 --> 01:12:33,710
And it's not such a big
country that a bunch of people

1593
01:12:33,710 --> 01:12:38,580
want to own krona
for a store of value.

1594
01:12:38,580 --> 01:12:41,170
So the total outstanding--

1595
01:12:41,170 --> 01:12:42,510
is there a question?

1596
01:12:42,510 --> 01:12:45,750
STUDENT: Because like all the
companies that are listed,

1597
01:12:45,750 --> 01:12:48,650
they're listed in
kronas in Stockholm.

1598
01:12:48,650 --> 01:12:53,440
So how come it's not used at
all but the stock markets use it

1599
01:12:53,440 --> 01:12:54,040
widely?

1600
01:12:54,040 --> 01:12:55,540
GARY GENSLER: The
stock market what?

1601
01:12:55,540 --> 01:12:57,880
STUDENT: Like the
companies which are listed,

1602
01:12:57,880 --> 01:12:59,593
they're listed in kronas.

1603
01:12:59,593 --> 01:13:00,510
GARY GENSLER: Correct.

1604
01:13:00,510 --> 01:13:03,030
STUDENT: So like how come
it's not used at all?

1605
01:13:03,030 --> 01:13:04,890
GARY GENSLER: It's not used--

1606
01:13:04,890 --> 01:13:06,810
no krona is used digitally.

1607
01:13:06,810 --> 01:13:09,630
I'm saying paper
krona is not used.

1608
01:13:09,630 --> 01:13:10,950
Paper krona.

1609
01:13:10,950 --> 01:13:12,600
But they're saying,
we maybe want

1610
01:13:12,600 --> 01:13:15,420
to make sure that
there's a government's

1611
01:13:15,420 --> 01:13:21,050
direct relationship to
electronic government money.

1612
01:13:21,050 --> 01:13:21,890
The properties.

1613
01:13:21,890 --> 01:13:23,570
They've said-- they
were willing to put

1614
01:13:23,570 --> 01:13:25,310
a comprehensive
range of services

1615
01:13:25,310 --> 01:13:26,960
in, make it widely available.

1616
01:13:26,960 --> 01:13:29,480
They've answered the
design considerations.

1617
01:13:29,480 --> 01:13:30,980
And they actually
say that they're

1618
01:13:30,980 --> 01:13:33,443
looking at putting
interest rate on this.

1619
01:13:33,443 --> 01:13:35,360
They think that putting
an interest rate on it

1620
01:13:35,360 --> 01:13:38,270
makes sense.

1621
01:13:38,270 --> 01:13:40,520
And that it should
have e-identification.

1622
01:13:40,520 --> 01:13:42,435
They say, it will be traceable.

1623
01:13:42,435 --> 01:13:44,060
They've already said
in their documents

1624
01:13:44,060 --> 01:13:48,110
they're not going to go with
totally anonymous e-money.

1625
01:13:51,690 --> 01:13:53,700
This is out of their report.

1626
01:13:53,700 --> 01:13:58,290
But as you can see, the
blue line is Sweden.

1627
01:13:58,290 --> 01:14:00,420
That their total
outstanding cash--

1628
01:14:00,420 --> 01:14:02,880
this is physical,
tokenized cash--

1629
01:14:02,880 --> 01:14:05,040
was 4% of their GDP.

1630
01:14:05,040 --> 01:14:08,430
It's now less than
2% of their GDP.

1631
01:14:08,430 --> 01:14:10,980
The US and Europe would
be the green line.

1632
01:14:10,980 --> 01:14:13,470
We're up to about 10%.

1633
01:14:13,470 --> 01:14:17,090
But as we talked
about on Tuesday,

1634
01:14:17,090 --> 01:14:22,820
8 of those 10 points in
the US are $100 bills.

1635
01:14:22,820 --> 01:14:28,230
And 4 or 5 of the 10 points in
the US are outside of the US.

1636
01:14:28,230 --> 01:14:29,730
STUDENT: [INAUDIBLE]
is part of this

1637
01:14:29,730 --> 01:14:32,670
because bank
deposits or reserves

1638
01:14:32,670 --> 01:14:38,040
or what we would hold involves
in dollars in the United

1639
01:14:38,040 --> 01:14:38,690
States?

1640
01:14:38,690 --> 01:14:42,114
The banks here are
holding in Euros.

1641
01:14:42,114 --> 01:14:44,580
GARY GENSLER: No, this
would be cash that's

1642
01:14:44,580 --> 01:14:47,700
outside that the public holds.

1643
01:14:47,700 --> 01:14:48,610
Or the public can--

1644
01:14:48,610 --> 01:14:51,330
STUDENT: Not held in banks.

1645
01:14:51,330 --> 01:14:52,710
GARY GENSLER: That is correct.

1646
01:14:52,710 --> 01:15:00,700
So if it's-- if it's cash
that JP Morgan is holding

1647
01:15:00,700 --> 01:15:03,640
physically, just because they're
putting it in that daily ATM

1648
01:15:03,640 --> 01:15:05,410
machine, it might be included.

1649
01:15:05,410 --> 01:15:08,470
STUDENT: Or like the
x number of dollars

1650
01:15:08,470 --> 01:15:11,142
in everyone's bank accounts
[INAUDIBLE] bank deposits.

1651
01:15:11,142 --> 01:15:13,100
GARY GENSLER: That's
[INAUDIBLE] bank deposits.

1652
01:15:13,100 --> 01:15:15,470
STUDENT: [INAUDIBLE] M1.

1653
01:15:15,470 --> 01:15:19,970
GARY GENSLER: This is actually
only about half of M1.

1654
01:15:19,970 --> 01:15:24,175
This is the $1.6 or
$1.7 trillion of--

1655
01:15:24,175 --> 01:15:25,960
it's about $1.8 trillion.

1656
01:15:25,960 --> 01:15:33,360
$1.8 trillion in the US, of
which $1.6 trillion or $1.5

1657
01:15:33,360 --> 01:15:36,530
trillion is $100 bills.

1658
01:15:36,530 --> 01:15:38,110
There's only $200
to $300 billion

1659
01:15:38,110 --> 01:15:45,700
of US currency, paper currency,
that is not $100 bills.

1660
01:15:45,700 --> 01:15:48,040
And well over half of
$100 bills are outside

1661
01:15:48,040 --> 01:15:50,230
of the US per Federal
Reserve statistics.

1662
01:15:50,230 --> 01:15:52,510
I think 57%.

1663
01:15:52,510 --> 01:15:53,980
How they trace
that, that would be

1664
01:15:53,980 --> 01:15:56,870
another story for another day.

1665
01:15:56,870 --> 01:15:59,170
But Sweden doesn't have
a bunch of people holding

1666
01:15:59,170 --> 01:16:01,630
the equivalent of
$100 bills or 500 euro

1667
01:16:01,630 --> 01:16:04,390
notes as a store of value.

1668
01:16:04,390 --> 01:16:06,220
And so you see a
decline of their paper.

1669
01:16:06,220 --> 01:16:08,440
You see the retail
merchants aren't taking it.

1670
01:16:08,440 --> 01:16:09,850
People aren't using it.

1671
01:16:09,850 --> 01:16:11,740
So Sweden feels
compelled to say,

1672
01:16:11,740 --> 01:16:14,290
I want to do something here.

1673
01:16:14,290 --> 01:16:18,310
Tuesday, we're going to be
talking about crypto exchanges.

1674
01:16:18,310 --> 01:16:20,800
It's a bit of a setup
also for Thursday

1675
01:16:20,800 --> 01:16:26,200
when we've got our outside
speakers I keep chatting about.

1676
01:16:26,200 --> 01:16:27,737
I think Talida--

1677
01:16:27,737 --> 01:16:29,320
Talida had to leave
early today, but I

1678
01:16:29,320 --> 01:16:31,112
think Talida is going
to send you a message

1679
01:16:31,112 --> 01:16:35,110
or put up on the website,
Jeff Sprecher and Kelly

1680
01:16:35,110 --> 01:16:37,090
sent a list of readings.

1681
01:16:37,090 --> 01:16:39,130
I guess they're used
to being-- they're

1682
01:16:39,130 --> 01:16:40,630
not actually used
to doing-- they're

1683
01:16:40,630 --> 01:16:41,995
doing this as a favor for me.

1684
01:16:41,995 --> 01:16:44,620
I got to know him very well when
I was at the Commodity Futures

1685
01:16:44,620 --> 01:16:45,910
Trading Commission.

1686
01:16:45,910 --> 01:16:49,590
They're rolling out the--

1687
01:16:49,590 --> 01:16:52,910
both a crypto exchange
and a payment alternative.

1688
01:16:52,910 --> 01:16:54,470
And so they sent
a bunch of things

1689
01:16:54,470 --> 01:16:56,178
that they thought you
might want to read.

1690
01:16:56,178 --> 01:16:59,635
So we put them up on the
website midday today.

1691
01:16:59,635 --> 01:17:01,760
I know that you've got a
lot of other things to do,

1692
01:17:01,760 --> 01:17:03,410
and it's getting to
that time of year

1693
01:17:03,410 --> 01:17:05,668
where there's fewer and
fewer things you're reading.

1694
01:17:05,668 --> 01:17:07,460
But what we're trying
to do on Thursday is,

1695
01:17:07,460 --> 01:17:10,760
I'm going to open up with
a little fireside chat.

1696
01:17:10,760 --> 01:17:14,192
They want me to ask them a few
questions for 10 or 15 minutes.

1697
01:17:14,192 --> 01:17:15,650
And then we're
going to open it up.

1698
01:17:15,650 --> 01:17:17,570
It's all going to be your time.

1699
01:17:17,570 --> 01:17:19,580
They're with us about an hour.

1700
01:17:19,580 --> 01:17:22,190
Now we might encourage
them to stay till the end,

1701
01:17:22,190 --> 01:17:24,800
but they're here
from 2:30 to 3:30.

1702
01:17:24,800 --> 01:17:26,900
Now I know we always
start at 2:35.

1703
01:17:26,900 --> 01:17:29,960
But if they're ready
to go at 2:32 or 2:33,

1704
01:17:29,960 --> 01:17:34,220
I might start with them and
start the fireside chat.

1705
01:17:34,220 --> 01:17:37,180
And then it's going to be
you're asking them questions.

1706
01:17:37,180 --> 01:17:40,220
So to the extent that you
read the things that they

1707
01:17:40,220 --> 01:17:42,812
sent around, better for you.

1708
01:17:42,812 --> 01:17:45,020
I will say this in advance,
because one or two of you

1709
01:17:45,020 --> 01:17:46,875
have already come
saying, I want to see

1710
01:17:46,875 --> 01:17:49,250
if I could go work for the
company that owns the New York

1711
01:17:49,250 --> 01:17:51,530
Stock Exchange and owns
[INAUDIBLE] and everything.

1712
01:17:51,530 --> 01:17:53,840
I will be glad to
send whatever resumes

1713
01:17:53,840 --> 01:17:56,310
or anything you want
to Jeff and Kelly.

1714
01:17:56,310 --> 01:18:00,830
I'll act as a clearinghouse and
send it if that's your goal.

1715
01:18:00,830 --> 01:18:06,290
But in advance, I'm not going
to give their private emails

1716
01:18:06,290 --> 01:18:08,160
to you and everything like that.

1717
01:18:08,160 --> 01:18:11,120
But I think that would be
an interesting conversation

1718
01:18:11,120 --> 01:18:13,400
next week.

1719
01:18:13,400 --> 01:18:16,140
So central banks play an
important role in the economy.

1720
01:18:16,140 --> 01:18:18,650
We already live in
an electronic age.

1721
01:18:18,650 --> 01:18:23,510
But they really are absolutely
at the epicenter of money

1722
01:18:23,510 --> 01:18:26,930
and how money's been defined
for 300 or 400 years.

1723
01:18:26,930 --> 01:18:31,070
Payment systems and Fiat
currencies have had challenges.

1724
01:18:31,070 --> 01:18:32,960
I still continue to
think blockchain--

1725
01:18:32,960 --> 01:18:34,580
I told you, I'm
not a maximalist,

1726
01:18:34,580 --> 01:18:37,820
but blockchain technology
can be a catalyst for change.

1727
01:18:37,820 --> 01:18:42,740
Central bank digital
currencies is evidence of that,

1728
01:18:42,740 --> 01:18:45,270
even if it's not based
on blockchain technology.

1729
01:18:45,270 --> 01:18:50,210
I think it's partly inspired
and urged on by this.

1730
01:18:50,210 --> 01:18:53,210
It doesn't solve what
blockchain technology

1731
01:18:53,210 --> 01:18:55,370
would do for it, but--

1732
01:18:55,370 --> 01:18:58,860
I think that central banks
by and large are monitoring.

1733
01:18:58,860 --> 01:19:01,640
They're exploring
payment systems,

1734
01:19:01,640 --> 01:19:05,240
and a handful are looking
at the central bank

1735
01:19:05,240 --> 01:19:06,650
digital currencies.

1736
01:19:06,650 --> 01:19:08,360
I think-- and this is
my own prediction--

1737
01:19:08,360 --> 01:19:10,160
that with 180
countries, somebody,

1738
01:19:10,160 --> 01:19:11,660
Sweden might be
the one to do it,

1739
01:19:11,660 --> 01:19:14,930
will be there to do some
central bank digital currency.

1740
01:19:14,930 --> 01:19:18,050
Venezuela says they're
doing one backed by oil.

1741
01:19:18,050 --> 01:19:19,910
So it might be the other end.

1742
01:19:19,910 --> 01:19:21,590
Iran says they want to do one.

1743
01:19:21,590 --> 01:19:23,000
They would avert sanctions.

1744
01:19:23,000 --> 01:19:25,880
We didn't talk about that,
but sanctioned countries

1745
01:19:25,880 --> 01:19:28,170
are looking at ways
to avert sanctions.

1746
01:19:28,170 --> 01:19:32,030
So there could be countries
in distress, countries looking

1747
01:19:32,030 --> 01:19:36,080
to avert sanctions, or, you
know, kind of first tier

1748
01:19:36,080 --> 01:19:39,470
economic countries like
Sweden that are looking at it.

1749
01:19:39,470 --> 01:19:42,010
So I will see you next Tuesday.