BitGo CEO Mike Belshe: Crypto vs the Banking Cartel | BMP 016

Hey Spencer, great to see you. Thanks for having me on.

It was a great event. Thanks for you guys' participation helping indirectly organize it or I'm not sure exactly, but it's a good crowd. The thing I like most about the Bitcoin dominant, I wouldn't say it was quite specific, but pretty close to Bitcoin specific. The folks that are in there have been around for quite some time. I think you don't have to worry about their ethos as much. They're in it for the right reasons. A lot of really good people there that are in it because they see the long-term potential and value of Bitcoin. Everybody's kind of scratching their head when you're in that space right now thinking, look, we know that there are real issues with the US dollar. We know that Bitcoin can be used as a global settlement system in a way that we've never had the ability to do before. And yet Bitcoin is not trading super great right now and there are a lot of questions. I think there are two things on people's minds. Number one is quantum. Whether you believe that's an issue or not, that's not my point. There's a lot of people that are worried about that. The second thing that people are looking at, at least for the short term, is they don't really understand what Michael Saylor's products are, how they work. And they hear leverage. Leverage obviously a lot of bad things can happen when you're overlevered. They don't know whether MicroStrategy and Saylor are overlevered or not. They don't understand the basics of it. But they are confused by it. I think those two things are leaving everybody befuddled as to why Bitcoin isn't performing a little bit better right now. Of course, we have AI out there. The vibes of the conference are very nice. It's a great group of people. We go through ups and downs and I think everybody there is pretty patient.

Part of the reason I got into Bitcoin in particular, it's the first time I ever got into anything even close to finance. I spent my entire career as a technologist. I spent all my time doing software engineering and technology. I had friends in college that went off to work in finance. For me, I've always felt finance is kind of just a bit of a scam. There are these people that produce nothing. They take an oversized bite for giving you advice on how to invest and allegedly help you make more money. Yet if you look at them, even on average they aren't that good. The vast majority of them are not that good. You look at funds, about three quarters of them are always underperforming the S&P. What kind of a career do you have if the best you could do is run a fund that couldn't even beat the S&P? I think finance is riddled with these people. I'm a little bit off track from your question. You were asking what is holding back institutions. The institutions don't really understand what Bitcoin is. They'll invest in anything. They'll invest in meat pies, they'll invest in crypto, they'll invest in AI, whatever they think is going to make money. Frankly, they don't really have as much insight as they'd like you to believe they do. Nonetheless, the girl in the red dress is absolutely AI. She is enamored all of them, and they're only focused on that right now. When they think about Bitcoin a little bit, they've never really understood it. They think it doesn't look like it's doing much right now. But I mentioned quantum already. They're really worried about quantum. They don't get quantum either. It's a crazy complex technical topic. You have to go read a lot of papers to understand where quantum might be on a timeline, what impact it might have. I think we do have to address this. As much as I complain about others, we are here because we'd like to see Bitcoin proceed further and faster. Part of what you have to do to get people to work with you is to demonstrate and convince them that whatever their fears may be, there are good solutions, they're addressed. The good news is that the Bitcoin core team and a number of initiatives are all moving much faster than they were a year ago to address this problem. I think we should get a quantum-resistant signature inside the Bitcoin core protocol ASAP. As soon as we do that, I think we'll unlock a lot more institutional interest again.

I think it's actually real. When we were doing our roadshow for BitGo going out to the public markets just in January this year, I was surprised. I expected to get questions about BitGo and how we're performing. Of course, we did get those, but a top three question all the way through was what's going on with quantum computing. It's a real concern that they have. Think about it this way. You're going to run a fund and you're going to have billions of dollars in it. Imagine if one day billions of dollars is gone. They also don't really understand anything about the products that they invest in. When they hear this quantum computing threat, they don't know what to make of it. It is so new that it's kind of an outside thing. There are not very many risks that are just like, hey, that's a risk that could completely take all of my capital. It's an unusual thing and they're more concerned about it than they should be. For the record, I personally don't think quantum is a significant threat in the near term. Doesn't matter what I think. What matters is what the world thinks. If the world thinks it's an issue, we should just address it. We're getting close to being able to do it. I have zero doubt that the Bitcoin community will come through and come up with a quantum-resistant algorithm. They will then have enough time to get it into wallets. BitGo will absolutely lead that just like we did. We're the first to put a taproot transaction on chain years ago, adopting both taproot and Schnorr. We designed the UTXO spending algorithm that's inside Bitcoin Core today. We will continue to be Bitcoin forward. We pioneered multi-sig as well, which you absolutely should be using if you're using Bitcoin. We'll be there. The industry will be there. The core devs would absolutely come together if there was ever a need to scramble, but I don't think we're going to need it. Nonetheless, let's make sure that nobody has to worry about it.

Well, we just talked about how quantum can really inhibit the adoption of Bitcoin because people don't quite understand it. The good thing about stablecoins is they're really easy to understand. First, you have to understand that there's this blockchain primitive that allows you to move value around seamlessly very quickly. But then the idea of a one-to-one correlation between the stablecoin and the dollar is super easy to understand. The Genius Act was passed last year already. It was not only easy for people to understand from a how-it-works perspective, but it was also pretty easy for legislators to understand how they might regulate it. We're going to have a token, we're going to verify that there's a backing of at least this type of asset behind it. Turns out we've had this for a long time. It's called the Reserve Bank. That's what BitGo does. We are an OCC-chartered national bank. We are not a depository bank, which is the type of bank that takes risks and needs to buy extra insurance to cover those risks. Instead, we just hold your assets, and you have them a long time. Stablecoins fit the bill for how do you make something that people can conceptually understand and not have to say, I don't get this, I can't adopt this. Everybody sees the potential. There's been a pent-up demand prior to crypto for something like a stablecoin. This is evidenced by the myriad of different payment fintechs over the last few decades that shouldn't have existed if the banking system worked well. If banks did a great job of payments, we used to write checks, then we moved on to credit card banking a bit different, but people use it for payments all the time. Debit cards, ACH, then you end up with PayPal, Venmo, Cash App. Why do these payment apps exist if banks are making payments great? They failed. They don't make it easy. It takes them a long time to move. They get stuck on regulatory. I'm not trying to blame them alone. They have been heaped with a very high regulatory burden, which makes it difficult to roll out new products. There's a bit of innovator's dilemma. Once you are the incumbent, you have this innovative team with a new idea and you're like, I don't know if it's going to work. Instead, PayPal does it. It turns out to be an interesting thing. So stablecoins, there's a lot of pent-up demand. When you really start talking about a global economy and a global financial system to go along with it, this is where the banks got stuck, mostly due to regulation. Every jurisdiction, whether it's the US, China, Europe, the UK, has its own controls on money. Everybody decides differently. Every government wants to control its money. That's natural. What happened prior to having stablecoins is that we never solved the problem. Moving money internationally is hard to this day. Western Union charges exorbitant fees to people that want to move money globally. Stablecoins finally disintermediate that. You can move money super easy. It's a dollar. People get it. We had a zero interest rate environment just a few years ago. Tether was operating all through that, kudos to them. They weren't making a lot of money in a zero interest rate environment. Then as the US started to increase rates after the COVID period, the US dollar got stronger against other currencies. The US is already a strong currency, the reserve currency of the world, despite its flaws. But for some of the more brittle currencies, they start to inflate. A little drop in strength and they go crazy. This happened in Turkey. The poor people of the country that is losing control of its money, and it's always losing control of money, just ask Milton Friedman. It's government overspend every single time. Their savings are disappearing in front of them. They have to do something. What did they turn to? They didn't turn to Bitcoin. They turned to Tether because it's conceptually easier to understand. It's a digital dollar. They can get it. They need something that gets off their currency. They can get to the dollar and save their family. Stablecoins are clearly here. What's good about them is that people get it conceptually. We're getting stuff in place legislatively. That'll come down to regulation. Companies like BitGo, an OCC national bank, can provide a Genius compliance mechanism. Today, we're doing that for the USD one. It's now a little under $5 billion in size. We're doing that with SoFi, a top 50 bank in the US. You can do it through them. They use BitGo behind the scenes. United States recently moved over to us. We have a half dozen others doing as well. The bad news is that Genius doesn't allow for interest on your stablecoins. As with any regulatory capture, the guy that's got the regulatory capture doesn't want to let go easily. He's benefiting from it. The banks are like, come on, we know you want a better banking system, but can't we just keep making a lot of money for now? Wouldn't that be nice? Eventually, the banks are going to have to give it up. Stablecoins are a better way to save and hold deposits. You should get interest. It's your money. You deserve it. The idea that the government is going to tell you can't get your own hard-earned money, the risk-free rate is insane. As excited as I am about stablecoins, it's a massive change to payments. It's not completely done either. We still need more innovation. Most of the payment stablecoins run on Ethereum. If you want to run small transactions, the Ethereum fees are simply too high. You want to run a $10 transaction but paying a dollar ETH fee doesn't work. You can't do it there. You might move to Tron, Solana, or something else. There are places to go to lower fees, but if those coins go up in value and get more traffic, they'll also have a fee-related issue. More importantly, there's a second thing: ease of use. If I could give the crypto industry one thing to focus on for the next couple years, it's ease of use. If you get your grandmother to agree to pay you in stablecoins, she'll say, okay, it's $1. Then she tries to move it and it says she doesn't have enough to pay the gas fee because it needs an ETH fee or a Solana fee. These aren't plumbed through universally yet. There are some solutions. Stripe along with Paradigm created a blockchain called Tempo that allows you to pay fees in the stablecoin. It's early days, but they're up and coming. Circle has its own blockchain called Arc. Both of these guys realize you can't have a world where you're trying to move dollars but have to have some other foreign currency to move it. It doesn't make sense. Imagine going to Burger King and buying a $10 burger and they say it'll be $10 plus 0.3 euros. Nobody wants to do that. We have to fix two problems. First, fix the fee problem so it's not variable tied to the chain going to rates that are too high. Second, probably more importantly, make the usability so that you don't have to pay in the native coin. This is being addressed now for the first time, and that's due to people finally getting their heads around the opportunity with stablecoins.

I hope we see a full transformation. When it comes down to regulatory things, it's not a fair playing field. A lot of different outcomes could be possible. Senator Elizabeth Warren published a piece accusing the OCC of granting companies, including BitGo, trust charters inappropriately, and it's going to make the banking system unsafe. In her letter, she didn't say anything about how that would actually come to be. From our side at BitGo, we very much think not only is she wrong, she's completely opposite wrong. What BitGo does as a national trust bank is a reserve bank. It's actually the bank you wish you had but never had. Pre-computers, it wasn't realistic to have a reserve bank like what we do. Instead, you were using a traditional bank, a depository bank. These guys take risks with your money and from time to time they screw up. It's happened over the last 120 years. When it happens, it can be spectacular. The most recent banks that failed were SVB and Signature Bank. You probably remember Washington Mutual and many others that have failed. Every time they fail, it leads to some new regulations and laws, all well-intended, designed to protect against that type of failure happening again. Unfortunately, when you have a demand deposit bank which lends out money, there's no set of rules or regulations that will ever drop the risk to zero. It just can't happen. A demand deposit bank, a depository bank, means that you as a client can come in and make a deposit today, and tomorrow you can demand that money back and they have to give it to you. Imagine you walked into a bank that just opened the day before. You're the first account holder and you deposit a million dollars. The bank is happy, you're happy, your money is safe. Then the bank takes your million dollars and lends out 80% or 90% of it to somebody in a perfectly good loan, to be paid back in two years. If you show up the next day and say, I want my million dollars back, they'd say, we lent it out.

Yeah. Okay, so this is safety and soundness. Obviously, the banks are not allowed to do the scenario I just described. They're required to have policies and rules to make sure you'll always be able to get your money back. Yet they lend it out so they make money and keep the whole thing safe. Bankers have proven over and over again they're not very good at this. I'll give you one quick example. Silicon Valley Bank, run by financial professionals. These really smart, intelligent men decided in the middle of a zero interest rate environment that the best way to make money was to take depositors' money and put it into 10-year T-bills, making about 1.8%. That was their best idea. They're supposed to be financial professionals, and their best idea was to put your hard-earned money into a 10-year T-bill. I'd argue you can probably put it in a 10-year T-bill yourself if that's what you wanted, and then you get to keep the full 1.8%. Moreover, they didn't think that if interest rates go up above 1.8%, clients might want their money back to put into something that earns more. The bank went under as a result. These financial institution professionals are not always the sharpest tools in the shed, yet they're heralded to steward billions of dollars. We carry regulations to help prevent these things from happening, but it makes it very difficult for these businesses to do a lot of innovative things. We now have banks that can't keep up with payments. That's why you have all those apps that wouldn't exist if the banks were doing their job. I hope we can get a revolution. The depository bank has two functions: help the retail guy keep their money safe, hopefully give them a little interest, and lend out that money to businesses to provide liquidity. Those two things are coupled. You take depositor money and lend it. It used to have to run that way because we didn't have computers. But these days we have computers, so there's no reason these two things have to be coupled. You can have one place where you save your money and a different place where you go and lend and borrow money.

And the idea that these things are coupled is just historical. Now, the

Banks are clinging to that because that's their business model. And by the way, there's one other thing which is happening historically, which is why they're clinging to it. And that is that they are funding institutional businesses with lower interest rates than they should be paying by stealing from retail. And they don't want you to know this. It's one of many contributors to our K-shaped economy where those with assets are getting richer and richer and those without are getting poorer and poorer. And what I'm talking about here is you go to the bank and we just talked and we would just demonstrate they put your money at risk in various loans and duration mismatches and all this kind of stuff. You should get compensated for that. They are taking a risk with your money. There's the risk-free rate, which is putting it into a T-bill. It's the economic definition of a rate of return without taking any risk because a T-bill is perfectly good cash and is fully backed by the full faith and credit of the United States government, who prints the dollars and they can always print more dollars. So it's fully backed. It really is zero risk. And so, today that's 4%, but when you put your money at the bank, they give you 0% or 0.1%, which is so close to zero, let's call it zero. Why? Why do they do this? Because they're big business. And so, you have to remember, by having coupled these two things together, something happened. They've got depositors. The bank has two jobs: one, collect depositors, and number two, find borrowers. Those are the two jobs. All right, so they collect the depositors and they say, 'Okay, this guy should get the risk-free rate, maybe a little bit more. We should give him 5%, right?' And then the bank wants to take a little fee, maybe the bank wants to take 5%. So it can run its operation. Probably fair. And then, in order to lend it out, they have to lend it out at 10%. Over time, you know, businesses that want to borrow large amounts of money are the best clients that the bank tries to go find on the lending side. And, you know, somebody's borrowing a hundred million dollars. And so, that's a big client to the bank. And that guy says, 'Hey, Mr. Bank, you're charging me 10%. I only want to pay 9%. This is too expensive. If you can't give me 9%, I'm going to go to the other bank.' And the bank scratches their head and they say, 'Gee, but we have to pay the depositor five, and we need five. What do we do? Do we take that 1% from ourselves, or do we take it from the retail depositor? Well, the retail depositor has no power, so we take it from him.' And what's happened is, over time, because we don't have that many banks, and by the way, counter to Liz Warren saying we shouldn't have new banks like BitGo, you know, in the 2010s, there were like zero new banks created in the US. Like zero. Like literally zero. And all right, so the bank decides to take from the depositor. And over time, over the last couple of decades, this has just whittled down and whittled down and whittled down. And the incumbent banks are effectively like an oligopoly. They've all done this together, so that they're all charging roughly the same interest rate, and it's all about zero. And what they've done is they've subsidized that hundred million-dollar loan to the big business guy on the back of retail. They love this business, big business loves this business. They don't want to change.

I think these things all come together. Yeah, I think, you know, even just looking at kind of that business model. I try to simplify it down. I know I'm oversimplifying, right? But you try to simplify it down to just the basic functions: depositors, lenders—I'm sorry, borrowers. And it's kind of easy for people to understand. You throw in the other things, which is like, well, oh, that guy's going to now use his profits to go kind of make sure he can get a cheap loan. Yeah, he's probably going to do that. So, look,

I think there's a better model. I think blockchains are what deliver it. Stablecoins are what deliver it. And the new model is this. You take the stablecoins and you use those as your deposits. And that's for retail. You always give them at least the risk-free rate. They get their full 4 or 5%, whatever the number is. And they do it at zero risk. It's the risk-free rate. They get the risk-free rate. They pay a little bit for the banking and security, but this is measured in basis points instead of percentage points. Now, the lending market. So, the banks will tell you, 'But we need that money because otherwise we won't have liquidity in the market. You won't be able to get a small business loan. Everything's going to fall apart.' I call BS on this also. First off, the market is very efficient and has a great way of solving these problems. I think absolutely big business can afford a couple percent extra. It might cause his loan price to go up, but that might mean there's a little bit less borrowing. But I think the market absolutely can absorb it. And there's even a couple of historical examples that show that it can. But secondarily, I think we create a marketplace for loans, which is better anyway. So, now imagine instead you have a lending marketplace and, you know, borrowers can line up to borrow and lenders can line up to lend and you get it from private equity. Corporates can lend, high net worths can lend, retail can lend. Whoever wants to lend, it's just a marketplace. Create a lending marketplace. We have computers that can do this stuff. We no longer need a bank that couples deposits from retail with borrowing and lending to anyone and creates this unnecessary risk. So, I'll give you one last thing which might get you more excited on the political side since you sort of mentioned some of that. Once regulation comes into play, I don't think you can ever get rid of it. It just never goes away. It's a bureaucracy. It kind of lives on itself. So, when I complain about safety and soundness of a bank, I don't think there's any way to change all the regulations that are applied to a depository type bank. I think they're there for good. So, how do you make a lighter weight regulatory environment? And by the way, I'm not trying to make it less safe. I want to make it more safe. I think what happens, and this is where innovation is amazing, innovation comes in, gives us a new model, and we then look at that model, we evaluate it, we look at the risk of that model. This is where Elizabeth Warren is completely wrong. The new model is you take a reserve bank, like what BitGo does, not taking any risk with your money, and you regulate that differently. It doesn't need the full safety and soundness of a traditional bank because it doesn't do any of the lending. None. Right? By the way, she sometimes says, 'These guys aren't even insured.' And she's talking about FDIC, Federal Deposit Insurance Corporation. We're not eligible for the insurance because we don't take on-demand deposits. All right, so the innovation can shift the model. We separate out the deposit part to be stablecoin-based, risk-free rate, no risk being taken. The lending part, we get a better lending market anyway. And now we get the side benefit of having reduced regulatory oversight, which makes the whole thing more efficient.

Well, you asked two different questions there. Will it be an important force on the macro side? To some degree, yes. I think actually you bring a bunch of people into the US economics that otherwise wouldn't be there. I think we will see collapse of some of the weaker foreign currencies will just fold into dollars. You're probably familiar with, you know, El Salvador runs on the dollar today, right? Others run on dollar-backed currencies today. So, this will be sort of like doing that again. Now, then lastly, will it just keep growing? No, I don't think so. So, I think what happens is a little bit different. Instead, what happens is the liquidity on- and off-ramps between stablecoins and other types of products continues to grow. And remember, the number of companies that are offering stablecoin on- and off-ramps like BitGo is very small. It's measured in either hundreds or maybe low thousands, right? Whereas eventually everybody's going to support them and there's going to be lots of ins and outs. And so look, payments are money moving, right? You've got your savings, you've got your assets, the stuff you put to work. You have tremendous amounts of value sits completely outside of the currency system. Instead you store the value in assets, right? So there's some amount of payments that are kind of always in flow. And those will obviously exist. But the digital rails are going to be even more fluid than the traditional rails because they run 24 hours a day, because everybody can support it. It seamlessly goes from custody and not custody. It goes between the US and the world instantly. Banks don't have these features, none of those features. So banks have kind of an impediment which keeps more in the payment system than probably needs to be there. But I don't think we should be scared of this. Like this is actually just all good news.

Yeah, actually I feel really lucky where BitGo is. I mean, obviously you kind of know, establish a viewpoint from where you sit. But, look, our OCC chartered national bank is a really powerful entity, both on the banking side, how we just described about reserve banks and what can be done there that never could be done before, but then also on the tokenized equity side. And remember, so BitGo has the same standing as DTC, which is Depository Trust Company, not related to depository bank, but Depository Trust Company is the ultimate holder of all street name equities in the US, actually in the world. So about 85% of all equities sit over there. And then I don't know, something like 99.8%—I won't have that number right, but it's pretty close to that of traded stocks go through there. So we have the same standing that they do. And now the difference here on stablecoins versus tokenized equity: there was lots of discussion of, not just discussion, there implementations of stablecoins going all the way back to I think 2015, maybe when Tether started, I'm not entirely sure. But this has been growing for quite some time. The tokenized equities were really completely on the sidelines until 18 months ago. And that is the former administration and, you know, Gary Gensler at the SEC was simply unwilling to have any conversation about how to bring digital and equities together. I met with Paul Atkins actually last week. You know, everybody says the same thing. Like he's such a refreshing conversation. And you can be pro crypto or digital assets, you can be anti, the conversation with him is always great. He wants to do a few things. He wants to make it so that the US capital markets are the best capital markets in the world. I don't know anyone who disagrees with that. He recognizes that we need to have more IPOs. We need to have more companies choosing to go public. The fact that all these companies were kind of stuck in private land is a sign that we have not been keeping up globally as the best capital market. Now, don't get me wrong, the US is far and away the best capital markets, but if you keep that trend, it's the wrong trend for the country, it's the wrong trend for our economy. All of that's good. And then the third thing where he's just really refreshing is that he's like, 'Look, there's going to be new technology and we need to have the ability to innovate.' So he is very, very open to having safe harbor for innovation so that things can happen and it's not just you're going to get thrown in jail because you tried something that you thought would be great and didn't work out. Of course, you still got a lot of restrictions on equities. You have to trade them through broker dealers, they have to trade on ATSs and exchanges, but, you know, can you have some new inroads and tests that you're doing digitally? And then it's not just crypto firms are doing it. The DTCC, which is the owner of the DTC, is doing it directly. They got a no-action letter from the SEC, that's all public. So they are aggressively moving into this. Of course, all of the asset managers there, BlackRock, Fidelity, WisdomTree, Morgan Stanley now. On the broker side, of course, Morgan Stanley again, you've got Charles Schwab, Citi, like all of these guys are very excited about what's possible. And look, the crypto market [clears throat] in total is a little less than two trillion right now, I think. The equities market is like 70 trillion in size. So it really opens up the field for what can be done. And you know, the big change is that we finally have a regulatory scheme where we can at least start to experiment. And not only are we experimenting, we're experimenting with the guys that have been doing this forever. So it's really good news, it's exciting. I do think we're going to be able to see massive change here as well. And actually, the Reserve Bank, I think again turns out to be a critical piece for working in that field.

No, these conversations are happening right now. Look, actually if you take the anti-digital side for equities, I think you would say a couple things. You'd say, 'Look, the US capital markets are great. They're incredibly efficient, which is true. They, you can trade at almost no cost through Schwab, right? You can do trades for 5 cents, right? I mean, it's really, really low. And these guys still make money. So they're like, "Why do we need digital? Is it really going to be any better?" And when it comes to just spot trading, that might actually be mostly fair. So I think there's a couple of things that open up. One is potentially transparency. I'm going to come back to the 'potentially' word in a second. The second one is lending against securities. So just like you can borrow against your Bitcoin, shouldn't you be able to borrow against your securities? The traditional guys might say, 'Oh, but you can already.' No, no, no. If you go to Schwab, or any of these brokers, sure, they'll give you a margin account, which is letting you borrow against your equities so that you can do one thing: buy more equities. [laughter] They don't let you take the money out to pay for your kids' college, things like that. Some people can, of course. It does vary depending on who you are, but for a large number of accounts, of course you can do that. So lending I think is one that opens up. And then the third one I'm just going to label as innovation. I'll leave a hint here. At BitGo, we have a bunch of ideas around where innovation can come. We haven't launched it yet, so I don't quite want to talk about it. But on the innovation side, the traditional guys would be like, 'Well, what innovation am I going to get?' Isn't that the beauty of innovation, right? You have to create an innovative environment to see what you could get. You know, they might say, 'Well, why don't the original guys do it?' Well, look, you need fresh blood. It's the same reason why, you know, the youth become the adults. Everything cycles in life. And yes, we need innovation to bring in new ideas. And I would predict 90% of the new ideas will be terrible. And there will be 10% which will be okay. And there'll be a couple that'll be so awesome, we'll be really glad that we digitized all the equities. But that's what innovation is. And it always has been. So, this isn't like a crypto-related thing. Now, back to the potential transparency. The reason I said 'potential', you know, in the blockchain space, we've said for years that blockchains provide better transparency than traditional markets. It's true. But we haven't really added privacy into most of our coins yet. And then you can see where one place where the traditional world is going is Canton Network. Really one of the first networks to enable privacy. The traditional firms like it because they get a permissioned ledger, so they have more control over it, and then it's also got some privacy. Interestingly, you know, the same regulators that a couple years ago to all of us trying to do retail products, they said, 'No, no, no, no. No privacy to retail. You guys are doing bad stuff. Money laundering. Bad, bad, bad.' But then when the corporations do it, they say, 'Oh, yeah, of course you need privacy. Yeah. You can't trade without privacy.' So, like, wait, which one is it? Anytime you see one privilege being extended to institutions, businesses, whatever, and not being extended to retail, you know there's something wrong. Right? So, of course retail needs to have privacy. Once we have privacy, you won't have quite as much transparency, but you'll still have mathematical proof. And mathematical proof is incredibly important. You know, the GameStop guys will tell you that, you know, there was a heck of a lot of shorting there. It looks like somebody was doing naked shorting, you know, hasn't happened. If you move to a pure blockchain system, it will be mathematically impossible to do. So, anyway, I think there'll be a bunch of benefits that we get from it. A lot of them we won't be able to see until it comes, but look, every single traditional firm is also seeing the excitement of upgrading their systems to something more modern, reducing the number of errors, increasing the speed. Crypto already deserves credit for making 24/7 markets even in traditional. They are copying because of Bitcoin, because of crypto. So, that's a win. That should be claimed by digital assets. Anyway, there's more to come.

Well, I don't like the either/or that you gave me there. So, I'll let me just split that into two parts. First, you've got kind of open networks versus closed networks. And like when you've got permissioned ledgers, that's a closed network. I think they always lose to open networks in the end. Maybe regulatory capture helps them stay alive a little longer, I don't know. But ultimately an open network will be better. And it's very simple. The best markets are the markets that bring the largest collection of buyers and the largest collection of sellers. And an open market by definition will do that more than a closed market. Regulation could play it. Well, second thing, when it comes to money, there's going to be regulation. There's going to be rules around it. It's not going to be open, you know, complete Cypherpunk, like you said, where it's just like everybody can do everything. So, this is just going to exist. Whether it should or not, I almost don't even want to say. I probably lean more libertarian than not, but I don't think it matters. I think that when it comes to money, most Americans actually do expect some amount of safety and control. Without it, you get things like FTX, right? So, and we in the crypto space certainly can't denounce that there's been some pretty colossal ugly failures when you have purely no rules. So, I think we definitely need rules. There will be some. I think that we will have open networks that abide by those rules. I hope that we end up with regulations that allow us to continue to have those open networks. Because if we can make sure that the money flows freely at as many places possible, that'll be a win. I'll give you a quick example on this. You know, there's a lot of competition between the US and China. Obviously China is a massive country. They outnumber America in terms of population by about four to one, I think. The economy is booming. They've got tremendous manufacturing capabilities. They will be the largest GDP in just a couple of years here, and nobody questions this. But will they be a place of global capital markets? No, not for a very long time. So, they have severe capital controls, which is the flow of money. It's a closed system. It's not an open system. We've seen, of course, that when companies get too big for their britches, Ant Group and whatnot, you know, the government will step in and just declare it gone. Foreign ownership is extremely limited. If you want to have an open network, an open money system, it's got to be open to as many people as possible. I think the US should kind of rethink its policy here. I think this is an issue for us. You know, under the Biden administration, they decided that the sanctions controls on Russia should be implemented and we should just take their—I forget what it was, 300 billion or something like that. Look, whether you're pro-Russia, Ukraine, that's not my point. We have the US dollar is the world's reserve currency, which is a different thing. It's not political. It's money. And if you want to have the world's reserve currency, you can't go snatch away from people that you don't like. So, there's lots of countries that are, you know, allies of the US and yet they do things which Americans sometimes don't like. And if they worry that America's going to just steal their money because they did something bad, like maybe they killed a reporter in their land, hm, heard that before. And if you were afraid of having all your money taken away because of the US political thing, that wouldn't be very good. So, again, this is really just open systems versus closed systems, right? The closed system allows you to take the money away. The open system allows everyone to participate. So, anyway, everybody needs to be aware of that if you want to win.

It is true. And this is where stablecoins don't cut it. So, Iran learned a frustrating lesson. They had their tether confiscated. And of course the government didn't have to go take the tether coins. Took the underlying, right? So, went to Tether and said, 'Hey, give us Iran's money.' And of course, Tether did. I'm not criticizing Tether here in any way. You know, any US regulated company would have done the same thing. So, stablecoins don't have that sovereignty that Bitcoin does. Now, some people might, you know, Elizabeth Warren probably would say, 'Oh, that's a bad thing. Stablecoins good and Bitcoin bad.' Look, if we are going to have multiple governments, multiple countries, which I believe we will. I hope we do. Each one of these countries has its own things that it wants to do, its own culture, its own people, its own rules. And that's okay. And we don't trust each other and we shouldn't trust each other. And stablecoins from one country aren't going to make it for global settlements. It's going to have to be something where the other guy can't rug pull you. And of course, Bitcoin provides that, but the stablecoins don't.

Well, thanks for doing the show. Everybody keep your chin up during the bear market. Been through this four or five times. I don't know what at this point. It always comes through. It seems dark when you're at it, but this is just part of the process as we grow. And there's so much more to be learned, so much more innovation to be had. We are definitely on the path to a better financial system.