Transcripts For CSPAN2 Discussion 20240703

And so build a better system, man. Thank you very much. Do we have do we go straight to the second panel or short break . Five minute short break. You guys enjoy anu a cup of ce and will be back for more fireworks here [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] ladies and gentlemen, if anyone would take a seat were going to get started. Everybody just wants to grab a chair, unlike the as Payment System, we want to run on time here. Going to have to do this the bob work away. Rest in peace. When the Founding Fathers sat down to write the u. S. Constitution in december 1887 they had been scarred that only by war but by a series of failed monetary experiments, experience with paper money issued by the states and the continental congress. The scars of those battles are written on the pages of the constitution itself which has a very narrow view of what money is. Okay. This is going to get ugly quickly. That you basically saw legal tender as gold and silver coins. At the moment in history there were only three banks in the entire United States. None of them played at particularly prominent role in the money supply. Gold and silver coins, no banks. Think of how far weve come in 200 years. Theres a a lesson here aboute durability of money and payment that i think is important in understanding the context for this next panel. In the first panel we talked about the challenges that we face in using technology that exists today in order to improve the system of money and payments that we offer americans. But we also need to have conversations about what money is going to look like tomorrow. It took us upwards of 100 years to figure out on the basis of the u. S. Constitution what a monitor system that actually involve banks would look like europe where currently less than a decade into the 21st y analog of that question which of what is money payments look like in a digital world, in a decentralized world, in a world when it only gold and silver coins but paper money have long since gone the way of the dodo. To help walk us through this conversation and be our guide we have none other than impressive chris berman at georgetown law. Crisp on the people that for the show needs absolutely no introduction. Some of you know chris from a scholarship. Some of you know chris from the incredible ball of energy that create the fintech podcast. And some of you know him as one of the most creative and constructive policy advocates in financial law and Technology Picks up we shown in welcoming state chris brummer. [applause] [inaudible] [inaudible] okay. All right. Everyone can hear me. For the next trick i will bring the panelist to the states pick the one only brian brooks. The one only brian brooks come someone who truly needs no introduction as with the service we are at the office of comptroller of the currency. He is an intellectual. He is a policy advocate. He has a huge break and is we have professor yadav also coming to stage. Im going to introduce you in order of the way youre seated. Yesha is helping to both organizes conference, a good friend. Under forever for really forever from the world bank to vanderbilt and is one of my intellectual partners in crime. Managing director of Fenway Summer also with extensive experience in Consumer Protection really at the frontlines of both Government Service as well as the private sector. Finally my good friend Christina Skinner from the wharton school, also one of the leading professors and scholars and thinkers on Financial Regulation and policy. It really is a panel full of people above the door, look up to, respect, and it really excited to really learn from you in this conversation. Okay. So as dan had mentioned the last panel really was bringing together a number of themes, really going to the heart of the health of the economy and the critical nature of the Financial System. I think what we can certainly say is that todays Payment System is really a mix of the old and the new. I have likened it before to jfk airport. You know, its always before i guess current renovations you would go there and it would be a little bit old, a little smelly, a little slow, slightly embarrassing but yet the heart of global commerce. Theres a certain kinds of similarities between jfk and our modern Payment System. But lets jump right into the conversation about what exactly are both the options on the table, what exactly can be said about the direction in which our Payment System is evolving . From going to start off with yesha. Maybe you can kick us off with a professor oriel explainer of stablecoins and cbdc since that is really where the policy conversation is centering. You can schoolhouse rock us with the basics and then maybe jumping to some of the critical points of emphasis for the policy conversation. You want to do professorial crisp and of all per soil at that we could be of the whole hour. So we can just keep going. Either too young or too old. So to get professorial lets just take a step back. The stick a step back, i want to go back to it and said in the last panel, which was to raise the notion of public. Nothing is worth while to stop the definition and clarifying the difference between public money and private money. We all know it but i think its worth being very clear about it. Which is public money that is backed by the full faith and credit of our government, and that is issued obvious he by the fed in the case of paper money, the treasury, in the book case of notes and coins. Its wonderful, gorgeous, its items. And, of course, their money with a little bit of credit risk and that is private money. These are the claims were using all the time in the context of a banks can nonbanks and others. We talked about money. We have so conversation in the Morning Panel about sort of private money that is very prevalent across our Payment System. That is the basic dichotomy here. Here. When we think about cbdc, that is a way to digitize public money. For us the public money that were all interacting with as people are basically notes and coins and physical cash. Now as we talked about at the very start of the whole thing, most people today are moving towards a more cashless universe. The question for policymakers is do we need to digitize public money to put into the form of cbdc that can come with some of the potential sophisticated cool things, schoolhouse rocky dick, which is potential for programmability programmability to think that was a witch that money can be directly programmed to do certain things for example, be distributed in the context esteem as payments are maybe two kids that they dont spend it on certain things. Their set programmability element as well as a full kind of fullback by the government, potential programmable, and also therefore potentially very cheaply distributable to maybe reach those who are financially excluded and would benefit from very cheaper access to formal Financial Services. So thats the cbdc. Now we are in the world of private money and looking a stablecoins. These are tokens sort of referencing, we talked about earlier sort of hard assets, claims that are now transacted on payment rails settling on payment rails had a global call that are verifying transactions inserted very rapid moments in time, and are able to move in sets of money super, super cheaply. So what theyre offering is a vision of payments potentially that is a little more international this movie money superfast that is referencing money at the back and supported by a thick buffer of assets, but potentially able move money much more cheaply and faster than traditional Banking System has been able to do. Those of the functionalities the stablecoins and cbdcs are looking to offer in the big picture. Theres a whole conversation we would have about how to think that regulating and talking to them but those are the to make basic dichotomy circa public money come privately, cpcc stablecoins that come into play today. Was excellent, excellent. Sort of annually thinking about the definition of money at about how the definition money is changing from just a unit of account to storage instrument for really moving value and introducing questions like programmability. Brian, you have a really unique Vantage Point and really firsthand experience from the time in government and also as someone who usually been working on Digital Assets for really quite some time period the points of emphasis from yesha were stablecoins and cbdcs, right, and we are seeing that conversation continue. Particularly with circle, paypal and other cbdc conversation but where are the banks in the conversation . You dont really hear too much about the specific role that major banks can play in leveraging Digital Assets to improve payments. What should we be interpreting from that . Is at a good or bad thing . And then where do banks sort of fit in this larger cocktail of both policy and Technological Solutions . Cocktail is a good metaphor i think for this conversation otherwise would pick up on all these airline metaphors this morning in terms of like our airlines a Financial Services company that happens to fly planes here are the planes that offer Financial Services . Based on my expenses morning they are only Financial Services companies. But anyway, so let me address the question this way. Ill try to be super provocative because thats always my role on the panel. I think you could make an argument that one of the reasons for the increase demand for stablecoins over the last lets call it five years with stablecoins went from a market cap of about 3 billion of market cap of about 100 billion today. So you go from beginning of 2020 to debate that two debate that roughly the growth trajectory. One of the reasons for the increase in demand is not because stablecoins themselves are so super awesome. It is because the United States is the only country in the developed world and with that doesnt have an open Banking System. What it needs is you have banks that have Privileged Access to the Federal Reserve Payment Services and then you everybody else in the universe. But that means is that the United States the cost of operating the Payment System is roughly 4x the costs of operating the Payment System in safe britain or the eu, and thats because in those countries there is a licensing status that allows access to the settlement rails with that being a bank. In other words, you have to be a depository to access the bank of englands Settlement Services but you do have to be a depositor to do that in the United States. That creates this enormous incentive for some nonbank instant settlement solution because the traditional payment processors have to use banks, and its that extra layer that makes everything so expensive. Im going to argue theres a market need for instant settlement and it doesnt have to be outside of the Banking System. Medically. But the reason it is outside the Banking System is because we have not allowause we have not allowe Federal Reserve. Thats why. There are some great things about stablecoins separate from that like, for example, the fact they allow people to hold dollar equivalents without having to hold them in a bank account. Thats not particularly relevant in this country but as argued in a recent wall street journal oped is highly relevant in other countries. What is the big trends going on in a world and to make this last point and ensure that but it think its relevant to the discussion is we live in a world whether strong geopolitical pressure in various parts of the world to deed all the rise. Thats sometimes for purely ideological reasons. Sometimes its because legitimate fear about the way the dollar has been handled by a policymakers in the recent past. So, for example, when the United States froze russian a dollar assets because of the ukraine war, its like on the one hand, russia did invade a sovereign nation of that is definitely not okay but on the other hand, money is money and its their money. So when suddenly you can do that it causes other holders of dollars to thank there but for the grace of god go i. Maybe its time for me to a basket of other currencies. Stablecoins become relevant to the discussion because even when governments want to grant you the truth is virtually every person in the world would prefer to hold the wages in dollars than any other currency and so if you live in a country like ive been spending a lot of time in we like brazil or argentina. The day you earn your wage, inflation starts to eat away at that. Tiffany and whether its brazil or argentina or venezuela it starts to eat added quickly or very quickly. If you could hold dollars instead of holding argentine pesos or ray eyes in brazil that would be a much better strategy if you accept the problem is the Banking System doesnt support retail dollar deposit against other so you cant go get a dollar bank account and sao paulo. What do you do . Which it is you open your cryptoware and hold u. S. Ct tokens. Thats a super easy way to his door the widget dollars which it creates upwards pressure for stablecoins event because its like a euro dollar a campy something that a supervalu. I money making two points. One is theres artificial pressure instant some outside the Banking System because we do have open banking. We could solve that but we wont. And then theres the man from below globally for stablecoins as an artificial Dollar Savings account. Those are secular, longterm and i will be here to stay. Its really interesting, really think about the domestic demand and international or Global Demand and how the two are not necessarily the same. There are different kinds of use cases and value propositions for this particular assets. Lets sort of continue along those lines. You are a venture you obviously been at the forefront of a number of Consumer Protection issues as a Deputy Director of the cfpb. When you think about that consumer interface with these instruments, what do you, number one, what do you see when it comes to the question of use case . And then secondly from the Consumer Protection standpoint, what are you seeing from the technology . What are you saying from the transactions themselves . That would sort of lead you to sort of kick the tires as to anything from safety and soundness to disclosure issues . Well, let me start with the question of use cases, which candidly i think has been sort of a frustration over the course of the last ten plus years because the reality is that most of the use cases associate with, for example, stablecoins today have faintly self referential quality to them that kind of had to do with the cook the business and what you exit the perimeter of crypto, these cases are quite a bit harder to find. That said, there are a few things im quite optimistic about. So one kind of ties to this notion of ubiquitous dollar payments. It just so happens our commercial Banking System ties together a number of structural advantages for banks that are not necessarily logically compelled to be to give any creates real problems are underserved people within the u. S. Its a global phenomenon though, not just focused on the u. S. Those privileged privileges the banks are for example, access to the Payment System, access to choice of law, so great preemption for example, National Bank preemption. And Privileged Access to liabilities obviously. Banks are able to leverage and weight nonbanks are not by virtue of insured deposits. What that results in because the commercial banking business is i would argue principally a liability economic profit engine, it makes it hard to serve households that dont have much money. Because banks also have privilege access to payments, it means people without a lot of money find it very hard to make payments in an efficient way. Essentially stablecoins to me are a means of delinking the access to leverage and access to Payment System and that has the impact of getting a real benefit to the 50 of the households in the country that pound for pound are just not especially great economic profit drivers for liability centric banks. Yet. One way of saying that is simply the small deposit customers over at banks are not business of the most profitable, so the question as to what degree are the incented if a menu correctly to what degree other probably incented to create efficient Payment Services . Which is been a really small extend the question i think in space is, what are the incentives to serve the little guys . Cbc these cbdcs are introduced as one potential solution because you have the government stepping behind both helping to create and stand behind a value system. There are been plenty of people to sort of quite literally waved the flag thinking about cbdcs as a means of exporting not only u. S. Foreign policy influence as a means of not opening not only helping to achieve more, more effective financial inclusion, but also as sort of exporting u. S. Values. Christina i know you havent always been you are waving the flag but maybe not necessarily for cbdcs. Maybe you can lay out like what other kinds of tradeoffs and the kinds of things that come to mind when you think about the policy conversation . Sure, sure. Maybe waving a white flag. To put down the project release go a little slower would help if i to my mic on. So yes, absolutely. I even think about cbdcs particularly in the context of the global questions the domestic context, and a think there are a lot of tradeoffs that havent really been sufficiently wrestled with the special because in these early phases weve been mostly think about cbdcs from a technological feasibility standpoint from the sort of economic standpoint. I started to think about cb cds anymore political economy. One thing but the implication domestically for the separation of powers and to think the help of the interaction of cbdcs would really shift power in state and society. I have been pretty skeptical of cbdcs domestically and i want to qualify that. I am really going to speak for the next couple of minutes about retail cbdcs in the delayed will have a chance to disentangle that from wholesale cbdcs. The reason i have been quite guarded in my viewpoint on cbdcs is truly threefold. First there is his entire sort of set the questions about Financial Market structure. So we pretty much know or we can anticipate with a reasonable degree of certainty that the introduction of retail cbdc is going to this intermediate the Banking Sector which is to say that people are likely to swap their bank deposit for cbdc to the extent of making some substitution. We know americans to value cash for privacy with a recent convert convenience related reasons. We know that Central Banks are saying we are not going get rid of your cash. We also know that the way that Central Banks and the fed a little bit less of the other Central Banks around the world are sort of some the project as saying cbdc would be safer for you because it doesnt come with that credit risk attached to a bank deposit. Some jurisdictions around the world might enumerate the cbdc considered by skeptic pics of the point here is we can expect some portion of the population is going to substitute bank deposit for cbdc. We also know bank deposit are important source of funding for banks. So the bigger question here is what would be a knock on effects of that . What will be unintended consequences of Financial Market structure . Will this make loans or expensive, the consequent and so on so forth. Cbdcs in some quarters have been touted as sort of Financial Stability enhancing to the extent folks are worried about stablecoins being sort of Financial Stability risk and perhaps cbdc might be an answer to that. I think the jury is very much still out on that. If we got sort of a flight to cbdc quality in a crisis thats going to be for the destabilizing of banks. Theres this whole sordid and the duty of a Financial Market structure. The second thing i have looked at sort of in my own scholarship is this question mark individual economic rights, and really what how money is really important part of the relationship between people and the state. So first theres this question of who gets to issue money . You can go back i was loving conversation start with the founding, you can go back to the founding and see this very deeply rooted tradition in which referred to as popular monetary sovereignty. Yes, the state has a role in creating some kind of asset referenced money back in the use internationally, but the private sector also plays a a very Important Role in issuing money in particular to sort of check the aggrandizement of the state power. We note european monarchs like to inflate the currency and all kinds of things that are not really good for the people, and so its always been an important part of our tradition to have a vibrant private sector issuance. The question is how the issuance of a cbdc is going to shift the balance of power on the tradition that we have that really encourages private sector issuance of money to sort of a more state have the model. You can think about property rights. We tend to hold onto this tradition that money is a form of an alienable property right but cbdc is not that. Its a programmable policy tool like we were talking about before. Thats a completely different kind of monetary instrument in the same sorts of things you might worry about the private sector in terms of capturing the founding behind payments transactions. The state can do that as well and use the information behind cbdc to finetune policy programs which might be really intellectually interesting for policymakers, but it does implicate something really weighty for individual economic rights. Of course privacy is always top of mind when were talking about retail cbdc, and right now at least it seems like the technology is just too immature to create a cash like privacy instrument and something that is identity verified and consistent with Bank Secrecy Act or so and so forth. The last thing i will say here is central bank independence. If you create a retail cbdc that is a liability on the Balance Sheet of the central bank that has to then be matched with more assets. So as soon as we tell the fed to go out and buy more assets, you open the door to pressure from the treasury to buy more debt, the road this will display, pressure to buy Corporate Bonds and pick winners and losers. So i do sort of see retail cbdc as a big picture of pandoras box. That was depressing. Sorry. Just as a question just to make sure i understand a little bit more. Is it that, is it your hunch that the problem with the retail cbdc is at many of the problems that you identified are not easily remedied even through sort of finetuned policy implementation . Like in other words, is it really an overall macro problem thats kind of hard to get yourself out of, or is it something that you think you get enough wharton professors to give interim they could figure it out . Soft try to be quicker in my answer here. I think with a retail cbdc of the threat of the problems are intractable because there are too many tradeoffs that one cant reconcile while still protecting the appropriate balance upon of power betwe and the state and between the separation of powers between congress and the executive branch. So i have a lot more optimism and i think its a lot more sensible given the potential consequences of introducing a retail cbdc to address the policy problems that were identified on the first panel in the beginning of our conversation with either sector solutions, and more low hanging fruit. Tackling the overgrowth and the sort of incongruity in a email and Counter Terrorism financing law, right, taking deficiencies their contents into at least some for the deficiencies in crossborder payments. And inking about wholesale cbdc which maybe we will talk about later. So let me go, quicken of wrap up of our panel here seems, it seems to indicate a number of things. We have certainly cbdcs and stablecoins is a primary question august the people think about when it comes to upgrading our Payment System. Nonetheless, banks tend to be a little bit sidelined perhaps from this, in part potential because of internal incentives to serve no deposit customers, potential in part because of thinking through what does it mean in terms of the Bank Relationship with master account and the Federal Reserve. Could be another kind of the question or an issue that also impacts larger innovation questions. And ultimately cbdcs are interactively problematic so that would probably seem to suggest that stablecoins and or wholesale cbdcs are maybe the best direction. We havent really talked about and we can always think about the newest iteration of the debate with tokenize deposit but i think we will get there a kind of gradually here. Okay here yesha, im going to return back to you. Cbdcs according to christina are, you know, just a problem that they are the best and are probably in the world for lawyers because they can never be solved. Stablecoins are potentially a problem that can be addressed, potentially here or have issues that can be addressed. What you think of the top three priorities that regulators and or our policymakers should be thinking that if they are going to sort of position these instruments in a way that can really serve to constitute the arteries of our payments of architecture . Thanks so much, chris. So just want to think about what christina has been saying about the political enemies and talk more about the tradeoffs. Im a little bit more bullish about these tradeoffs in a sense that there are a number of use cases, for example, emerging in the content of cbdc to speak to the asia Financial Stability. In other words, for example, if you like a sweden, with the suites have been worried about and why theyve been pushing really hard is this an balance between having a huge amount of cash and an overwhelming level of private money claims in a common relative to public money claim. No one no is using physican sweden. They have swish. Their sense of Payment Scheme which everyone is using. Its become an economy that is hugely commented by private money claims and so that is the impetus for them take the cd cd really harder on the financials to boost their point theres this other sort of other ballots the other which is Public Sector being crowded out of money creation and thats another thing to think about when that money creation is focused by heavily in the Banking Sector that at least look at swedish history has been liable to collapse on a number of occasions. Theres that tradeoff. All of the inclusions that everyone has to think about the tradeoffs are emerging in favor of hitting folks that are unbanked that would have access to any kind of sort of private infrastructure the ability to go ahead and get some amount of access to the formal system. In that context of bermuda sand dollar, for example, has been giving like 500 worth of an account thats likely to kind of destabilized the Banking System but a loving folks into the normal economy. Sort of more widely than that theres this ability to harness the private sector in cbdc issuance in other words, money backed by the state distribution can occur through private banks, nonbanks that are then able to offer Addon Services that can enable those with no Financial Access limited Financial Access or who are just wanted os attached to a state bank claimed to get the service. Theres never different tradeoffs and appreciate actually what christine is saying but theres visibly potential to look at regulatory solution as well take a figure that was a witch to lever some of the Financial Stability risks. For example, what introducing limits on how much a cbdc account can have it so forth. Think about that and looking at the stablecoins side of things, i think theres been a really cool conversation this morning on what are some of the regulatory steps that we need to enable both Digital Private money and digital public money creation . Within our Payment System. Soul like the top three chris is what you asked for, i think first and foremost come to discussion that were having the first panel as well as director chopra, which is just being able to ensure that stablecoins issuers have assets that the promised there would have in these assets are high quality assets that are backing the stablecoins that we can absolutely guarantee that you have the tokenized deposit there that is back by real verifiable assets in that context. Obviously theres complexity to that. Erin race it earlier. Where are these assets going to be held . In the case of, in the case of a today many of these assets are being held in banks which means that banks are doing banking to the stablecoins unzipping lit out and we saw what happened with circle and svb in that context. So the risk migrated from the context of the private Banking System into the stablecoins system. So one big question is how well stablecoins assets be held . Sure that the access to the master the mr. Katko is the question we decided we discussing today. What can of licensing regime would enable that potential happen so we can guarantee these assets are exactly where they are supposed to be and are exactly in the quantity theyre supposed to be at and theres verifiable and that he available to ensure thats the case. The other thing we also need to think about at least in our context is federalists, the federalism were dealing with the state versus federal. What is a balance of regulatory oath refill existed in terms of licensing the stablecoins, federal supervision. What is about us that we are going to aim for and what were seeing today is a lot of activity in the state realm with respect to stablecoins regulation. New york, wyoming and others have done a lot to try and create a framework for stablecoins issuers. Thats another big issue here. Thinking through what i do see the assets making sure their back and verified, thinking through two, how these assets are likely be held that if the kids master to stablecoins issuers, and three, 92 or supervisory structure supervisor structure here that is going to make sure were going to have a very effective regime to balance the normal Payment System regulation that we cut so far between state and federal, whats the valves were going after reached with respect to stablecoins and that that is between functionality and systemic stability that is implied to their pick. So a little bit of a different take. Little bit more scalpel i guess argument than the hammer. Brian come speaking of famers, brian, you can go after at this year. Really i will cure this with your thoughts. Not just on this sort of larger stablecoins and cbdc debate, and really get your thoughts on what optimal systems should look like. As we sort of tidbit from the conversation of how do you address Systemic Risk civet embedded in that conversation is also just how the industry itself on the private side should really make itself safer and particularly for the general public. Im going to gather your general impression of the conversation thus far to really get your perspective. How to make the system safer . First of all im still back on christine is comment which i agreed with what he heard something id never heard h is one of the risk of cbdcs is they might erode our fiscal discipline. This is the United States in 2023 after all. We havent had fiscal discipline 30 years so seems to me of all the arguments but anyway. Exactly. Whatever is left that may not be much. I have a number of thoughts about how to make all of this stuff safer and obviously they are very heterodox because ill get rejected on january 21 of 2021. My basically system is we have a fairly wellestablished system of Financial Regulation in this country that exists to manage an activity that is inherently risky. Financial services is and have a risky extension of credit implies a rate of default. Thats what were charging Interest Rates. Theres a time value of money, and Interest Rates risk, duration this, all set of risks that exist any time were involved in the credit operations. The Payment System also involves risk. Theres intraday liquidity issues and all kinds of Others Technology issues and all kinds of other things. For that reason we created this funny thing called a bank charter and the bank charter exists to bring those risks inside of a system that has a set of rules to it. Capital rules come liquidity rules come supervisory oversight and the city of the kinds of things. We do that not so that safe stuff can happen inside a banks but so the risky things that an economy needs to grow cant occur more safely. Oddly, there does seem to be a view that certain kinds of risk however must occur in the unsupervised system. So things like stablecoins, one viewpoint has it, shouldnt be in sight of Banking System that would make banks risky. This has it backwards. This is the world turned on its head. I think the whole point of our overarching financial architecture is to provide supervision, liquidity, capital and Operational Risk management, a whole set of other things to take financial intermediation which is nearly risky and make it somewhat less risky. When i was leading the occ we did a series of things designed to do just this. We said, for example, banks have the authority to custody reserve assets of stablecoin projects. We also said banks have the ability to serve as validator notes on blockage which after all of the Underlay Networks of which stablecoins trial. With the bass heavy authority to custody Crypto Assets not to stablecoins but bitcoin and of the kinds of things. We did it not because we were blind to the risk of crypto stablecoins. We did so precisely because those activities are highly risky and ought to be supervised, you would think. If there was anything that underscored the need to do that it would be the explosion of ftx. The trial is going on as a speak up in new york. The conversation i have with people who were in that industry everyday is wow, if they just been Market Structure will for crypto the same as or for equities, if they custody function had to be separated from the broker function, san could never have stalled all those people bitcoin and we wouldnt be in the situation and get some of people took the opposite lesson which is look out risky crypto is, we need to keep it away. I think we get this backwards. We know how to not perfectly but recently manage an interest in a way that doesnt blow up the system, and as new forms of payments or lending or deposit taking occur, watauga stablecoins here so those are at least deposit taking a famous, stablecoins of both of those things, a make sense to do with them the way we have dealt with other kinds of things in the past. One thing i want to say is the idea that stablecoins are some of unique because they are nonbank issued forms of money or whatever isnt all that i know in our system. There was a time when American Express didnt have a bank but the diffusion of travelers checks and assembly can expect to be how American Express travelers checks precentury banker any different from stablecoins, ill buy you lunch. Weve seen this movie before. We used to have a different view of these things and some out we have just decided because blockchain is simple is a special case. I dont think its every special case. Innovation occurs but the human needs answered by innovation of saint human needs over time. Any payments, linda, deposit taking. Those three activities are the core of the Financial System. We voice in how to regulate them. Keeping the stuff outside the system is crazy. I think that such a powerful and useful sort of meta. , which is when you have financial risk metapoint meta pt risk be regulated . And how exactly do we contain that risk . For the panel in general i think its worth taking a step back because thats in question is asked in a number of parallel sectors, often died to blockchain. Id be curious to get anyones perspective or if you have any kind of response. I will start maybe with you, christina. So in terms of how we draw the regulatory perimeter for things like stablecoins. Its pretty clear about what your view is on cbdcs but sorties are risks associated with stablecoins and of the Financial Assets that are blockchain base. Do you have a sense that these kinds of things should be brought into a bank, or is this something that should be left outside of the Banking System altogether . Yeah, well im completely with brian on this one. Mic, sorry guys. Im totally with brian on this. We should encourage this innovation in monetary instrument creation but it should be within the regulatory perimeter. Its going to be very hard to increase legitimacy surrounding things like stablecoins so that they can be sort of mainstream form of payments which they are not right now, and the sort of everyday people feel like the credential at the Consumer Protection pieces are there. Its always a mistake to say just regulate it like a bank. Of course is that going to be like a bank. The risk profile is going to be different though we do have playbooks. We know how narrow banking works. It is possible to think about bringing in Payment Services providers that are not deposit takers and having sort of the credential and over that sort of expanded competition and innovation in the payment space without having to go to retail cbdc i i want to reiterate something christina said earlier because it has the stench of truth about it on the retail cbdc front, which is if they are not come if there were such a thing and it were not irrelevant it would be an Intentional Movement of liabilities from the commercial bank sector to the central bank, which means unless youre just going to say goodbye to the commercial bank credit corridor, you have to replace that somehow. And given examples of sovereign decisionmaking on credit, take for example, our entire Education Finance industry, im not super optimistic that can possibly be done in a democracy. It would be a disaster. So there. [laughing] with respect to the question of stablecoin regulation, obvious if there should be standers and supervision with respect to assets and liquidity standards by contrast, you should never bank like Capital Requirements on a stablecoin business. If its not going to be leveraged its not obvious to me you can have like a tier one leverage ratio over the top of it would render the entire thing like affirmatively value destroying for everyone involved. I think frankly the villa came out of committee in the house goes a long way and all those directions. I echo what is been said here. We need strong rules. We need to have standards. We need to make sure no standers are appropriate to the business that is being conducted. This is not a banking business. Theres no fractional reserve banking thats happening here. So that kind of usual set of protections that we apply in the context we have detailed their income rate to do with the actual functions of stablecoins and the use cases that are being put to. Coming back to what dan said in the earlier panel, this is about who does the job best. Nonbanks, banks, this is a competition, a competitive economy. Folks should be allowed to compete on networks they bring in how they do it and be given access to infrastructure to enable them to do it as best as possible and as safely as possible, provided they are regulated. You know, in a cohesive and robust way. That seems to be something that we aspire to in three as an economy and the something we should be able to get as sophisticated regulatory marketplace is able to calibrate the regulatory requirement and tailor them to the actual functions and the tools that companies are using to do that. When you think about stablecoins and cbdcs top altima getting back to original conversation on of money, i s tell my students money is one thing that everybody understands. Whether or not you have it or you dont have the money is something everybody gets. Its the ultimate consumer facing product. When you think about like what this sort of ultimate consumer racing product should look like and where the demand comes from and who gets a say in terms of what the product looks like, christina has been alluded, has expressed some question about the degree to which consumers are getting a voice in terms of how new kinds of products are created and the folks and consumers are able to voice their interest. Raj, want to go back to you on that particular point because you picked up on that from christina. Is there a way particularly putting on your pc hat and also the regulatory hat. Is there a way to think it is up to entrepreneurs and Services Provided to speak up for consumers or are the ways in which consumers themselves can can influence how that tech is constructed and regulated . I think the former and not the latter. Like realistically as consumer businesses are not generated at the Grassroots Level and magically coalesced into skillful schedule of infrastructure that makes it real. There are no things we could do that would enable more innovation with respect to particularly kind of low balance transaction accounts. Like, people dont agree with the segments of customers because they are done or they are mean. Its because fraud cost a bunch of money. Its because Identity Theft is real. Its because Customer Service costs are pretty high. Its because the amount of transaction monitoring expense associate with mobile account is a huge fraction of the Overall Economic profit available. If we were easy those constraints we will be a lot closer to having a better and more inclusive Financial System. When you compare again some of the challenges with christina with cbdcs and stablecoins, and it can also think that with the ultimate design of the product should look like, from the regulatory standpoint what you think of some of the First Principles given the problems with cbdcs works where you start when you start to think through what the regulatory toolbox should look like for stablecoins . So things have been mentioned before in terms of standards and supervision for the assets backing the coin, i think our starting point, i think in terms of who should issue stablecoins license i agree that the bill that came out of house set out a pretty copperheads of regime, gave the fed quite a bit of sort of override authority which seems like it might be contentious on the state level could ultimately be something that works pretty well seems to parse out the differences between what a a stablecoin id what a bank is. I would agree thats a pretty good starting point for regulatory First Principles in terms of who can issue the stablecoin, with backing the coin, what are the retention rights of the holder to go to the Consumer Protection peace . And then sort of just two rounded out with the corollary to your question in the cbdc space, i do think there is productive so to counter my pessimism with the law optimism, i do think there is productive potential publicprivate innovation in the crossborder wholesale space which has suffered the misbranding almost in the way of wholesale cbdc because ultimately if what we talk about is an approved Settlement System and a way of tokenizing reserves to be sort of reserves 2. 0 that can sell faster with atomic sub averages so that risk and that seems a good project worth pursuing although i have yet to sort of see proof that that would actually speed up crossborder payments once you later in aml and cft. I think the jury still out on that. So i think wholesale cbdc has some promise, and the stablecoins bill seems to offer some good First Principles. Are you differentiating like the tokenized deposits in making that from wholesale cbdcs . So i think the idea with wholesale cbdc is that tokenized deposits could and, in fact, would be running on wholesale cbdc rails, right . So the idea that the central bank would be issuing a kind of reserve, right, because wholesale cbdc is going to just be running between Financial Institutions essentially and sort of fit into the existing 4x infrastructure that we more or less ready much have, and so the essential ideas that youre still bringing in the commercial banks into the system, you just providing a kind of settlement asset that can work on some kind of launching technology and a portly be interoperable with bridges between different jurisdiction because ultimate thats we have to figure out and there are crossborder payment space is how you make of all improbable both technologically and legally. So we only have two minutes and 22 seconds left so i will split the between both yesha and brian and brian first. So First Principles if youre going to name one or two for stablecoins and if you happen to have a father to one tokenized deposits that is the time. Or i i could you say whatei want. Or that. [laughing] if you are giving me 59 of the segment i will start by saying on the point about financial inclusivity i would argue one of the recent stablecoins have not become more widely adopted outside of crypto in this country is because our system clunky as it is works pretty well. You see mass adoption of stablecoins in other parts of the world. You really do. If you went to argentina and saw with the fintech sort and five it looks like around stablecoin u. S. Dollar savings accounts, they are going 100x. They are a gigantic visit and diapered neither can pitches from stored on the space in the last six months alone. I would begin by say however that our system is its good enough that you dont have gas demand where as you do in systems that are truly broken. I would start with that dickinson First Principles of stablecoins, if youre not a fan of stablecoins in how to solve the open thinking problem. What you can have is a big bank monopoly on the Payment System that creates this giant payment tax. It is crazy that stripe, to deny he as, 50 or 100 billion Payment Company is unable to process payments. The hefty use wells fargo to process their payments. Thats insane. If you dont like stablecoins he have to be broken faster for open banking or if you dont like oven baking just accept the inevitability of stablecoins in civil court to our qlac blockchain i would posit it that way. What he said. [laughing] okay. Well then that would mean that seriously . Okay. I think were 25 seconds. Go. In 25 seconds. Look, i want to reiterate that we living in a bubble here. We need to travel. When you does it was going on abroad. We need to see whats going on in other jurisdictions. Go to asia, cms choice is being encapsulated in the different payment choices that folks have caught to include not just realtime payments, to include stablecoins. You know, to look at payments world which a become a far, far more inclusive than we can ever imagined i was in india over the summer. Folks living on the street of using upi. Very open to new kind of payment if i missed it was a cbdc pilot underway where people paying for the gas using cbdc accounts. We are in a bubble here and we need to look outside to see whats available to us. Were helping ourselves to have a better Payment System, a Payment System frankly sucks for the country that we are, for the economy that we are aiming to get in the Financial System that we deserve to have everyone. And we need to do a hell of a lot better and break all of these d. C. Brains to get it to get that done. What she said. [laughing] sold. Thank you so much for a great panel. [applause] [inaudible conversations] we are taking a break. 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