Guest · 54:03
Not really paying you anything. Mhmm. And so that's a source of, quote, unquote, deposits for them that then they use, and then they create money. They make new money, and then they loan it out. And then they have that that loan book on the other side. But, you know, to... So what's happened with with digital currencies like this is I think the the sort of developers have basically built protocols that are themselves borrowing and lending markets. So the the the market to borrow and lend is a piece of software that's on the public Internet. It's a public protocol. It's it's not a company. So you're... Anyone that wants to borrow and lend from each other does that through the protocol itself that's, you know, running on a on a virtual machine and a smart contract on on one of these networks, and that's what makes them decentralized. So it's this protocol that's out there. And and then individuals, whether it's an individual or a household or a firm or whoever, can take their stablecoins or other digital assets and lend them to the protocol. And then there's people on the other side of it who will borrow it. And these protocols, the well known are like Aave and Compound. These are some of the bigger ones that are out there. You know, essentially, are are... Have created these capital markets in software on the Internet. And the the reality is... And all the risk management and and how the the the collateralization and liquidation and all the stuff that goes on for these markets, it's open and transparent because it's all open source. Everything is public and transparent, and everything that's happening in that market is real time auditable because it's on blockchain. So everyone can see the risk and what's happening. So it's it's... First of all, it's just an extraordinary innovation and breakthrough. But secondly, the borrowers of capital are paying... Are willing to pay a high interest rate, essentially. So if the borrowers of capital are willing to pay, let's just say it's 6%, $4 on these markets, and and then the the protocol itself generates income for the protocol, and then people who, you know, participate in it generate a piece of the the fee. Then there's a piece that's then passed along to the to the lender. And so that's basically it. You're... You you don't have a bank as an intermediary as as one of
Kara Swisher · 56:36
my Yeah. You just killed the bank.
Guest · 56:37
Yeah. I mean, it's like self self driving self driving banks is the concept that Self... Oh my sounds scary, actually.
Kara Swisher · 56:44
Yeah. It is. Don't use that one. I would not use that one. So let me... I have one last question. So there was a lot of friction between your sector and US regulators with, I guess, yell... F d... Federal Reserve chairman Jeremy, Jerome Powell, treasury secretary Janet Yellen, SEC chair chair Carrie Gensler, as I said, wanted to tighten regulations of stablecoins. And and and Gentler called it the Wild West in his testimony. So one thing you said is that it's critical. Let me read you a quote. You said, I think it would be great if there was a clear set of rules in the banking system in The United States around crypto asset lending. It doesn't really exist. We see it as a really important product here with a lot of growth. So can you... What would you... What is the one thing you need the government to do right now in terms of bringing this... Not calling it the Wild West, which is okay, but what to make it not that. To to make it not that, I guess.
Guest · 57:37
Yeah.
Kara Swisher · 57:38
But to their liking, I suppose.
Guest · 57:40
Yeah. I mean, the the the thing that that that I'm focused on and we are focused on is and and by the way, this is, like, very aligned with what, say, the US Treasury Department is proposing. And there was just testimony to congress last week from the undersecretary, Nelly Lang. She's gone to the senate next week. And and and there are a lot of people in congress who are now working on legislation. So we'll see if congress can do something. But they're working on legislation to say, if you are a stable... A dollar stablecoin issuer, here's what you gotta do. You have to have the following reserve requirements, liquidity requirements
Scott Galloway · 58:20
Mhmm.
Guest · 58:21
Audit requirements, any money laundering requirements, controls, etcetera. We're gonna define a charter for that. You gotta register with the US Treasury Department. You're gonna be supervised by the US Treasury Department, and in some cases, supervised by the Fed as well depending on the the full scope of your activity and define that. So that's what's needed, and that's basically what the White House has said they'd like to see, some version of that. Mhmm. And then it's like devil in the detail stuff. There's a lot of of of things that, you know, could go too far or or too little. And and so... But that's the essence. And then I think the other thing is, you know, essentially, we need some definitions of these things so that accountants, just, you know, good old fashioned accountants, know what the hell these are. And they can treat them like cash and cash equivalents so that corporations and financial institutions and and households know that they're dealing in dollars, essentially, that this is, you know, something that they can account for in the right way. Because right now, it's it's it's it's amorphous. What the heck is this? Mhmm. And so you need some definitions, and then you need this kind of US treasury supervision. And and in order... You you know, you need to do that at a national level, basically.
Kara Swisher · 59:39
Yeah. Which they have not done. Alright, Scott. Last question.
Scott Galloway · 59:41
Quickly, business model. And how do you establish any sort of sustainable advantage as a USDC or a stablecoin?
Guest · 59:48
Yeah. Yeah. Good point. Yeah. So on on the on the business model, so we sort of operate a couple of key businesses here. The first is what we call our stablecoin market infrastructure. That's a mouthful for what we do with USDC, but we we have ambitions to do other currencies beyond the dollar. But that that market infrastructure. So we operate that. We scale that. We support that. We support the whole ecosystem that builds on it, and then we monetize it through the reserves. So, you know, the reserves are basically growing. There's 52,000,000,000 in circulation, and, know, you there's an interest rate environment. So we we we monetize through those reserves. So that's one big piece. And that's quite significant if you look at what the interest rate environment is and and and where it's going and this... How fast this is growing.
Scott Galloway · 1:00:32
That's pretty to a traditional bank. You have money or custodian. You loan it out at a higher interest rate.
Guest · 1:00:37
We don't loan it out. We do not loan it out. We are full reserve.
Kara Swisher · 1:00:41
You facilitate. Got it. They facilitate the loan. Yeah.
Guest · 1:00:44
And, well, that's that's the second piece, which is basically once people are living in digital currency instead of in legacy dollars and legacy banking system, We provide a whole suite of essentially, like, accounts for businesses that want to transact in this, use it in their payment systems, integrate it into their own applications. We provide ways for people to lend it and borrow it and and the like. And so that's that's purely in the digital currency itself. It's not in the legacy banking system. So we're sort of conducting these new commercial finance activities on top of blockchains and using the digital currency itself. And and so that we have... It's what we call our transaction services and our treasury services, and it looks a little bit like a commercial bank. And and so that's a second piece, and and and that's something that we we we monetize is growing fairly quickly. In terms of your last question and, like, how do we think about competitive advantage or or doing this? You know, I, as you know, like, I come at this from the angle of, like, Internet platforms and technology platforms. And I look at this as how how do... How are we building a kind of open platform for dollars and money on the Internet? It's about developer adoption. It's about scaling the ecosystem that uses this, making it as widely accessible as possible. And it's it's a network effects business. I mean, basically, I mean, the more people who plug into the protocol, the more utility it has, the more demand there is to use it. And the more people who have the format, it's sort of like, why did m p three win? Well, because everyone put it in devices, and it worked. The more people have the format, then... And and the more people who hold that, the more utility value it has. And so it has really strong network effects. And and so I I think that's the... That is the core is it's like an Internet platform, developers, applications, integrations, distribution, and and that's how we maintain the competitive advantage that I think we have right now.
Kara Swisher · 1:02:38
Alright. Jeremy, sounds exciting. You're gonna help me find my Bitcoin someday? Oh my god. Buy some back then when you told me to. He's
Guest · 1:02:46
he's one
Kara Swisher · 1:02:47
of the two people who told me to buy. I lost it, Jeremy. I don't know where it is.
Guest · 1:02:50
Could be an No. No. You're not like that guy who's... That's in the dumpster in England. Remember?
Kara Swisher · 1:02:55
He's got 500. I I don't have 500. I think I bought 10 when... Up on your advice, and the advice is Wednesday's cazares. I don't have it, Jeremy.
Scott Galloway · 1:03:04
Mean, we could have a pretty good time in Vegas with that jungle dog.
Kara Swisher · 1:03:06
We could. We could. We could. But, again, Jeremy was one of the earliest person to tell you this, and I... And, again, I apologize for yelling about video, but it didn't work. In any case, Jeremy, thank you. Good luck. And Thanks. This is a really important issue. This is, you know, critical instead of, figuring out how how these, financial instruments are gonna work for regular people and also throughout our economy. It's very exciting. It's still a very exciting arena. Anyway, thank you, Jeremy. Really appreciate it.
Guest · 1:03:32
Thanks, Kara. Thanks, Scott.
Kara Swisher · 1:03:33
Alright, Scott. One more quick break. We'll be back for predictions.
[Ad break]
— Predictions segment begins —
Kara Swisher · 1:05:13
Okay, Scott. Predictions. Go ahead. Make a prediction, obviously. We didn't expect the Peloton guy. We'll see.
Scott Galloway · 1:05:19
First off, go Rams. Let me just say that. Not a prediction, but go Rams.
Kara Swisher · 1:05:23
Is that a football team?
Scott Galloway · 1:05:24
No. It's an off Off Broadway play that we're going to together.
Kara Swisher · 1:05:27
Oh, okay. Good to know.
Scott Galloway · 1:05:28
So anyways, my prediction is Coachella is doing something interesting. They're selling 10 tokens or NFTs or... Wait. What are they? I think they call it a token that gives you lifetime access to the music festival. So far, the highest bid is 75 But this is the beginning. That's the tip of the iceberg. You're gonna see in 2022 what I call lux coins emerge, and that is, organizations that try to monetize the scarcity value of access. And it'll be interesting things. If I were Chanel or Hermes, I would issue a 10,000 coins access to all Hermes products anytime with a stylist. And it'd be such incredible signaling and the perfect gift for every guy's fourth wife. I think they could raise billions overnight. I think Stanford or a university could issue a coin that says, okay.
Kara Swisher · 1:06:14
How do you account for that in terms of accounting of the cost, like things you owe later? I don't know.
Scott Galloway · 1:06:19
Just Oh, you might just be
Kara Swisher · 1:06:20
putting my accountant hat on.
Scott Galloway · 1:06:21
Yeah. But you... You'd get the cash up front. I mean, you might not be able to take an... You might not be able to recognize the accounting revenue, but you would raise billions of dollars overnight, get rid of stupid development departments, get rid
Kara Swisher · 1:06:32
of very
Scott Galloway · 1:06:32
rid of the admissions depart... What about... I'll give you another one. A Langone, a Cedars, or a Jackson, or a Cohen, and that is Yeah. Cradle to grave health care, no insurance. Say you're a parent, what do you leave your kids in your will? You leave them a stablecoin for their family that says cradle to grave, anyone with your last name gets gets great health care at Cedars or Langone for the rest of their life. They could raise billions. So the scarcity monetizing, they'll use technology. They'll have a technology overhang, but there's just so many things you could do to get upfront payments around scarcity value from universities to hospitals to health care to aspirational events. Burning Man could issue a coin and say that whoever owns this coin for the rest of their life gets to be in the best earth with the best art or whatever it is.
— Predictions segment ends —
Kara Swisher · 1:07:21
Alright. We'll see how many they'd sell with those. Yeah. The best yurt. Best Yurt.
Scott Galloway · 1:07:24
Whatever the heck Is it yurt? Yurt?
Kara Swisher · 1:07:26
I I have to provide the
Scott Galloway · 1:07:27
yurt. Going... I think I'm gonna go to Burning Man this year. I've never said it, but I'm
Kara Swisher · 1:07:30
gonna You know, this feels... It could be like that that island. What was the island? I can't even remember it anymore. That everybody... Fire festival. Whatever.
Scott Galloway · 1:07:37
Oh, fire. Oh my god. I love that.
Kara Swisher · 1:07:38
This feels fire festival to me. But... Okay. Sure.
Scott Galloway · 1:07:40
Jesus Christ. Don't even use the terms fire festival when our our Pivot Miami conference kicks off in seventy two hours. Don't even
Kara Swisher · 1:07:46
say We will have baloney sandwiches for you all. Speaking of which, I will see you soon, Scott.
Scott Galloway · 1:07:51
Oh, we almost had Emily Rodikowski. That that would have felt very fireish.
Kara Swisher · 1:07:56
No. No.
Scott Galloway · 1:07:56
She was, like, one of the models promoting Fyre Festival.
Kara Swisher · 1:07:59
Does she?
Scott Galloway · 1:08:00
No. No? Is that misinformation?
Kara Swisher · 1:08:03
I'm looking it up because I have to fact check you in real time. Okay. Alright. Here's the deal. You're correct.
Scott Galloway · 1:08:09
You seem so disappointed.
Kara Swisher · 1:08:10
There was a post about the Fyre Festival. Okay.
Scott Galloway · 1:08:13
Yeah. I know probably a little too much about Emily Rodikowski.
Kara Swisher · 1:08:17
I love saying that. Anyway, we'll be back on Tuesday for more from Miami. I will be with Scott in Harrison in Miami, and we'll both be wearing wearing our Miami clothes. We'll be... We'll have such a good time. The weather will be warm. Anyway, Scott, I'm looking forward to seeing you in person.
Scott Galloway · 1:08:33
Yeah. Likewise.
Kara Swisher · 1:08:34
It's gonna be fun. And please read us out.
Scott Galloway · 1:08:36
Today's show was produced by Lara Naiman, Evan Engel, and Taylor Griffin. Ernie and Jotod engineered this episode. Thanks also to Drew Burrows and Miel Silverio. Make sure you're subscribed to the show wherever you listen to podcasts. Thanks for listening to Pivot from New York Magazine and Vox Media. We'll be back next week for another breakdown of all things tech and business. That deaf, dumb, and blind kid sure plays a mean pinball.
