Well, financial technologist Steven Diehl says crypto technology does not
solve a real problem. In his piece, The Case Against Crypto,
he writes Crypto coins are simply speculative gambling products that only
create a massive set of negative externalities on the world.
This is technical regression and flirtation with ecological disaster in a
time when we cannot afford to gamble our planet's fate on pyramid schemes and dog
means. Stephen is joining us now.
And Stephen, I know you also heard Glenn Goodman of E Toro name checked you in
our previous segment. So first, I will give you the floor to
your reaction to what he said. No, I totally agree with what he says.
I mean, there's definitely a need for more skepticism about crypto.
I'm a software engineer and crypto non-believer, but I'm pretty much in the
kind of Warren Buffet and Jamie Diamond Scarlet Fu and Crypto.
And a lot of us been tried to wave our hands around for years.
The problem with crypto must know little avail with the latest collapses.
When you talk about the lack of a point or a use case for crypto.
I immediately think of what we saw happen when Russia first invaded
Ukraine. There is a censorship.
I don't know how else to call it. That's kind of a jargon and crypto way
of saying governments try and control the money flow, right.
And with fiat currency, it's relatively easy.
We found last year that they can do it to some extent with exchanges on crypto
as well. But the point a part of the point, as I
understood it 10 or 15 years ago, was that you could work around that kind of
government censorship. Isn't that at least to some people,
important, Stephen? Problem is, we dig into the details of
how that would actually work, because if you want to send money to a person, you
know, authoritarian regime, ultimately you can't use the crypto as a courtesy
to do things like, you know, buy goods or services, you have to exchange into
the local currency. And if the local currency is controlled
by a regime that's authoritarian, they're like, what, you cash out?
And we saw this with the candidate with the protests last year.
You see this in China. So ultimately, it's not a very good
hedge against authoritarianism because it doesn't work for that purpose.
I was thinking of it. You send money out of an authoritarian
regime, right? The authoritarians are the one trying to
control the use and maybe the local government is more friendly to it.
In any case, the other the other use case is as a store of value, which we've
seen happen in many emerging markets with runaway inflation in Africa and
South America. It's been extremely helpful to those who
couldn't count on their own local currencies.
How do you refute that? Crypto?
It's not a store of value. You could look at the variance of the
price. It does not store value over long
periods of time. It is a pure speculative asset
predicated upon finding more later buyers to buy up old investors that has
exactly the same economics as a Ponzi scheme.
And like look at what happened with terror looted this year.
We thought that was a store of value and then it all went to zero.
And fundamentally, all of these crypto investments have exactly the same
fundamentals. They all at the same fair market value,
which is zero. And if we look at places like El
Salvador, where they tried to use it as a currency, it works very poorly.
It just does not work for purpose of their previous currency.
And I mean, at least the arguments you make could also be made about fiat
currencies. Right.
If you're saying there's no intrinsic value you could bring currency versus
investment were two different things. The exact opposite properties in
investment should generally appreciate relative to some underlying productive
activity versus a currency should have like 2 percent inflation.
So yes, I'd estimate risk value. But it's a currency.
Crypto, an investment. Quickly, Stephen, you were one of the
signatories on a letter to congressional leadership from back in June, basically
urging them not to respond to crypto financiers and lobbyists, arguing that
they shouldn't create a regulatory safe haven for crypto.
How would you like Washington to respond, then, to what we have seen take
place over the last several months? I think the actions from Washington
should be twofold. Number one, they should enforce the
existing Securities Act, all of the crypto exchanges operating domestically,
United States. Did you comply with our securities laws?
At the moment, they're in a non-compliant state.
So what the S.E.C. needs to do is bring enforcement actions
against American companies that are selling unregulated securities.
And number two, the executive branch should bring forward exchanges that are
basically operating counterfeit U.S. dollar derivatives.
And they should probably be sanctioned. They're operating in a way that's not
compliant with our laws and not in the geopolitical interests.
United States.