0:05

Hey,

0:05

everybody, and welcome to Intelligent acquired.

0:08

I'm John Dunban. And today we're debating something

0:11

that doesn't exist yet, and

0:13

we're gonna be asking whether it should eventually

0:16

exist. And so here is the and we are putting

0:18

up for Debates, do we need

0:21

a digital dollar? Okay. So maybe

0:23

this is not one you've heard argued before because of

0:25

that non existence factor and also

0:27

because it may not be entirely clear

0:30

what a digital dollar is supposed

0:32

to be. So before we actually get to

0:34

the debate, we are gonna do something different

0:37

this time and we're gonna ask our two debaters not

0:39

to argue just yet but to help

0:41

explain and lay down some understanding

0:43

of what the term digital dollar means.

0:46

So let's welcome Dante Desparte, who is

0:48

chief Strategy Officer and Head of Global

0:50

Policy for Circle, and that is a financial

0:52

services firm that works in private digital

0:55

currencies. Dante, welcome to Squared.

0:57

It's great to have you. Thank you, John. Great to be

0:59

here. And Gillian Tett, who is Chair of the editorial

1:01

board and US editor at large of the Financial

1:03

Times, Gillian, you have joined us and debated

1:06

a bunch of times before, so this is definitely welcome

1:08

back to you. I'm

1:09

delighted to be on the show, particularly with someone

1:11

like Dante.

1:12

So we're gonna try asking

1:14

the two of you to hold back on the arguments

1:17

and help us understand this term digital

1:19

dollar. Dante, I'll go to you first, and I think

1:21

the way I wanna ask you is

1:24

What is a digital dollar not? Right.

1:26

Well, I mean, we could start with what it is

1:28

not. It is not currently in

1:30

broad circulation. It is conceptual

1:33

framework, born

1:36

and accelerated at some level

1:38

in twenty nineteen, where central

1:40

banks around the world responded to

1:42

two fears. One was the fear of

1:44

big tech, entering the payments

1:46

and money movement system and the other is

1:48

the fear of China tech. And so the

1:51

the clearest definition of what a digital

1:53

dollar would be is a

1:55

digital dollar issued by a central

1:57

bank in the case of the United States, obviously,

1:59

the Fed or in other countries, their central banks,

2:02

that could exist at a retail level

2:05

and that would be supported over the

2:08

Internet or other sort of technologies

2:10

for transmission. in the

2:12

same way that you and I enjoy the transmission

2:14

of physical money today. So so that

2:16

that would be like the strictest definition is

2:18

is issued by a central

2:20

bank and as a part of the retail

2:22

payment system. Jillian, do you see it the same

2:24

way or any quibbles with that definition?

2:26

I broadly see it the same way. I mean,

2:28

a dollar is basically a current created

2:30

by the Federal Reserve Central Bank.

2:33

But I would add something else to it, which is,

2:35

to me, the easiest way to imagine it is to

2:37

think about digital tokens And

2:40

the easiest way to imagine digital token, which

2:42

sounds abstract, is to imagine

2:44

your phone taking a

2:47

photograph of a friend

2:49

And that photograph is not your friend,

2:51

but it's a token of your friend. And

2:53

you can send that picture across the

2:55

airwaves wherever you want, whenever

2:58

you want. And so in some ways,

3:00

what a digital dollar is is

3:02

a cyber snap shot, a token

3:04

representing a dollar created by a central

3:06

bank. That could be zipped around the

3:08

world anywhere you want on your phone

3:10

or internet or any other cyber

3:13

link you have. And

3:14

in what way is that different from

3:16

the experience many people have now of

3:18

already moving dollars around

3:20

with their phones using things like

3:23

Venmo and

3:25

Well, that's a really good question. And it

3:27

comes down to essentially to who is at actually

3:29

creating the currency, what kind of control

3:31

you actually have over that currency, whether

3:34

it sits in the central or central

3:36

hands of a central bank or

3:38

not. One of the points

3:40

to make about digital dollars

3:42

and many aspect of digital aspects is

3:44

that it's not necessarily complete

3:46

step change about what we have

3:48

already, but it is a significant shift.

3:51

And there's one other thing that's really important to

3:53

stress about this, which is that When people

3:55

talk about digital dollars, they often mean the digital

3:58

currency is created by central banks.

4:00

However, they can also be

4:02

under some definitions created

4:05

by private sector institutions if there are

4:07

other dollars backing or other dollar

4:09

assets backing what they're creating.

4:11

So there are some you know,

4:14

which are essentially creating quasi digital

4:16

dollars but backed

4:18

by real dollars as well.

4:20

And are we talking Dante

4:23

about this the digital dollar

4:25

being a new currency?

4:28

Or is it another variation

4:30

of the dollar that we that we know in the sense

4:32

that there are paper dollars and there are electronic

4:35

dollars or is it a is it a new currency?

4:37

Well, what would make it new and

4:39

unique is the marriage

4:42

of the preservation of privacy,

4:44

the marriage of the

4:46

ability to have censorship resistant

4:48

transactions, and peer to peer

4:50

transactions with the

4:52

Internet. And and that's think

4:54

the concept of a digital dollar becomes

4:58

boundary destroying when you think about,

5:00

you know, traditional money and regulation

5:03

and the role of central banking is that

5:05

at some level, the fact that as

5:08

Jillian described it, that that because

5:10

of an Internet native form, it has

5:12

the superpowers of the Internet and the transmissibility

5:14

of the Internet. In some levels, it

5:16

stops respecting the traditional four walls

5:19

of banking and payments and monetary

5:21

policy. So in that sense, it would be

5:23

distinct, but it would also potentially represent

5:25

a liability on a central bank

5:27

as a guarantor or a supplier

5:29

of less resort than an expression

5:31

of monetary policy. Despite the

5:33

that it would have this transmissibility in in

5:36

a digitally native manner. And the last thing I

5:38

wanna ask you is a digital

5:40

dollar is not a cryptocurrency

5:42

or is it?

5:43

Well, again, at the moment,

5:46

the field is moving so fast that

5:48

language tends to be quite

5:50

ambiguous and it's often a

5:52

spectrum and a single word can mean several

5:55

things. But I'd go back to this idea

5:57

again of taking of a token, of

5:59

taking a snapshot of your friend

6:01

and then sending it somewhere else. Now,

6:03

you've only got one friend who actually exists

6:05

in the real life. If you take a

6:07

photograph and frame it in the traditional

6:10

way and put it on the wall, then you

6:12

actually have a limited quantities of

6:14

photograph. If you start zipping

6:16

that photograph back and forth at gazillion

6:18

times and potentially altering it and if the

6:20

power to do that yourself on your phone,

6:22

then essentially you're using control

6:24

of that friend image. And

6:26

so one of the key questions of the heart of all

6:28

this is what are the mechanisms to

6:30

control the supply of that

6:33

token. Is it in the hands

6:35

of a central bank who says, actually,

6:37

I want to know every single token that's out there

6:39

and control it or at least

6:41

have a control over supply. And

6:43

that's kind of what happens right now with dollars when

6:45

a central bank actually creates

6:47

currency and dollars. they control

6:49

the supply overall to a degree.

6:51

You can argue about whether commercial

6:53

banks can create more dollars or not, but that's

6:55

roughly the broad idea. when

6:57

you get into a world of truly digital

6:59

currencies, essentially it's an individual

7:02

armed with a computer who

7:04

starts creating the currencies and The

7:07

real question is, is there a limit to that creation

7:09

of currencies or not? Is

7:11

it done through clever algorithms

7:13

and the way that say Bitcoin is, mining

7:16

of the current season tokens, or

7:18

is there something else which controls it? And to

7:20

what degree does it still sit in a central bank?

7:22

or individuals.

7:23

And, Dante, I I was gonna

7:25

ask you the same question. Is it a cryptocurrency?

7:28

But I I sense that you agree with most

7:30

of Gillian's description, but I

7:32

think to help the general audience again,

7:35

I'll put it this way. How is a digital

7:37

dollar not the same thing as Bitcoin?

7:39

Well, a digital dollar would not be the

7:41

same thing as Bitcoin, despite the

7:43

fact that notionally it may

7:45

leverage many of the same technologies. And

7:48

so one of the technologies that

7:50

a digital dollar would ostensibly leverage

7:53

is blockchain

7:55

based ledgering. And

7:57

so public blockchain infrastructure

7:59

like bitcoins and there are many others are have

8:01

solved one of the accounting world's most

8:04

vexing challenges. which is the

8:06

double spend challenge. And so in

8:08

Gillian's example, if she has

8:10

sent that image to me or that digital

8:12

currency to me, in a world in

8:14

which that's a peer to peer transaction, it

8:17

has to be final and it has to have

8:19

recorded the debits and credits in

8:21

in in a transparent manner so that the transaction

8:23

is completely settled. With physical

8:26

cash today, because

8:28

of the the the capacity of

8:30

how physical cash may be transacted. We

8:32

have all kinds of instances

8:35

of fraud and abuse and

8:37

and differences of opinion where it ends up

8:39

becoming my word against giants if in

8:41

fact no one else saw us exchange the

8:43

money. The idea of

8:45

digital currencies and blockchain based

8:47

financial services is that anyone

8:49

armed with an internet looking glass

8:51

as small as a phone or as

8:53

large as a computer is a part of that

8:55

collective witness that can verify the

8:57

transactions actually took place. So that's a

8:59

very unique property. which gives

9:01

digital currencies and cryptocurrencies cash

9:04

like transmissibility and

9:06

transparency. Alright. I hope that was

9:08

helpful for for our listeners and

9:10

thank you very much for indulging

9:13

me and us in that explanation without

9:15

actually debating yet. And I don't think

9:17

that either of you gave away which side of the question

9:19

you're on. So that was that's a neat

9:21

trick. So let's find out on that one.

9:23

On the question, Do we

9:25

need a digital dollar? Jillian

9:27

Ted, are you a yes or a no?

9:28

I am a yes, and I'll explain why

9:31

in a few moments.

9:31

Alright. So obviously, that means

9:34

Dante you are. I'm in the

9:36

formidable task of being a

9:38

no and being on the opposite side of

9:40

Jillian on this one. Alright. Let's get to the

9:42

arguments then. And Jillian, why don't you go first

9:44

and tell us why you're a yes and answer to the question, do

9:46

we need a digital dollar? Well, I

9:48

should start up by saying there's two form of digital

9:50

dollars, and I do want to stress this. There

9:53

is central bank digital dollars, which

9:55

is entirely controlled, created, and run

9:57

by central banks. And there's

9:59

also the other concept of digital dollar,

10:01

which is companies a

10:03

bit like circle who essentially creating

10:06

quasi dollars, which are

10:08

tokens that are backed by their

10:10

holdings of real dollars or

10:12

real short term money market instruments.

10:15

So you can define it both ways.

10:17

think the second second

10:20

version definitely has a reason to exist.

10:22

I'm sure Dante would agree with that as

10:24

well because essentially what

10:26

a digital dollar that's created by a

10:28

company like circle or a token backed

10:30

by real life dollars is doing, it is

10:32

actually creating a new element of portability,

10:35

fungibility to dollars

10:37

around the world for companies

10:39

or consumers who want to

10:41

make transactions. and to do

10:43

so without going inside the

10:45

pipes of a central bank necessarily in a rather

10:47

clunky way. So that's a kind of private set of

10:49

version of it. the public diversion,

10:51

the central bank version of that

10:53

is different. That's really the central

10:55

bank itself creating ledgers and running

10:57

ledgers. And the reason why I think we

10:59

need that is really twofold. Firstly,

11:01

for the simple fact that we live in an

11:04

era of broad technological

11:06

change and experimentation, and

11:09

we do not know where that technology

11:11

and experimentation is

11:14

going.

11:14

Maybe it will have fiddle

11:17

out. Maybe it will turn out that existing

11:19

computer ledgers or rather

11:21

the kind of blockchain ledgers

11:23

are just too darn clunky to

11:25

ever be much used. At the

11:27

moment, blockchain is quite clunky. You can't make

11:29

many payments, or maybe it's

11:31

going to accelerate dramatically And

11:33

quite soon, it'll be so efficient that

11:35

everyone uses it. We don't know. But

11:37

I think that central banks have to have

11:40

skin in the game and be practicing and

11:42

developing it so that they can keep up with the

11:44

rest of the world. Secondly

11:46

and perhaps most importantly, we

11:48

live in a time of extraordinary geopolitical

11:51

flux. China has been

11:53

very upfront about the fact that it

11:55

wants to try and compete with a

11:57

dollar with its own currency. There

11:59

are other countries that are likely

12:01

to try and do so as well. And

12:04

if the US does not get into this

12:06

game now by experimenting and

12:08

creating a digital toilet

12:09

under some conditions, then it's

12:11

gonna find potentially that it will get

12:13

out maneuvered and out arbitrage

12:15

by other countries like China.

12:19

I'm

12:19

John Don Van. This is intelligence

12:22

Squared you more of our conversation when

12:24

we return.

12:29

Welcome

12:32

back to Intelligence Squared Let's get back

12:34

to our debate. Dante,

12:37

what's your argument for saying no and answer to

12:39

the question? do we need a digital

12:41

dollar? Yeah. I mean, my argument for

12:43

saying no, at one level begins

12:45

with acknowledging I think as

12:47

Jillian read summarize the the current state of

12:49

play in the geopolitical reality. So just

12:51

to add a little bit of context to that,

12:53

today, you know,

12:55

the Atlantic Council, geoeconomic center,

12:57

tracks us very closely, something like a hundred

13:00

and five central banks, representing ninety

13:02

five percent of the world's GDP.

13:04

are at some degree of experimentation study

13:06

on the risks and merits of

13:08

what are known as central bank digital

13:10

currencies. And to be clear, that

13:12

is the variant of digital currencies

13:14

that I'm opposed to. In

13:16

no small measure because I think they fail

13:18

to acknowledge how money moves

13:21

today. And so on the score of

13:23

central bank digital currencies, I'm a resounding

13:25

no. And on the score of

13:27

the societal temptation to

13:29

potentially have a big red in

13:31

a centralized authority that could ostensibly

13:33

de platform people from their

13:35

money where the air gap between the central

13:37

bank your wallet and how you spend money is a

13:39

feature, not a bug. I

13:41

think is a temptation too risky. The

13:43

other point is to acknowledge the

13:45

fact that the the vast majority

13:47

of value added money in circulation

13:49

today stems from some degree of

13:51

rules based private sector innovation

13:53

and competition. The two tiered

13:55

banking system, the fractional reserve

13:57

banking system, breakthrough

13:59

innovations on moving money, whether in

14:01

physical form or in paper form or

14:03

in cryptographic form, all

14:06

are responsive to public

14:08

private oversight and rules based

14:10

competition. And so

14:12

the fears of big tech entering

14:15

the the the money movement domain and

14:17

candidly keeping up with China and

14:19

the People's Bank of China's efforts, which

14:21

were unveiled at the Winter

14:23

Olympics in Beijing recently in are

14:25

effectively a move towards a

14:27

model of currency and a

14:29

and model of currency movement that I think have

14:31

some pretty big boundaries around them vis

14:33

a vis privacy vis à vis

14:36

continuous innovation in the financial and

14:38

private sector. I don't think that's

14:40

an operating model that has served

14:42

any country very well for a very long period

14:44

of time. And so some folks analogize

14:46

this to a digital currency

14:48

space race. And so then it is worth

14:50

harkening back to the original space

14:52

race that we we won it

14:54

so called we the west when

14:57

our political leaders gave us a destination, and

14:59

then we ultimately marshaled a societal

15:02

approach that ended up creating innovations that

15:04

benefit society, humanity, markets,

15:06

but were nonetheless responsive to a set

15:08

of rules. And so when you think

15:10

about some of the challenges that central

15:12

bank digital currencies represent, you've

15:15

seen studies coming out of Europe that have

15:17

indicated that a digital euro would

15:19

put downward pressure on

15:21

euro deposits because it would be construed

15:23

as a safer economic asset in the European

15:26

Union. This is one of the reasons

15:28

why central banks have always put out

15:30

the concept of having balanced limits on

15:32

central bank digital currencies if they were

15:34

in circulation. The same also

15:36

holds true in the Chinese experiment.

15:38

And then it would again dismiss

15:40

the idea that in the twenty first

15:42

century where you're in my financial needs do not

15:44

take banking holidays, how do

15:46

you then have an operating model where

15:48

the central bank becomes a retail

15:50

bank. And so in the most

15:52

extreme, that operating model in

15:54

my mind would would pretty fundamentally

15:56

transformed the typically invisible

15:58

hands of central bankers and turned them

16:00

into competitors

16:02

with high street banking and retail banking.

16:04

And so so that's the version of this

16:07

innovation that I'm I'm

16:09

allergic to and I think we should have hard

16:11

societal questions. The last quick point I

16:13

would make is the UK parliament studied this in a

16:15

parliamentary inquiry not long ago and

16:17

came out on the side of this may

16:19

very well be a solution looking for a

16:21

problem that ignores the rules based

16:23

free market innovations that are currently

16:25

taking place and are responsive

16:27

to regulatory clarity. Alright.

16:29

Thanks very much, Dante. So so Gillian

16:31

laid out two kinds of digital dollars, the

16:33

central bank digital dollar.

16:35

In this case, it would be created by the Fed in the case

16:37

of the United States versus the

16:39

quasi dollars that companies are

16:41

creating. And I it seemed as though you don't

16:43

disagree over the quasi dollars. So let's dig in on

16:45

the central bank digital dollar model.

16:47

And Julien, I I have a question or

16:49

two for you, but I before I got to them, did was there

16:51

anything that you heard from Dante that you would wanna respond

16:54

to off the bat? I

16:55

think the main thing I'd like to respond

16:57

to is this, and I can't stress this

16:59

strongly enough. You know, we are at

17:01

a very early stage of

17:03

innovation and development. It's a bit like the

17:05

early stage of the Internet and

17:07

people saying, you know, I can't imagine

17:09

why you'd want to use the Internet because

17:11

it's very slow and clunky. in

17:13

the early days of the you had an email address, you know, it's

17:15

a whole string of numbers, no one really liked

17:18

using it, you couldn't guarantee it

17:20

would work. And it's really just to

17:22

turn around and say, oh, it's ridiculous. Let's just get

17:24

out of this. But actually,

17:25

we now know that the technology

17:27

evolved much more rapidly than we expected.

17:30

And I am probably

17:32

sharing Dante's concerns

17:34

about privacy issues. You know, if you

17:36

have a true that's run by

17:38

Central Bank in terms of recording monetary

17:41

activities. It means that Central Bank can eventually end

17:43

up knowing everything you're doing, and that

17:45

kind of privacy intrusion

17:47

is something that, you know, essentially the central

17:49

bank in China is trying to aim for. It's

17:51

something most Western companies and

17:54

consumers would probably hate. However,

17:56

This is a however bit. I didn't see

17:58

anything wrong with the third essentially

18:00

trying to introduce this alongside

18:02

the current system or as an adjunct

18:04

to the current system. and

18:06

letting consumers i eat the market decide

18:09

if some people want to try and use that kind

18:11

of finance to again, as I said before,

18:13

keep skin in the game,

18:15

and keep essentially involved in

18:18

this fast moving technology. Julian,

18:20

and what would be the

18:23

consequence of in a sense

18:25

losing to China in that competition. If if China

18:27

were to succeed in creating

18:29

a digital currency that effectively

18:32

I think you might be saying displace as

18:34

the US dollar as the international

18:37

standard. What would be the consequences of

18:39

that? And is that, in fact, what concerns

18:41

you? Well,

18:42

let me take first of all, I don't have

18:44

a particular point about the value or not

18:46

value of having the US dollar at the center of the

18:49

system. I'm just saying descriptively, not

18:51

prescriptively, a sudden

18:53

shift in the dollar ratio

18:55

would be very, very destabilizing in many ways.

18:57

It will be stage destabilizing for the

18:59

way that the pipes of finance globally currently

19:02

work we destabilizing potentially

19:04

for trade relations and it could contribute

19:06

to growing this sense of destabilization

19:08

of fragmentation in the

19:10

global geopolitical order. You

19:13

know, the reliance on a dollar right

19:15

now does create a tremendous amount of

19:17

vulnerability for many non American

19:20

countries. I'm not saying that's not necessarily a

19:22

good thing or bad thing, but one

19:24

way to understand what's happening in the world today, the

19:26

financial system is

19:28

a bit like a mountain king, so the transit

19:30

net network in Chicago.

19:32

Anyone who's been to Chicago knows that

19:34

all of the transit lines

19:37

go out from the outside central hub.

19:39

And then if you want to get from one

19:41

initial cog, another end, you often have to go into

19:43

the center change and then go out It's

19:45

quite hard often just to go between

19:47

the adjacent districts. That's in a

19:49

sense a bit like what's how

19:51

happening with the financial system today with a dollar and that people

19:53

have to go into a dollar hub and then out

19:55

again if they want to trade across much of

19:58

the world. you can

20:00

sit there and say that, you know, it that's

20:02

irrational. It should be more balanced. It probably

20:04

should be. But

20:06

if you were suddenly to shift overnight,

20:09

and that's what some of these new digital currencies

20:11

do, that could be a very big

20:13

jolt for the system as a whole.

20:15

So if nothing else, the

20:17

US Central Bank needs to stay in that

20:19

game and be simply

20:21

able to respond and adapt

20:23

as conditions develop.

20:24

So, Dante, what I'm hearing from Julien, her overarching theme

20:26

is that the United States

20:29

cannot be head in the sand about this because things are

20:31

moving, things are moving elsewhere. Squared

20:34

the outcomes are unpredictable, but they would be

20:36

predictably not great for the United States if

20:38

things go to a new innovative place in

20:40

the US is not part of that. what's your

20:42

response to that overall concern? Well,

20:44

III don't disagree

20:46

at all that hurry up and wait is not

20:48

a particularly great strategy for

20:50

central banks or any part of free

20:52

society to respond to the

20:54

emergence of competition, geopolitical

20:56

and geopolitical realities or the emergence of

20:58

new exponential technologies. So IIII

21:01

think we should have some skin in the

21:03

game as Jillian described it.

21:05

And candidly, the whole world is

21:07

waiting for the United States to

21:09

lean in. There's a whole host of international

21:11

bodies from the Bank for International Settlement,

21:13

the Financial Action Task Force, the Financial

21:16

Stability Board, that have for the last five years or

21:18

so waited for the United States to

21:20

excel and demonstrate

21:22

that that we we mean to lean

21:24

in and continue to

21:26

have a role to play in in a lot

21:28

of this evolution of money and the uploading

21:30

of money on the Internet.

21:34

However, and and one of the analogies

21:36

I've tried to use for my friends who

21:38

are central bank digital currency

21:40

maximalist is The Federal Aviation

21:42

Authority doesn't fly planes and build

21:44

jet engines. However, it

21:46

does have a say in terms of

21:48

responsible conduct in the skies.

21:50

and we're better off for having choice, and I think the skies

21:52

are safer. And this is one of the debates that

21:54

that I think the the central bank digital

21:56

currency posture currently omits,

21:58

which is that there

21:59

is a current world in which more than a

22:02

hundred and twenty billion dollars

22:04

of

22:04

privately issued digital currencies known as

22:07

stable coins, are currently

22:09

circulating on a host of open

22:11

public blockchain ledgers and that have

22:13

increasingly transmitted trillions

22:15

and trillions of dollars very

22:17

safely across a whole host of

22:19

traditional financial services sectors and

22:21

active digital wallets all over the world.

22:23

And to ignore that breakthrough innovation

22:26

would be borrow one of Jillian's analogies that if

22:28

this is the Internet of value, it is still

22:30

in its dial up phase and

22:33

what a lot of regulators and frankly

22:35

what the central bank digital currency conversation

22:37

is telling us is stop innovating. It

22:39

would be like stopping the development of

22:41

the Internet because we didn't like the dial

22:43

up phase or the worldwide way to phase. And

22:45

so that that's the tension is we we have

22:47

to acknowledge the role private responsible

22:50

regulated actors are playing and

22:52

not have Central Bank digital currencies presented as

22:54

a substitute for this innovation, but perhaps

22:56

is additional to it. And that

22:59

that to me is is how we

23:01

land at winning the long term stakes

23:03

of a digital currency space race.

23:05

Can I

23:05

just jump in here and say I've got three things to say on that.

23:07

One is that obviously where danties are going from,

23:10

which is Circle, which is,

23:12

you know, one of the groups that actually runs

23:14

essentially a private digital

23:16

dollar like currency that's backed by dollars.

23:18

You know, no one Turkey's never looked

23:21

for Christmas. Circle's never gonna

23:23

say, gee, would a great idea to have the

23:25

Fed come in and displace us.

23:27

And that's not what I'm arguing, although

23:29

certainly in the Chinese case, that is actually

23:31

what's happening in China. The central bank

23:33

has come in and displaced all

23:34

of the private sector alternatives

23:37

because it wants control. And how has it how

23:39

has it done that? It's done that through through legal means

23:41

as well. Correct? Yeah. It's

23:42

basically typical Chinese

23:45

you know, authoritarian way. It's

23:47

essentially banned Bitcoin.

23:50

I think it's that banned a lot

23:52

of Bitcoin activity. It's banned a

23:54

lot of alternative

23:57

digital crypto activities.

23:59

And it's essentially threatened

24:01

Jack Ma who created a digital

24:03

fintech company with all kinds of

24:05

political issue. But it

24:05

So it so it it out it out logged the

24:08

competition to their digital Exactly.

24:09

Nobody is suggesting doing that to my

24:12

knowledge within America. that is not a broken

24:14

way. On the contrary, Jay

24:16

Powell has recently indicated in a

24:18

speech that he'd pro preferred the

24:20

private sector, companies like

24:22

Dundee's the one that Danny works for

24:24

to actually take the burden of much

24:26

of the innovation. And please

24:27

remind our our listeners who Jay Powell

24:30

is. Jay

24:30

Powell is the chair of the Federal Reserve. So he's

24:32

basically like the pope

24:34

in the financial Vatican.

24:37

that goes around with all the priests, AKA banks,

24:39

and blessing everybody, and speaking of financial

24:41

Latin that no one else understands.

24:43

So I'm I'm well aware that right

24:46

now we're probably all speaking by natural Latin, and we're having to

24:48

basically put it into the back end of vernacular

24:50

because otherwise, we're gonna end up, you know,

24:52

in love with our own innocence of them. So

24:54

apologies

24:54

if anyone is listening. And and if

24:56

I if I could just building on the

24:59

the the Vatican analogy, in

25:01

the papal conclave of central

25:04

bankers, There is one distinction that

25:06

the Chinese digital currency

25:09

initiative from the People's Bank of China would

25:11

have over the current

25:13

generation, even the private sector innovations

25:15

that are currently in circulation, and

25:17

that is this idea of digital

25:20

legal tender. Right? And

25:22

today in a world in which there's

25:24

regulatory ambiguity in the United

25:26

States, the United Kingdom, and

25:28

in and other major western countries around the world

25:31

about the role of privately issued

25:33

digital currencies and what type of

25:35

legal certainty they enjoy. is

25:37

a world in which I think one of the

25:39

clear advantages China has

25:42

produced is this idea of

25:44

conferring legal certainty and digital legal

25:46

tender status. on on these

25:48

individual tokens. Now at great societal cost,

25:52

privacy, censorship resistance, this

25:54

soft expropriation of private sector actors and

25:56

and sort of competitive actors in the free market.

25:58

All of those costs are very

25:59

high. There's one other cost that I

26:02

think matters. which is in the United

26:04

we are woefully behind the rest

26:06

of the advanced economies in what

26:08

is

26:08

known as real time gross settlement.

26:11

The Fed now system is

26:13

a system that was designed and is now

26:15

late. So I joke that it's called

26:17

Fedwin, that that was supposed to create

26:19

faster intra bank

26:21

and interbank payment rails. sort of

26:23

an instant payment network. That

26:25

is Debates. And oftentimes, the

26:27

domestic central bank digital currency

26:29

conversation is hiding the

26:31

void of real time gross settlement in the

26:33

US, for which a digital currency

26:35

wouldn't necessarily be a fix because those

26:37

are wholesale pipes. that connect the banking

26:39

system to the Fed and vice versa. Well, let me

26:41

jump in there because I my understanding is that

26:43

one of the benefits perceived

26:45

benefits of a digital dollar is that

26:47

it would that problem, that it would it

26:49

would smooth out transactions, lower

26:51

transaction costs, not just for big players,

26:53

but for small players and individuals as

26:55

well, Dante. Well, remember, and

26:57

and just 111 quick point and I

26:59

suspect Gillian and I were not gonna find a lot of

27:01

disagreement on this issue is banks

27:04

live on non interest

27:06

income. AKA, the death by a

27:08

thousand cuts fees that you

27:10

get for payments activities,

27:12

for checking activities, anything that would

27:14

be construed as a convenience inside

27:16

the traditional banking space.

27:18

is often paid for in the same way that

27:20

with telephony, the longer the call traveled

27:22

over fixed line infrastructure, the more expensive

27:24

it was. And so If you

27:26

banking outcome that is fast or

27:29

convenient, you pay a premium for it.

27:31

And so one of the

27:33

gaps we have in domestic payments in the United States

27:35

is the lack of interoperable payment

27:37

systems. And so the advent of

27:39

digital currencies and public infra

27:42

this blockchain digital wallet

27:44

environment is that it's creating a

27:46

really, really interoperable payment

27:48

system that overcomes what is known as the

27:50

walled garden problem. which is

27:52

that inside the environment of a

27:54

PayPal, you have very efficient payments. The

27:56

second you want to send a payment to an

27:58

outside account. then you enter the

28:00

realm of the systems are not

28:02

interoperable, and and ultimately, you're you're at

28:04

the mercy of a lot of fees. And so

28:06

presumably, Fed now would have a trickle

28:08

down effect of making the

28:10

IntraBank payments more efficient and then it would

28:12

trickle down to the end user. But I

28:14

still think you need competition for

28:16

lowering fundamental costs. And that's why, again,

28:19

candidly, a lot of the banking

28:21

lobby is at once

28:23

against central bank digital currencies, but they're

28:25

also fundamentally against normalizing companies

28:27

like mine who were introducing new

28:29

forms of moving value in the twenty first

28:32

century. I

28:32

mean, our job here and say, do the things dirty. Turkey's do

28:34

not vote for Christmas. No bank is gonna say,

28:36

well, what a fabulous idea to have circle

28:38

competing with us. and circles

28:41

never gonna say, well, what a fabulous idea to

28:43

have a central bank competing with us. You know,

28:45

that's called natural business incentives.

28:47

But I think it's important to step back here and add

28:49

to what Dante is saying, which

28:51

is that one of the reasons why

28:54

Bitcoin why Central Bank digital currencies,

28:56

why all of these digital assets are

28:58

being discussed is because the current

29:00

legacy systems are pretty rubbish

29:02

in many ways. I mean,

29:04

the bitter irony of twentieth century capitalism is

29:07

that many sectors of business cut

29:09

out middlemen became hyper

29:12

efficient and became hyper

29:14

streamlined and took out all the fees in the

29:16

middle in a name of creating more

29:18

capitalist efficiency.

29:18

Like, what what sort of is just

29:20

to say some examples. Well, the

29:21

retail world, for example, you know you

29:24

know, think about Walmart. How do you get such

29:26

cheap things on Walmart? How do you get such

29:28

competition when you go online and try

29:30

and buy you know, a new sofa is because you can

29:32

see twenty different examples and you can twenty

29:34

different shops and you can have competition and you

29:36

can get rapid shipping, etcetera,

29:38

etcetera, as finance, in many ways, has lagged way

29:40

behind. Nearly other sectors has been as almost as

29:42

bad as being American healthcare, where

29:44

there's been massive of middlemen

29:47

essentially taking fees and very

29:49

clunky pipes that money has

29:51

moved along. And it's

29:53

important to distinguish how

29:56

this is actually functioning because there

29:58

are two different aspects of

30:00

finance. That's what we call

30:02

retail finance, which is what consumers use.

30:04

and there's wholesale, which is institution to institution

30:06

bank to bank. Now

30:08

the good news is that retail

30:10

finance actually has become quite a bit

30:12

more efficient quite often. And

30:15

some of that's actually in reaction

30:17

to the onset of cryptocurrencies. So

30:20

what you're getting as a result of the rise

30:22

of digital assets is that the

30:24

traditional legacy systems in the

30:26

retail sphere actually kind of is

30:28

getting that and there's studies of places

30:30

like Singapore where actually

30:32

the ability to spend money on your mobile phone has

30:34

gone through the roof because suddenly

30:36

all the old companies are

30:38

going yikes. we don't want to be knocked out

30:40

by digital assets and competition. In

30:42

the wholesale sphere, and it's very

30:44

important to stress this, when you've got

30:46

big banks sending each other payments

30:48

across borders around the world right now,

30:51

that's incredibly clunky

30:53

still. And that's one reason

30:55

why if you're sitting in Ohio and you

30:57

wanna make a payment to a friend

30:59

in Delhi, it can end up taking a

31:01

lot of time, a lot of cost, to get

31:03

that money across the wholesale pipes are clogged

31:06

up. And in fact, I was talking to the

31:08

central bank governor in Brazil the other day who's

31:10

telling me that The

31:12

joke in Brazil used to be that if you wanted to

31:14

send money from San Paulo to

31:16

London, it was faster to give them a plane

31:18

and take some money in a bag than to

31:20

actually use a clunky, old

31:22

fashioned wholesale pipes because

31:24

there hadn't been any competition

31:25

before. More from Squared

31:28

US when we return.

31:35

Welcome back to Intelligent Square

31:37

U. S. I'm John Don Let's get

31:39

back to our debate. Alright. So

31:42

Dante, what I hear Gillian saying is that a digital

31:44

dollar would allow for a great so much more

31:46

efficiency in speed that it's it's

31:48

it makes the case almost on its own. Well

31:50

and then there is the public

31:53

sector scorecard of digital transformation

31:55

as checkered at best.

31:58

siloed at worst. Right?

32:00

And so that, you know, just recently the

32:02

Europeans had to pass a

32:04

law to try to get the big

32:06

technology companies to make sure the plugs

32:08

worked, and that all the peripherals for your

32:10

iPhone would be conforming to a

32:12

certain standard. And so I do

32:14

think we should be really,

32:16

really candid and really honest about.

32:18

The point here is not one substituting

32:20

the other, but that even cross

32:22

order money transmission rails, the

32:25

networks that move the money, is

32:27

the real breakthrough innovation. Even

32:29

know, the former treasury secretary Hank

32:31

Paulson, you know, was a little dismissive of

32:33

this idea that the United States

32:35

is gonna lose ground and the color will

32:37

be dethroned by Chinese digital currency initiative

32:40

unless we've responded in kind

32:42

in no small measure because a digital

32:44

currency is the sum of its

32:46

parts. it's a sum of its institutions. And so

32:48

a digital rendition of the Zimbabwean

32:50

dollar would be exactly what the Zimbabwean

32:52

dollar is. A hyperinflation

32:54

generic digital currency, not worth the code it's

32:57

printed on, in the same way that the

32:59

physical bills would not be the pay worth the paper

33:01

they're printed on. And so my

33:03

my challenge and I think what Gillian also underscores

33:06

is the breakthrough is

33:08

about

33:08

transmission of value in an

33:11

always

33:11

on Internet native era

33:13

and in a and a hyper connected

33:15

and globally connected global economy, we

33:17

need to really contemplate rails.

33:20

because the Swift network, ACH

33:22

networks, the credit card networks are

33:24

all operating largely on technology

33:26

stacks that have not had systems upgrades.

33:28

in quite a long time. And that's how

33:31

far back to those systems go. I mean, it

33:33

depends on the standard, but in some cases,

33:35

up to fifty years or more. And they're

33:37

very vulnerable They're very vulnerable

33:39

pipes that are fundamentally messaging

33:41

systems, not actual value transfer

33:43

systems. And so things like settlement

33:45

finality, using traditional payment rails

33:47

take a long time. And you're operating

33:49

effectively in a correspondent banking

33:51

network that is sending messages and payment

33:53

instructions to one another, not actual

33:56

money. And that's Debates the gap that we have

33:58

to fill. And so I I think of

34:00

the the central bank example that Gillian

34:02

just gave of not only with getting

34:04

on a plane with money instead of sending it

34:07

through traditional rails trigger a

34:09

suspicious activity report, But in

34:12

many cases and in many corridors, it is the more

34:14

efficient way of moving money. And and it's

34:16

because the underlying rails, the

34:18

transmission networks are

34:20

not interoperable They're not Internet

34:22

native, and they haven't had systems upgrades. And

34:24

the last point I would make to Gillian's great

34:26

commentary about Turkey's

34:28

and competition, is that in most cases, we we are at the mercy of

34:30

duopolies at best,

34:32

cross border payments. It's typically one of

34:36

two companies. the credit card networks is typically one of two

34:38

companies that that dominate

34:40

a lion's share of money

34:42

movement activity

34:44

And I think that's a heck lot factor

34:46

of a digital currency itself

34:48

or its economic backing. Again, to the essence

34:50

of what a digital dollar would be

34:54

Gillian, I the the evangelists of cryptocurrency

34:57

were

34:58

and are attracted to

34:59

the whole concept because of

35:01

the notion of decentralization

35:04

of finance, and anonymity,

35:08

and privacy, that there is no

35:10

governing body overlooking the what's

35:13

on the blockchain. But a digital

35:15

dollar created by the Fed, I I think

35:17

it's already been put out there. that

35:19

the Fed could literally, technically,

35:22

know how everybody is

35:24

spending every transaction that

35:26

you make they'll have that information. And Newsweek published

35:28

a a sort of warning

35:30

by an official of the

35:32

Heartland Institute. And I do wanna point out that the

35:34

Heartland Institute

35:36

is is a libertarian think tank, which has also

35:38

allied itself with the

35:40

tobacco companies on the question of

35:44

whether smoking is bad for you. They've come down and they were arguing that it wasn't and

35:46

also that they questioned

35:48

climate change, but they stated

35:51

this argument very clearly in Newsweek.

35:54

Digital dollars could easily be tracked by

35:56

banks, federal agencies, and the

35:58

Federal Reserve, they could be

36:00

programmed to control the kinds of things people can

36:02

buy, how much could be purchased at a single

36:04

time or any number of

36:06

other variables. That does sound like conspiracy. Talk stuff, but it does

36:08

go to it seems

36:10

the fact that there

36:12

would be much

36:14

less of the privacy and anonymity involved with

36:16

the digital dollar than with the cryptocurrencies like

36:18

Bitcoin or Ethereum. And I want to ask

36:20

you, is that a serious case to

36:22

to take on as it should be regarded as

36:24

serious? Well, here's

36:25

three points I wanna make wanna make. Firstly, the

36:27

fantastic thing about this entire

36:29

development and debate people

36:32

think about the underlying platforms

36:34

and rails, as Dandy says,

36:36

on which money actually

36:40

moves. And For the last fifty years, people have given it almost

36:42

no thought because let's face it.

36:44

Talking about logistics, talking about

36:46

financial plumbing is a mind

36:48

numbingly boring. normally. For

36:50

everybody, anybody who's normal. I mean, you turn

36:52

up at a party and say you wanna talk about

36:54

the rails of finance, everyone's gonna

36:56

fall asleep. talking about

36:58

money. Yeah. We all love to talk about that,

37:00

but not about the logistics of it.

37:02

And what this whole debate has

37:04

done is concentrate mines on the logistics

37:06

of money. And it really, really matters partly because

37:08

if the logistics are vulnerable, the

37:11

whole system can

37:14

collapse. No one thinks about plumbing in their house until suddenly

37:16

there's a block block drain and a terrific stink

37:18

and a mess, and then you really care

37:20

about it. Otherwise, you ignore it.

37:23

And Jillian, that is that is your fourth fantastic

37:25

metaphor in this conversation so far. It's

37:27

a mixed

37:28

metaphor. I'm sorry. But that's

37:30

really serious because, you know, when there is a

37:32

block, pipe people care. And we need to think about pipes

37:34

right now, particularly at a time of geopolitical

37:36

tension because they could

37:39

get attacked anytime soon. Point

37:42

one. Point two is that the the logistics really

37:44

matter and the plumbing really matters

37:46

because and the question of

37:49

who controls it is very

37:51

subtle, but critical. Now in a

37:53

central

37:53

bank currency, at dollars, at the end

37:55

of the day,

37:57

is to Not entirely, it's a large rate the central bank

37:59

that

37:59

controls the creation of dollars.

38:02

In fact, commercial banks can control them as well

38:04

through lending, but let's see that aside for

38:06

the moment. One of

38:08

the key things that Bitcoin

38:10

and other decentralized currencies do

38:12

is essentially let the crowd create

38:15

the money. And the only

38:18

constraint on how much money is con created

38:20

is how fast the computers can run

38:22

and whether people do or do not actually track trust

38:24

the computer platforms. So the

38:26

control is in different hands. Now you

38:28

can argue which is better or

38:31

which is worse. I tend

38:32

to think at the moment given how rapidly this

38:34

whole system is evolving and developing is

38:36

that we need to have

38:38

competition And right now, it's no

38:40

bad thing that actually, if people think I

38:42

do not trust the central bank at all,

38:44

I hate the Fed, they can go off

38:46

and use a Bitcoin or something like that.

38:49

I do think we have to give consumers

38:51

a level of choice about how much privacy they

38:53

do or don't want. Most people

38:55

sign up for say social media

38:57

platforms, even though sacrificing a lot of privacy because they

39:00

like the convenience that is offered

39:02

by those

39:04

platforms. Maybe people, some people would actually say, you know what, I

39:06

don't really care if the central bank has

39:08

all my records on its own ledger. I

39:10

actually like the idea of additional dollar.

39:14

Maybe people won't. But I think we actually should not be

39:16

shutting off any options right now once you

39:18

let the market choose. Sort of

39:19

in a way that another metaphor

39:22

that some people are are very

39:24

uncomfortable with the fact of security cameras on the

39:26

street, and other people say, I don't care. And

39:28

and if it's keeping other safe,

39:30

I'm okay with that. Dante, I wanted to

39:32

take the same question to you. I mean, Gillian is

39:34

saying that these concerns - the

39:36

concerns raised in the sort of alarmist

39:38

scenario laws can, you

39:40

know, safeguards can be put in place so

39:42

that the federal government if it's issuing

39:44

a digital dollar and technically would have

39:46

the ability to intervene in our lives because

39:48

of that. won't that's

39:50

not really a really serious

39:52

concern. Just wanted to take your take on it.

39:54

Yeah. No. Well well, one, you

39:56

know, the good news is The Federal

39:58

Reserve in its most recent paper on

40:00

this topic reported out

40:02

what is known as Project Hamilton, which is

40:04

the Boston Fed's particular experiments looking

40:07

at the technological capabilities

40:09

necessary to have a

40:11

central bank digital currency. And

40:13

what they've said is, are three things that I think should

40:16

give the those

40:18

who are listening who might be afraid of

40:20

the prospect some degree of

40:22

comfort. Right? Number one, a

40:24

central bank would have to be

40:26

intermediated. Number

40:28

two, essential bank would have to be privacy preserving, which think up

40:30

some serious questions about its form factor. And

40:32

number three, it would have to be

40:36

KYC. And so you can imagine KYC is a term of art

40:38

meaning know your customer and that

40:40

the the access to a central bank

40:42

digital currency would have to have

40:44

an individual

40:46

identified and known. And so you could see a tension between number

40:48

two and number three. But that

40:50

ultimately means it's gonna flow through

40:54

the regulated financial system. And so then the

40:56

question becomes, then how will

40:58

it produce better outcomes if

41:02

it's just taking the existing rails and making them slightly more

41:04

efficient. Because we have to remember, the

41:06

existing rails by design

41:10

are competitive by design are exclusive of

41:12

one another and, you know, to to build on

41:14

Jillian's analogy of clogged pipes in

41:16

your home, We

41:18

suffered through this domestically with the advent of COVID nineteen in

41:20

the United States. So up until recently,

41:22

I sat on FEMA's National Advisory

41:26

Council, and we we mobilized as a country more than six trillion

41:28

dollars of taxpayer funded money to everyone.

41:30

And because the money

41:33

couldn't move an auditable near real time payment

41:35

networks. We may have lost anywhere between seventy

41:38

billion dollars and four hundred billion dollars due

41:40

to fraud

41:42

and crimes of opportunity because there was no auditability

41:44

of how money moved or we just used

41:46

completely blunt force approaches sending

41:48

physical checks to everybody and

41:52

the the the payroll protection program and so on. And so

41:55

that's a function of a void

41:57

of rails. It's it's a

41:59

like building a high be

42:01

trained but not caring about the train network.

42:03

And so that's the missing link in the

42:05

United States. Other countries have

42:08

open banking systems,

42:10

other countries and other regions like Europe have fast payment

42:12

systems for intra bank payments and

42:14

mobility. But where I think

42:16

we should be very

42:18

concerned societally And I think it's

42:20

candidly anti democratic is when the

42:22

central bank ultimately gets all the way down to

42:24

the retail level

42:26

of transact action engagement and having digital wallets.

42:28

And so as an example, a

42:30

digital a postal banking

42:32

experiment only had six total users on

42:34

it recently.

42:36

And so I think the boundary of where does

42:38

a free society want the public sector involved in

42:40

money in their financial lives are

42:44

pretty clear. that we just don't

42:46

want these innovations at the retail

42:48

level. But

42:48

I'll just say to you doing for that. Firstly, if

42:50

the prospect of this digital currency puts

42:52

the fear of god into the existing

42:54

legacy system and makes it more efficient.

42:56

That's a win win for consumers big time. And

42:59

I think the jury's allowed. It's possible

43:01

that the entire crypto

43:03

revolutions may impact to humankind will be to

43:05

make traditional financial legacy systems dramatically

43:08

more efficient

43:10

belatedly. But the other point is

43:12

that I don't think we always know what consumers want

43:14

because I'll give you one example going

43:16

back to my cell phone again. When

43:19

facial recognition tailored, technology was

43:22

first muted about a

43:24

decade ago. Most in all

43:26

opinion polls showed that most American

43:28

consumers were so horrified by

43:30

that concept they wanted nothing to do with it.

43:32

Today, a very large chunk of our

43:34

smartphones use facial recognition

43:36

technology to enable us to sign

43:38

on to things. And

43:40

it's quite possible that we'll end up going

43:42

down the Chinese route and using facial recognition

43:44

technology to pay for things and

43:46

to get into buildings. And the

43:48

reality is that consumers'

43:50

culture is shifting all the

43:52

time. Culture does not exist like

43:55

a plastic Tupperware box. that you can

43:57

stack up in a hierarchy of value to another metaphor. It's more like

43:59

a slow moving river where you have new

44:01

currents coming in and changing.

44:04

And yes,

44:06

we should all make sure the population and voters understand very

44:08

clearly what's a stake in these Debates.

44:10

But we can't necessarily assume

44:13

that we know how people

44:15

are gonna feel in ten, twenty years'

44:18

time. And lastly, the very point

44:20

that Dowdy said about how terrible the

44:22

experience was of trying

44:24

to distribute the COVID

44:25

checks shows. That is

44:26

not either all. If there'd been additional

44:29

currency there, that people have been using to

44:31

some degree, we could have done it very,

44:33

very very quickly. But it doesn't mean that

44:35

the rest of the payment systems necessarily die and wilt

44:37

on the vine immediately anymore than

44:39

the fact that we have credit cards

44:41

means that suddenly old fashioned cash and checks have suddenly

44:43

vanished as well. I want to look at the one other word in

44:45

the

44:45

question that we're raising, do we need a

44:48

digital dollar? We

44:50

haven't talked a

44:52

little bit about who we mean by we. And we

44:54

have talked to you I'm using we

44:56

in a different sense. Now the three of us

44:59

have talked about the term retail

45:01

user has come up from time

45:03

to time.

45:04

the and And

45:05

I wanna I wanna explore whether there are retail users who

45:07

would be better off in a world with digital

45:10

dollars as opposed to a system where right now

45:12

you have to have a bank

45:14

account and an ID

45:16

card, etcetera. Dante,

45:18

I guess I'm asking you to

45:20

to take on a question which might

45:23

actually argue against your no position, but maybe not. Are there people who

45:25

would be better off with the digital? Well well, there

45:28

are. And and I think, you know,

45:30

one of the big

45:32

fig leaves that the digital

45:34

currency world and the blockchain based

45:36

finance world in the cryptocurrency world

45:38

currently hides behind is this

45:40

financial inclusion

45:42

fake leaf. which is which

45:44

is the argument is very straightforward.

45:46

Right? That in a world in which you have

45:48

one point seven

45:50

billion people with no

45:52

formal access to the formal

45:54

economy for good reasons and bad.

45:56

And the the the good ones are

45:58

that if to be banked requires brick and mortar in a traditional

46:00

sort of, you know,

46:02

retail bank access. Can wait.

46:04

I I need to stop because

46:07

if you're using the word bank as a as

46:09

a as a particle, which is make making a

46:11

verb of it. So what do you mean

46:13

by bank and unbanked? If you're a banked person

46:15

versus an unbanked person, who are you? That's right.

46:17

Well, it's it's the think of it, well, better

46:19

to better state it and maybe more crudely

46:22

stated, it's to

46:24

to be have

46:25

margins of poverty and

46:28

margins of access to the formal

46:30

economy. So to

46:32

be presumes

46:32

and the FDIC produces great research on

46:34

this every year. To be bank, presumes

46:37

you have access to a

46:39

series of formal banking and financial

46:42

services from low

46:44

cost chest check cashing to

46:48

low cost checking account access and to

46:50

over time things that could accrue credit to

46:52

you and lending and so on. So that's

46:54

like the the very simplistic

46:56

definition of What does it mean to be

46:58

banked? But then you have and

47:00

the COVID example is really

47:02

a positive. You have

47:04

rural populations that were told

47:06

on the one hand by the

47:08

CDC and others to quarantine and

47:10

stay at home to then get a

47:12

physical check that they would then have to go

47:14

cash somewhere they didn't

47:16

just get an asset, they got a

47:18

liability because that liability

47:20

ultimately needed to go to a physical

47:22

location in order to

47:24

get cashed. And so the advent of digital currencies, private

47:26

digital currencies, and faster payment

47:28

systems starts to remove some

47:30

of the logistics,

47:32

again, barring Julian's, I think, great terminology

47:34

for how money moves and how it reaches end users. And so that's

47:36

like one big problem set. We have a planet

47:38

with an enormous number of people

47:42

who are perennally on the margins of the formal economy.

47:44

Advantaged now how in

47:46

a digital currency? They would be advantaged

47:50

simply by the same way, and this is where it it perhaps

47:52

is too simplistic, but in the same way

47:54

that if to have access to telephony,

47:57

hinged on antiquated fixed line

48:00

infrastructure, you would have billions and billions of people all

48:02

over the world who wouldn't enjoy the

48:04

revolution of mobile telephony and now

48:06

mobile Internet. And so this is

48:08

where this is a Cambrian explosion of

48:10

innovation in banking and payments and

48:12

finance, is that armed with little

48:14

more than an Internet

48:16

connected device a smartphone,

48:18

a basic phone, a basic android phone,

48:20

that device can now become

48:22

a compliant payment endpoint. and

48:25

that's where this revolution is really starting to take on

48:27

pretty big societal proportions. Something like seventy

48:29

five percent of all the merchants

48:31

in the world contemplating

48:34

accepting digital currencies as a part

48:36

of their retail payment experience.

48:38

And so that that's a pretty big

48:40

flywheel that analogizes very closely to

48:42

mobile money -- Yeah. -- and the mobile

48:44

money experience we've seen in regions in

48:46

in Africa and countries like Kenya. But

48:48

as the as the debate are taking the side

48:50

in this argument, you've you've said

48:52

that all these benefits you just explained are

48:54

something of a fig leaf? No. Well, so

48:56

here here the fig leaf is that

48:58

the only factor in an

49:00

economy that can deliver those social

49:02

impacts are the

49:04

the public authorities is is the the

49:06

thing I'm railing Right? That because one of the arguments

49:08

for Central Bank digital currencies is that

49:10

you could have better forms of

49:13

social money, helicopter money,

49:15

and had we had during COVID,

49:17

this Fed could have magically parachuted funds directly to

49:19

the end user. Alright. Well, Dante and

49:21

Gillian, thank you so much. You you helped us

49:23

get through this with

49:26

with the with the with help of many metaphors and analogies

49:28

and numerous references to plumbing and

49:30

rails. But I I think it helped

49:32

make some of this abstract material concrete

49:36

for us. So I wanna thank you both for for helping us figure out,

49:38

do we need a digital dollar? Yes or no? So

49:40

Dante Gillian, thank you so much for joining us

49:42

in Intelligence you. Thank you,

49:45

John. And for now, I'm John Donvem, and we will see you

49:47

next time. The conversation you just heard is

49:49

just a great example of why

49:51

we do these Debates. to

49:53

hear to people who disagree do so civilly, even to the

49:55

point where they meaningfully agreed where

49:57

that was useful and helpful to all of

49:59

us understanding what

50:02

this complex issue is about. And also, we appreciated their predictions of

50:05

the future, which we can check back on

50:07

in the future. And we hope you are

50:09

there with us when that happens.

50:11

For now, I'm John Don Ben. This is

50:13

Intelligence squared, and we'll see you next

50:15

time. Thank you for tuning into this episode

50:17

of Intelligence squared. made possible

50:19

by a generous grant from the Laura and

50:22

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50:24

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50:26

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50:28

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50:30

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50:32

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50:34

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50:36

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50:38

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50:40

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50:42

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50:44

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50:46

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50:48

and I'm your host, John Don

50:50

Bank. We'll see

50:51

you next time.

51:00

Panoply.