Are TradFi Institutions Lying about Tokenization? | Austin Campbell

and the traders. Because I look around at the street, what I'm seeing is a lot of science experiments by people who don't have P and L.

favorite is the Treasure Save five. It's a beautifully designed and easy to use hardware wallet guys, and it's my go to and they support a variety of coins, all your top crypto tokens, your big coins, your x rp Ethereum, Solana and much more, and even new coins even black Rocks Biddle token. So they support coins on the institutional side where you have tokenization of different assets and much more. And they even offer a great service that helps you

to get your treasure device set up. You get one on one customer support from their team, so you can check that out as well. So once again, I'm a big fan of this hardware wallet. So if you'd like to learn more, visit the link in the description. Hey everyone, welcome into the Thinking Crypto podcast. I'm your host Tony Edward and we are recording at Station three in New York's Financial District. And joining me is Austin Campbell, who is the founder and managing partner at Zero Knowledge Group

and an adjunct professor at NYU Stern. Previously, he ran Stable Value Trading at JP Moore, was the cohead of Digital Assets rates trading at City, and was the head of portfolio management at Paxos. Austin, great to have you.

if you're at like Go Anywhere type fund, if you're engaged in certain strategies where you're providing liquidity, they have to follow essentially the hot ball of money wherever it moves between markets, right because that's going to drive interests, that's going to drive trading volume, that's going to drive premiums. So some of the discourse that you're going to see online moving from crypto to precious metals right now, or

you know, move from game stop to crypto. In the first place you've got to understand is there's a whole business model of like liquidity, provisioning, trading, like all of these sorts of strategies that work on where the money goes and money and markets just flows around.

who continue building things. And the question of when the next cycle shows up is fundamentally a question of are the things you're building things that work and have any value and capture people's interest again, or are the things you're building kind of crappy and don't work and aren't valued, in which case they're going to get washed out and

then people are going to try again. And if there's really no there there, you could have an entire sector die like good example, like can anybody point me to a horse and buggy company in the s and P five hundred right, Like that's a thing that just got wiped out by the forward progress of technology. But there are consumer package goods companies, There are banks, there are insurance companies, and some of them are very new if

you look at like SOFI, very recent. But if you look at like JP Morgan, like hundreds of years of history and so each industry. As you look at that hot ball of money phenomena, you've got to differentiate between call it the trading and short term investing and like the long term ability.

the inventory and things like that. Okay, you know what that is a floor that you're going to find out value for a lot of things. One of the problems you have in crypto and maybe large is there's often no real floor value, or if there is, it's very very low, because like what's the floor value of doge coin? Right exactly?

of tech companies, they've traded vastly above current earnings. And that's totally rational if you think future earnings will be very big, right, and so so long as there's a belief in like future platform, future earnings, future scale, then you would expect those values to hold up. Number three is sort of what I'll jokingly call the mimetic or trading value, or just people are buying it because other people are buying it. Like, whether you like that as

a concept or not, it's real. We see bubbles and markets, We see people who are buying things, especially in like meme coins or collectibles because they think other people will buy them, right, sort of greater fool theory is one way of describing it. And so all of those forces right now have been working against crypto. If we're being totally honest, you're seeing very little like core fundamental value for some of these things, especially non RWAs RWAs live

in their own world, but like for crypto native assets. Two, you've got to ask about future adoption. And here's where I think there's been a real problem, which is with genius passing with more institutione utional people coming into the space. Something I've actually been talking about for a while. I think I said this like two years ago on odd Blots and it kind of shocked Joe and Tracy at

the time. Was just because people adopt crypto, I don't know that the value accruise to the current platforms are tokens, right, So like when JP Morgan or Fidelity Right or Stripe enter, is that value going to a crue, to etherorium in salata or are they going to do something else to

capture the value for themselves. Like it was never obvious to me that growing adoption equals token price go up, and I think other people are seeing a little bit of that, and that's been weighing on tokens because if you look at the divergence between bitcoin and alts.

we would have never thought of back in twenty fourteen or twenty fifteen, Banks using bitcoin and crypto's collateral, incredible tokenization happening on eth and Solona and so forth, and then you have more ETFs than ever I mean on rams being built, and it's not just the United States but across the globe. But yet something seems broken. How do we get out of this? How do we recover from this?

than almost all the banks. Do we think that's correct? Like I would genuinely ask that question, like the reality as token prices may have just been too high and the correction is healthy because that will bring us back down to more realistic expectations. The other part is if they weren't too high, the way you fix it is by building much better platforms to capture more of the

economic value when people adopt. But again, crypto has this magical way of like speed running history, and there was the whole fat protocol thesis, which was similar to the idea that the rails are going to capture a lot of the value in finance, and it turns out no whoever has the customer relationship captures the value right like DTCC, Yes, is less profitable than like being one of the global megabags, even though every single global megabag uses DTCC to settle securities.

which somehow are even more consolidated than finance. But ignoring those, these two are like slamming into each other at high speed. That is a chaotic situation, and you need to think deeply about where is value going to accrue and what are future systems going to look like. And what I would tell you is that I think the crypto community has had a lot of incorrect beliefs about how things work that have led them to value things that quite

frankly don't have much value. However, I would level the exact same critique against the traditional financial industry, Like, if you think a lot of your centralized intermediaries are going to retain their value ten twenty thirty years from now, you guys have no idea what's coming, and so it's sort of going to like scramble everything on both sides,

not just one side or the other. And so this sort of psychic shock that I think people experience sometimes when I talk about these things is because I've lived in both of them and like tried to pay a lot of attention to the actual market structure on the ground and where the value accruise, and I think that leads you to some surprising places.

the content. Thank you so much. So, speaking of the collision, do you see that this convergence over time will blend the markets where it won't be the tratfi markets and the crypto markets, it will just be the.

subscribe to. You've got some theory of call it credible neutrality. Now, is that completely decentralized anonymous validators like ethereum or hypothesis? What if the five hundred largest financial institutions in the world all just ran a blockchain right where none of them had the power to unilaterally change. That's actually still

quite decentralized. Fine, but those are blockchains. Two, they tend to be open access, and this like, we talk a lot about decentralization, but I actually think the open access part is more important in the long run. And what I mean by that is the traditional financial system. It's a little bit like getting into this building. You have to go to the front desk, you have to check in, they look at your ID, they let you in. If you're on the list, you come up here, you do

the podcast. Okay, fine. Blockchains are more like a public park. The default is you're allowed in, and in many cases you could be kicked back out for bad behavior, especially with RWA's or permissioned protocols and things like that. But the reality is in many bitcoins a little different. But certainly for like stable coins, token is stocks, tokenied gold, there's not infinite tolerance for bad behavior, but the default assumption is yes instead of no. That change is huge.

The other part is it's an omni ledger. That means we can put all this stuff on there right if you live in the United States right now and You've got a Fidelity account, a bank account, and a coinbase account getting money from here to here to just kill me now, it's crazy, right, Whereas what the blockchain instant or at least close to instant. And so it is these open access and omni ledger components that I think are more powerful for financial markets in the long run than the decentralization.

I'm at JP Morgan. Come put all of your trading data, all of your technology, and all of your customer activity on a ledger that I unilateral culture, right, okay, obviously held out, But then imagine that pitch in reverse. So Goldman builds their private chain and now they come tell JP Morgan, why don't you use this? JP Morgan is, of course like no, and so there's no mutual meeting point.

And all we've done is everybody's running their own private ledger and then you're somehow having to get information between them, and you don't trust what's going on on the other side. Same situation that led to the creation of DTCC. Okay, and so if you're trying to build a private blockchain like product, I would tell you it will not work if you're the only one doing it. If you look at financial markets, there's two consortium models that historically have

done well over time. One is what DTCC did, which is to say you get all the big guys in a room on day one, and it's got critical mass, so other people have to use it. So if somebody came to me and said, hey, I'm launching a blockchain in the US and it's a permission chain, and as validators, I have all of the top twenty banks and a bunch of the asset managers, I would say that's probably gonna work, right, that has the scale to force other

people to use it, right, Okay. Two is something like Visa, which is to say, we've built a platform that people can join, and when they join, they basically get the same economic terms as the people who are already there.

Because the thing that will not work is I built a platform and I gave a really favorable deal to the early adopters, and everybody who comes later on gets a worse deal because they're going to look at that and rationally be like, well, why don't I just build my own thing to compete with you unless you already had critical scale, which is DTCC. So this explains, like I've been very skeptical, for instance, about like Tempo and Canton and things like that. It's because they don't fit

into one of those two buckets. Interesting, right, Like and so what like the history of fighting like zoom out from blockchain bock chain parts not relevant here. The history of financial products would tell you those things don't survive, got it?

given that they may feel threatened that hey, let's all come together. I don't know whoever, JP Morgam City Bank of America, all of them. They come together in a form of consortium. They said, hey, let's launch our own public blockchain, kind of like what you're talking about. All be validators, everybody gets a fair stake. Do you think they might do something like that.

going to be down with that. It would be my prediction. Okay, I think if you did that but added in asset managers, payments companies, large insurance companies, now you might have something. But that's how you get towards credible neutrality. Hey, we're all one kind of institution and we're going to control this is not credibly neutral.

Morgan favor Canton over just using their own thing? Right? This is that mutual like conflict that we were just talking about. By the way, Okay, now both of you were doing this, go pitch HSBC. Good luck both of you. Right, And so you know again it's the if you want other people to join over time, you need to have given them the same deal. Right. So if you've got something like a Canton where you know they'll argue, well,

there was no pre mind. It's like no, but you had an inner circle doing the permitted activity, piling up a ton of tokens, and now they've got it and you want other people to join. That's no, like I would tell you bluntly. I used to be the cohead of digital assets at City within Global rates. If somebody brought that to me, I would be an absolutely not right. I would just look at that and be like, this

doesn't work economically, get out, We're not using it. And so I if there are even semi competent people right at many of these other places, I don't see future adoption there.

that you work on, like City and JP Morgan now going all in in crypto, it seems like if you don't have a crypto strategy or you know, hiring Guessada, it was announcements of different folks hiring at Morgan Stanley and that now they're all in and races on.

That's where all the revenue flows through. And the finance team at Facebook is like in a back room, right, Like, imagine trying to get something major at Facebook done, like as a product by going in through like their treasury cash management team. It's not going to happen, right, Like, could you get them to change their local cash management strategy? Maybe, but could you change like Facebook or Instagram? Absolutely not. Yeah, okay, So here's the problem at banks that's reversed. The tech

teams don't matter. They are far down the stack. They are not the important people. The revenue is the commercial bankers, the people running the credit platform, the investment bankers, and the traders. If you're not talking to people in those groups, nothing is happening and it doesn't matter. So as I look around at the street, what I'm seeing is a lot of science experiments by people who don't have P

and L. Right, That's mostly what I'm seeing. The outliers for that are probably Standard Chartered and JP Morgan, who are doing a little bit more. But in general it's much smaller than people think. And the other part is banks don't really have the best personnel here right, they're going to need to wrap their head around how to build like tech divisions and blockchain talent, and like get the people who know how to trade these twenty four

to seven systems. And like I'm not seeing people from winter Mute going to Morgan.

that got wrong that held this back so far. One they didn't write anything down and by the way, if you look at some of their court filings, like they're arguing mutually contradictory things in different cases, Like I have no time for that, Like that's not okay from a rule of lost standpoint, And I actually want to pause for a moment and say this. There are a lot

of very good people at the SEC. When I say I have problems with Gensler's SEC, I largely mean the chair, his policy people, and a few people in enforcement who were driving those actions. There's actually a lot of very hard working staff at the SEC who I think were kind of victims of this whole thing in many ways because they are very well intentioned. Fine, but so to be very specific, it's, hey, you can't argue two different

theories in two different courts on enforcement. That's crazy because, by the way, that's a super highway to the Supreme Court. Two write things down, Like why is this hard? We can't be like we're not going to tell you what the speed limit is, but then I'm going to ticket you for speeding. No, And because they didn't write it down or have first principles. If you look at their

enforcement record, it's like the work of a madman. Okay, they were going after coinbase and binance and cracking and like this project doing a decentralized library and like stoner cats and like all of that stuff. Do you know who they didn't get in front of before bad things happened? FTX three Arrows, Capital, Terraform Labs, Celsius, even Block five. Right, they just missed everything that was bad and hit everything

that was good, like random dessic. Putting all the names on a wall and growing darts at them would have produced a better enforcement outcome.

advice to do that. That was a good decision. Fine. Now, look, I know I'm an outlier opinion on this, but I think whether clarity passes or not, a good bill would be helpful. A bad bill is harmful. I don't think it's as important as people think if the CFTC and SEC just write rules down. Right. We know how securities work, we know how commodities work, we know how derivatives work.

There are some novel questions around crypto because let me pose you a question in nineteen seventy that was unanswerable, which is how do I do clearing without a centralized counterparty? Now we could do that, So there probably needs to be some interpretive guidance exemptions. But like the SEC has done this before. I will remind everybody electronic trading is not mentioned anywhere in the forty Act named that because

it was written in nineteen forty. And the ABS regime for like registration and reporting and all of that was just created by the SEC because like essentially SPV that just exists on paper to hold assets is not an operating company. They're capable of these things. As I said, there were some very good staff members at the SEC. They were just prevented from doing any of this. Man.

like the Clarity Act not necessarily important. But the regulatory agencies, the twin towers so to speak, the SEC and CFDC, you know, they are the ones that need to put out the guidelines and the rules. But do you think the CLARITYAC allows more capital and could to come into the crypto industry and acid class and could it be a catalyst that sparks a rally, not price predictions, but just curious.

what money looks like on a blockchain. It was a good one because they basically took two thousand and eight money market reform and there's a straight line from that all the way to Genius. Like I'll tell you the reserves and design of Genius stable coins I have very high confidence in. And that forced the banking regulators to get out of their box and start writing rules for all these things, which means now the banks can do it. So I don't think clarity is nearly as important because

Genius passed. If Genius had not passed, I think clarity becomes vastly more important because he needs something to force the regulators to get off zero. But we've already got that. And by the way, there was a rally after like Genius was passed and then Trump was elected, so I think we got that rally. So clarity passing, I think is a neutral right for the industry in the sense of like, okay, now, what are you going to do with it? Becomes the question because we already got off zero.

So now it's much more a question of is this legislation effective or not? Because clarity is very complex in financial terms, the answer to that will be checked back in five years, which makes it hard for there to be an immediate rally.

the executives, this is incredibly stupid. You were some of the biggest beneficiaries of yield peg stable coins in the entire world, and you were shooting yourselves in the foot and reloading. Now, why do I say that stable coins

are crypto euro dollars? Okay, something like eighty to ninety five percent of holders of stable coins are non US persons, all right, So the flow of funds to get there is you had a local currency, you exchanged for something on chain off in bitcoin, and then you exchanged that for a US dollar stable coin. So this is reducing the demand for foreign currencies and increasing the demand for dollars. Right.

It's also going to systematically take money out of the euro dollar system that was held in deposits at foreign banks or literally physical cash in some cases, and bring it back formally into the US dollar system through a US domiciled US dollar stable coin. Now, what do most of the stable coins do with their reserves? Look under the hood, bank deposits, T bills and overnight reverse repo that last one is the key. And by the way, go look at Black Rocks fund that they run for Circle.

There's a lot of that in there. Reverse repo is funding for the large banks. So these guys are taking money out of the Euro dollar market to lower your

cost of funding. And it's mainly non US users, and you're freaking out about it because you have uninformed people who think it's like sixty five year olds in the US using this stuff, which it is not, and you are I'm not kidding, Like, if you're Bank of America, you're currently in DC arguing I want my funding costs to be higher and I want to be uncompetitive in

non US dollar markets. That's insane, Like really, this is what I mean by like the collision is not well understood and people have the story totally backwards in some cases, but is part of it.

deposits from US persons. Okay, that's mainly what's in there, so to speak from a consumer franchise deposit perspective, all right, And there's kind of two things going on here. Number one is that the big banks have already been the big winners in the system. If you look at banking deposits in two thousand and eight to present, it is a one way flow into the big four. Right. It does not seem to matter that they're paying zero interest

because the money keeps going there anyways. And a lot of that is that they provide all kinds of other services. Like if you bank with b of A or Chase, you have a bank account, you have a savings account, you have a card, you have a brokerage account, you have a mortgage. Right, Like the interest on your checking account is probably not even close to your biggest consideration

in the relationship. The people that's been hurting are community banks, who are now down to like low double digit percentage of the system, right, And a lot of that is because for community banks, every year your average customer gets one year older, which is to say, young people are not using them. Right. If you're your local community bank, I have bad news, which is basically it is likely that the fastest growing bank in your locale is so Fi.

But like Apple Bank is a bank here in New York. An Apple Bank will pay you two percent on your check account. But the problem is they are psychotic. And what I mean by that is if you go look at their technology, there's a separate app for your bank account and your debit card. Whoever at Apple Bank did that, please,

for the love of God, stop right. Yeah, it's if you're under the age of sixty five and you see that happen, you're gonna throw your phone out the window, right, Like, no, I looked at Apple Bank and said no because of that. So just to be clear, here's one potential customer you lost, and so like you got to fix those things. Stable coins are a way out for them to fix their technology problem and for the big banks because most of the users are non US, it's a giant source of funding.

By the way, they can also do all the trading for the bills and the refo, They could do the custody of the assets. They can process pavements between the stable coid and traditional banking rails, so you could capture international wire business. Like, there are infinite reasons where you could grow your bonuses by doing this. This is a little bit like everybody in nineteen ninety eight, like, let's ban internet commerce. Yeah, it's just not going to work.

If you stand in front of that train and shout stop, you're just gonna get run over.

in the banks. But they also don't want to get up there and give the middle finger to like Amazon, Walmart, Target, et cetera. So what do they do. They just back out of the room. Right, It's like the homer backing into the hedge meme is what's going to go on here? And so you're just not going to have anything happen.

best interests because they don't understand how things work. Like I would tell you, I think the big problem is if you look at like the Bank Policy Institute, the ICBA, which represents the community banks, they have leadership who are not informed on these topics and not up to speed on how things work like in actuality on the ground, and therefore think this is a competitive threat to their membership when actually it's a huge benefit to their membership.

This would be a little bit like Ford Motor Company arguing for very restrictive rules on autos and letting horses and buggies operate untaxable. Like they're just wrong. So I do hope it gets fixed because they're damaging their own industry with what they're doing.

and sixty five year olds not all. There are some who clearly get it, So I'm speaking in generalities here, right, but sixty five year olds on average don't get it because they didn't even grow up with the Internet. And all of this is still a little bit weird. It is the body of people between like call it thirty to forty five point fifty somewhere in there, depending on how tech savy you are, that get it because like they've learned how things work, but they also grew up

with the tech. And so as that body of people pushes further and further into management, I would expect this problem to say of itself, the question is how many dead bodies are there going to be on the road in the process. And also do we fumble in the United States the edge to a lot of international banks, right, And so this is part of why I'm so agitated about the lobbying in Washington is I'm an American. I

want America to win. Yes, right and right now many of the banks furthest ahead here are non American because of this stuff.

saying the bill may not pass. But do you think that some folks capitulates that, you know, we got to get something through because the midterm elections are coming up, with worried another Genser may come in.

the agencies. There's a thing called the non delegation doctrine. Like Congress can't just pass a blank sheet of paper that says, hey make rules for stable coins, like that's not constitutional. They have to write down what they think

they mean. And over time, especially the current Supreme Court has been getting more and more skeptical of agencies taking aditionative themselves and kind of like, if I could summarize the Roberts Court in one sentence, it would be it means what it says, right, and so genius is already written down. You could put somebody relatively like strong armed in there, but they can't undo the fact that these

things can trade on blockchains. There's also some court to decisions that because the Gainstler sec grossly overreached, they kind of blew themselves up on like the ETF decisions. So they're stuck with those two. I don't think another Gaenstler sec is possible. Would you have somebody restrictive, Yes, but I think Againstler sec would get run over in court immediately and it would just be a disaster. Honestly, it might. Like,

what's the best way to say this. If I were advising the US financial regulators, I would be super cautious about taking anything to SCOTUS right now, because you do a lot of things that are based on you thinking you have a lot of agency powers that they might disagree with. So this could be one of those not only can you not do the crypto thing you were doing, but like, here's eight other things you're doing in regular markets, you also can't do those, right, I would be careful,

So I don't think that's going to happen. Now, do I think it's good or bad that clarity doesn't pass? That becomes a question of craftsmanship. Our best outcome is a good clarity bill passes, Our worst out come as a bad clarity bill passes. Because then, based on what I just said, and that's why I did that whole lead up, it means what it says. So if you

write something stupid, that's what it means. Yeah, right, So you're better off not writing anything at all than writing something dumb, But you're better off writing something good than not writing anything at all. And if I were steel Manning, coinbases position on this who you brought up. I think their view was enough had gone from the good to

bad that they thought nothing was a better outcome. And I want to be clear, you may agree or disagree with them, but I think that was a genuinely held belief. I don't think they were bluffing, right.

catch is tether, right, because tether understood the problem. If you are a non US citizen who is not rich enough to have a Swiss bank account, how do you securely get dollars in your own country? If you're the average Argentinian or Venezuelan or Nigerian or Indonesian and you had to pay an egregious FX rate to get dollars in your local bank, that they'll just steal from you if they don't like you, or you had to hold physical dollar bills and hope they don't get stolen or destroyed.

You now have the option of a let's go back to what we were saying earlier, open access, credibly neutral ledger where you can keep your dollar bills. You could think of like US dollar stable coins as globally people being able to opt into blockchain technology and US rule of law, and that's a huge expansion of human rights.

So if you saw like a JP Morgan right, or a Bank of America, like if Bank of America launched America Dollar like the Bank of America stable coin and shotgun to that into the world, that is a real like effort. And by the way, BFA, if you're listing, you probably should do that. But right like that would be big, and that would be hundreds of billions to trillions of dollars because they will have way more trust than the current crypto companies who are in there in

much better rails underneath it. But we're not there yet. That's why I say all of this. What's the right way to analogize this? We're like in the early to mid nineteen nineties in tech terms, right like, still sounds like an electronic goat is being tortured when you get on the internet. We've got all these spare coasters, Sorry, I mean CDs for you young people, right but AOL keeps mailing to people and I was alive for that,

so I still remember this. But we're not yet. There's no Facebook, there's no Google, there's no tiptop, right like, it doesn't just work right like. Stuff is still janky. And you'll know we're getting there when people start building at scale the stuff that just works.

stable coins. But I also don't think we're going to have like five hundred blockchains, like I think there will be some consolidation. I do think many assets will be on blockchains, and more importantly, kind of the call it unexplored quadrant is I think a lot of information will be on blockchains, right, that is to say, like driver's licenses,

housing title and leans. All of these things are going to move off of paper ledgers and fragmented stuff and out of the shadows where quite frankly, there's a lot of corruption and an efficiency and on chain over time, the gravitational pull is too strong and it doesn't happen all at once. It's debris being sucked in, right, But it will be happening by twenty thirty five, I would

expect to see at least some of that right. At least one US state will likely have figured out, wait a minute, if we just put everything we're doing on a blockchain from an information and like money standpoint, that's probably better and more secure than our current systems that get hacked and break constantly, and it'll be very good for transparency and corruption. It's probably a small state that already hates the government, so like keep your eyes on,

like Wyoming or Idaho or something like that. But the problem is when they do it in works, it starts becoming pressure for everybody else to do it right. Right two. I think by that point we're going to have rules and a lot of jurisdictions globally about how you do this stuff, and those rules will at least have become

somewhat technologically savvy. Because back to the age thing, however old you are right now, ad ten, that's how old you are then, which means a lot of people who are currently like junior to very early mid career are now the senior people at these regulars and have a

much better handle on how this stuff works. So the changing of the guard basically to be blunt the boomers aging out, I think will change things significantly from a technological adoption standpoint, because from gen X onwards nobody wants to be using paper banking in person. Right, The big divide is between gen X and the boomers. Three, I think a lot of small currencies will be under extremely severe pressure or collapsing at that point because of dollar

stable coins. Right. Again, if you live in a third world country with a corrupt government and an abusive banking system and you could just use a dollar stable coin, it's going to be very hard.

own any of our stable coins was North Korea. You have to turn the internet off, right, so capital controls are going to get broken, which means that a lot of these places people are just going to defect to the dollar. So I think like over time US dollar stable coins are going to dollarize not just informally but maybe formally huge parts of the world.

a row. I'm like, I can flip a coin and get heads three times in a row, and it's not totally improbable, like too small, so zoom out. What it

really is is transformational things in the world. And if you look at things that tend to be really disruptive transformational technologies, it's usually new ways of harnessing energy, right, So like, for instance, here's a big one that was globally transformative that like the people who talk about these cycles ignore all the time, which is just deep water sailing ships. Right once it went from I can only sail on rivers or take a horse to I have a giant ship that can move a ton of cargo

with wind across an entire ocean, world changing. Like if you want to know why the Spanish Empire existed, it was deep water sailing. They had the ports, they had the boats, they could get around faster and more efficiently than everybody else. Huge win, And that's harnessing a form of energy. The Industrial Revolution, steam coal, all of those things, right,

like similar so that's one. The other one is new forms of communication, right, Like obviously, probably the biggest invention in the history of humanity is writing stuff down right, because suddenly generational memory becomes infinite or at least as long as you can preserve your records for as opposed to Hey, a guy told me, right, And so those sorts of communication things are big changes. Well, guys, the

internet only hit in the nineties. We are in one of those periods, like, hey, pure to pure communication instantly globally. That was not a thing in nineteen seventy, not a thing. Now it is super a thing. Like Elon Musk is trying to make that a thing globally with starlink right now, even if people don't want it, He's like, no, you're getting it. And so I think that's the thing that's causing this disruption, because if you look at a lot

of what's causing the change in global order. In the seventies, you got your news from a newspaper. You probably spent fifteen to thirty minutes a day on it. You didn't think deeply about this. Now I can see live as an American French people talking mad shit about me online while at the same time, they have no economy and they're not paying for NATO. And this is why the

right gets all agitated. Right, And by the way, the reverse happens to like the French are very angry with America now in a way they probably weren't before, right, So like that's just one of many examples. But like, we're not gonna understand how that like shakes out until we see it happen. So I think the reason things seem so unstable and why the world is like reordering is we've had one of those transformational things hit, which was the Internet.

some really destabilizing events and commodities markets. Like anybody who wants to go to a gold standard, you're in great shape until SpaceX lassos an asteroid and they have more than all the gold on earth. Again, right, be careful what you wish for. But two and like this is an interesting thing that came out of two thousand and eight, and like, actually bernanke right place, right time for a guy who had studied this. Fixed money supply can be

a real problem in a downturn. And what I mean by that is when demand for money is falling and you're having deflation, you should hold onto currency. And when you hold on to currency, there's less buying of goods, which causes the economy to slow down, which causes deflation. Like that's the death spiral problem. And just like there are hyperinflationary spirals, there could be hyper deflationary spirals and

both of those kill currency. So the problem I think is not inflation or deflation, which is what people fixate on. It's more magnitudes. Lots of inflation is bad and lots of deflation is also bad. Right, And what you really want is a way to keep it bounded between those two things so that you're not having wild swings in

either direction. And a fixed money supply doesn't do that. Now, could you have a programmatic money supply that follows rules, so not human subjective but literally, like if inflation's high, there's less, and if inflation's low, there's more. Yeah, that might work, but that's not bitcoin. But again, this is what I mean, Like we're going into the future, Like tell me who in nineteen ninety four was like TikTok. Yeah, right, Like we just don't know.

a shocking opinion. We're already at like three hundred and ten billions, so if it happens in two years, within the realm of possibility, but I would like make a market at five to ten right now, and there's a lot of volatility on that two and I'm really watching for is the transaction volumes on this right, So it's less about just the resting balances. But when does this start replacing like international wires, right, like consumer payments? When's

it use to settle trades? That will really start accelerating volumes. And while you know you may not end up with like tens of tens of trillions, there's only like, you know, twenty trillion ish bank deposits, right, Like, it's not that big. You're going to see a lot more transaction volume. Because I'm going to give a number that is so large it sounds like my daughter made it up. But there are one point twenty five quadrillion dollars annually of wire business.

So that's why that's what I'm really watching. Like, the volumes there are so large, the numbers are almost like fantastical, and that's when that starts getting breached by stable coins. That's when you know their mainstream.

not just the business people. They're actually I think business people, there's probably more. It's more like risk legal, like senior management, Like these people need a lot of help, and they also have a structural problem where they can't just listen to the business people because they get paid on volume, right, right, So this is a governance thing. So you're gonna have a lot of firms, the broker dealers, the asset managers, the banks, the insurance companies who are needing help on

this front. And so people are starting to come into the door. There's gonna be even more. I could see the trend coming, and you're going to have people trying to make professional efforts. This is why I analogize to like the nineties in the Internet, that's when it stopped being like, oh, we have one weird guide cares about internet commerce to start being like, what's our internet commerce strategy? And once that happened, you needed a lot of help

and it started professionalizing. So I would tell everybody right now, the real thing I'm seeing is if you're a trad FI firm and you're starting the race now, one call me, But two, you need to do it in the next yearish or you're going to be behind your peers. Right. It's not a problem that you're starting now, but it is a problem if you wait.