Grant McCarty, Policy Director of Bitcoin Magazine discusses the ramifications of central bank digital currencies (CBDCs) on civil liberties with David Lin, anchor for Kitco News.
Code news special coverage of Bitcoin 2022 is brought to you by coin payments. Crypto payments made in. We're back. If they quit Miami here with grant McCartney, he's a director of policy and public affairs, a Bitcoin magazine. Welcome to the show. Thanks for having your grant. Thanks for having me. Yeah.
And I told you a and I told you all, thanks for having me because you apparently, you told me that offline your company is involved with, uh, actually the parent company is involved with the organization of this entire event, right? Bitcoin, Miami, one of the largest conferences, the largest Bitcoin conference.
It's the largest Bitcoin conference in the world, the largest crypto event in history, the apparently is the largest finance event in the U S that was announced at the beginning of the conference. This is breaking all sorts of records. Um, it's been unreal. Uh, it's been, it's been a big trend upwards, right.
Have you been involved with this conference for a while? Is this your first year, or? This is my first year being involved in the, in the company. Um, and, and. Even just being in mold at a high level, uh, you know, helping coordinate and plan and support the conference team, um, who by the way, are rock stars and, uh, have worked tirelessly for months to put this together.
Uh, and it's been truly, truly an honor. And I mean that, oh yeah. I believe you listen to 'em we're here to talk about legislation. And some of the most important developments in the us, uh, because that affects a lot of people, not just the retail consumers, but also the people who use Bitcoin, the investors, um, all sorts of actors are involved.
And, um, you know, I was just talking to another guest of mine and another person, um, yesterday about how the entire space has evolved. So, so dramatically over the last couple of years, I remember first covering crypto a few years ago and everyone was. How, um, they're skeptical about the space. And now I have friends who don't even know what the theory is and they're buying up teeth.
Actually, that's a bit of a stretch. You have to have the theory of buying them, but I mean, they don't need to know what it is exactly. You know, people at a high level don't really understand what they're buying, but they're just so much hyper mounted. And from a retail level, this hype has come with more scrutiny from us.
Legislators. Tell us about how legislation in the U S has evolved over the last couple of years. Sure. I'm going to come at this from two fronts, right? Because there's a lot of, uh, federal legislation. I think that that's the one that gets the most media coverage, right? Uh, there was a lot of coverage on the infrastructure bill last year and a certain provisions that were included in the infrastructure bill.
And we can get into that in a moment, but there's also a ton of important state and local work that's being done that frankly isn't as what it won't, it's, it's not a sexy, um, you know, people don't get riled up. Uh, municipal law that said sometimes those are the most important, uh, you know, pieces of things that way the foundation for innovation in Bitcoin, uh, for companies wanting to move to a certain city or state, um, and making it easier for people to transact with Bitcoin, uh, et cetera, et cetera.
And so, um, the infrastructure bill was kind of. The political fight and Bitcoin kicked off, uh, that happened, you know, kind of midway through 2021 in the U S we kind of have these massive omnibus bills. And what happens is a lot of times there are. Um, specific pieces of legislation included in these bills, uh, that sometimes are either snuck in or people don't really care about until we're about to vote on them.
And so in the infrastructure bill, there were two provisions, very high level. They were severely, uh, and, and it did pass so right. Uh, you know, set to severely impact Bitcoin and Bitcoin users and the way we transact and the way that's regulated and what that's done is really spur the community that take regulation and policy series.
I, you know, I, I have been talking about, um, with my other guests about how the transformative space of, uh, legislation has impacted, um, all actors. I mentioned earlier, Janet Yellen, for example, No. She was giving a speech in Canada a few years ago in Montreal. And she was saying how Bitcoin and cryptos at large are a vehicle for illicit activities and can't be trusted and there needs to be more government crackdowns.
Uh, basically nothing good can come from Bitcoin. Right? Just reading this article a few days ago, she made a speech. She said a digital dollar could be come a trusted money, compare comparable to physical cash. Um, and she was talking about how Bitcoin is a crypto is transforming. So really she's changed her tune over the last couple of years.
And, you know, Janet Yellen is one of the, uh, uh, you know, she's one of the hallmarks of traditional finance come from a very traditional economics background. So if people like her can change, I guess other people can change why the change of tune, why the change of attitude is what I'm wondering. It's interesting.
Right? Uh, because seemingly you're, you're coming at this from a positive perspective, unfortunately I would get it in a slightly more negative. That's great. Yeah. Um, I think a lot of people in the group. We're initially skeptical of Bitcoin and cryptocurrency at large because they viewed it as this anonymous way to transact that only criminals and cheats and liars that might even be a direct quote from Elizabeth Warren, you know, that only, you know, criminals, cheats and liars use Bitcoin and other cryptocurrencies.
Um, what the government has come around to the last couple of years and they've seen it, uh, you know, China using the digital Yuan, uh, that you remember, right. Um, Nation states are starting to harness cryptocurrency for their own purposes. And now the U S is looking into creating our own central bank, digital currency, digital us dollar.
So the U S thinks they can take all the good of Bitcoin, but central. Under the federal reserve. So you get all the benefits of crypto and all the benefits of Bitcoin in a centralized way that the government can control. So it's not necessarily that they've all changed their tune about Bitcoin it's that they think that they found a way to get Americans on board with the aversion of crypto that they can control.
What's that version of crypto you're talking about effect coin, essentially a fed coin. It is a digital dollar, uh, you know, it's known as a CVD CA central bank digital. And all that means is, you know, uh, in many ways, by the way, I should clarify the dollar is already digital. Most dollars in circulation, right.
Are online somewhere, you know, they're there, they're not like real paper dollars that you're using. Sure. Um, but, uh, CBDC. All of it, essentially virtual or digital currency. Um, meaning the government could instantaneously, you know, at the click of a button change interest rates, uh, which they already can do.
Um, this would just expedite and accelerate that process. They can, uh, potentially, again, these are all potential implications of the CBDC. They could limit what you spend that money with. For example, think with COVID when they sent out the stimulus check, uh, if they sent a similar. Um, through a given mind, a CDC might also have this federal bank account component where, you know, you have a bank account that's tied to the federal reserve or central banks control and, um, they could send out your stimulus check and they could say, you can only use it on food, water, and Netflix, if you want to use it on Amazon.
Sorry, right. Cigarettes. No. And again, you know, these are hypotheticals, but essentially what a CBDC does is it gives the fed more tools in their tool belt. Has there been a historical precedent where the government says you can't spend your money on Netflix? You can't spend your Fiat's dollars on Netflix.
You can only go on Amazon prime. Has that ever happened? So it was kind of tongue in cheek example, biting off your neck. You know, there, there are examples. So, you know, if you look at, um, certain things like an energy, uh, energy, right? The government is in the business of saying what types of energy you can use, how much energy you can use.
Um, you know, as a business or as a consumer and things like that. Um, the government is, you know, a lot of people ask me, they go, they go grant like, uh, where they pause it. They're like, you know, the CBDC thing, right? Talk about surveillance, capitalism. The government can look at all your transactions. They can stop.
That sounds like a crock. That sounds like a conspiracy theory. Right. And that sounds like 1984. Yeah. It sounds like 1984. And, uh, it's funny because you know, they're like, that'll never happen. We live in the U S you live in a democracy. Um, the government's on our side. Right. Um, and all I would say to that is just a.
I read a few books or like, go on. No, look, you just go on like the CIA Wikipedia or the U S government like Wikipedia click on the scandals, you know, and go down the list. Uh, look at the Patriot act and look at, you know, the government spying on us without our consent. Look at ways that the government has abused their power.
Uh, you know, in the past and really not ask for permission, but, and not really even apologize later. Well, okay. So, all right, so, so yeah, don't ask for permission, not even asking for forgiveness afterward, no bigger for forgiveness. That's just the way the government role. Yeah, so, but the government. Okay. So they're going to Institute the CBDC at some.
Um, it's in the works, actually, I think Jerome Powell, Fetcher, Jerome Powell has said that he wants to make digital a digital dollar, the most competitive in the world. Yes. And so I think it's in the works, not officially being announced. Is it mandated though that we, as citizens have to use the CBDC? Can I say to the government?
No, I prefer to stick to my cash. Great question. And so this is what the government's trying to figure out right now. So I think our overall. I don't want to misquote that number. There are dozens of countries that are actively looking into a central bank, digital currency for themselves. Yeah, us is just one of many, uh, China is way ahead in that race.
Um, you know, China banned Bitcoin and part of that was because they wanted to strengthen their Yves. Remember you, right? Yes. Um, the United States has not banned Bitcoin yet, uh, in any meaningful way. Right. We can talk. Uh, you know, some certain regulations or maybe trends of where things are going, but essentially, um, the government is figuring all this out.
So Jerome Powell and, and some other, uh, people in the government who have comments on this, they're essentially saying, Hey, if we want to do this, we want to do this. Right. And it's going to take a few years. And because we don't know. To botch this rollout. We don't want people to lose trust in this from the beginning.
We don't want the tech to be bad. We don't want there to be security flaws of the biggest things the government talks about with regards to cryptocurrencies, like consumer protection and fraud and cyber crime. So if the CBD. Simply perpetuates all of that. That's a failure from the government, right. So they're trying to figure all that out.
My take on the CBDC is that it's going to be a few years before we see one, um, could be as long as five to 10 years, it could be as soon as two to three, there is a range there that said, uh, and, and again, I don't want to misquote a name, but, um, there is, uh, in the interim, right? Um, the U S government has invested over the past few years in a program that is essentially.
Uh, halfway to a CBDC. Um, and so they've already invested a lot into, into that program. We won't need to get into specifics here. Again, don't want to misquote any like names or verbiage or, um, but there are some things in the works that make it seem like there will be interim projects that way the foundation per CBDC while they get it right.
Or their version of what they think is right. Okay. I read in the, um, executive order that president Biden, we stayed, announced, um, on, on cryptos, his executive order on cryptos, uh, in his report in a summary, it stated that, uh, 14% of us households now, 40 million people so far have a one point shredded or own cryptocurrencies.
Bitcoin is being a big part of that. If the government wanted to ban Bitcoin, could they. Okay, so this is a loaded question. Yeah. Um, by the way, those numbers we've seen various estimates anywhere between 40 and 60 million Americans. And sometimes we've even seen that number 40, 60, 40 to 60 million Americans who've owned Bitcoin.
Right. So, um, fascinating. I always like to make the distinction between Bitcoin, not crypto. There are fundamental differences between Bitcoin and that actually leads into the question. Can the government ban Bitcoin. Um, there are, again, my personal opinion is that it is much less likely that the us government is going to outright ban the use or transaction of Bitcoin in United States.
They will be able to ban or regulate or mitigate certain fundamental aspects of the, uh, usage of the network in the United States. Um, and we see that a great example would be a new. So New York currently has a piece of legislation on their state house for, um, that is a moratorium on Bitcoin mining on proof of work mining.
So notice how they're not saying we're banning Bitcoin. We're just banning the fundamental consensus mechanism that makes Bitcoin Bitcoin. So you're banning that client, right. Um, so they're not explicitly saying that, right? So you can ban proof of work. You can limit proof of work. You can ban, uh, the government is interested.
The limited, how limited from the minor side or from the investment side. I mean, China's done both, let's say China, for example, they banned the miners. They then also, I think. Uh, to a certain extent, uh, custody of cryptocurrencies, uh, you would get fined. Um, so I mean, what, what mechanisms could the government use in the U S for example?
Sure. Um, keep in mind, right. I think there's still something like 20% of the hash rate is still in China, even after they banned, even after they ban mining. So keep in mind that, like, just because you ban something, you know, in, in law, um, you know, does your doesn't mean that, you know, de facto, like in, in reality, Yeah, I guess this whole conference would be illegal then.
Right? What are you doing here? So that's a great question. Are you in jail? I mean, it's just, we do this interview from the prison. Um, yeah, we'll put the cameras in there, but no, but like, uh, you know, it just, it's a, it's a formality, right? It becomes legally. Um, a framework for elicit activity. I mean, we can't formally have this conversation anymore without being criminals.
It depends, scary thought. Well, 100% and really quick, like it would, it would limit the institutional aspect, right. There would be people running their own nodes in their home. There'd be even running miners in their home. Right. That that's kind of where some people have said that because of recent legislation.
Taxation of Bitcoin that that's actually a positive step. If you're taxing Bitcoin, you're not going to ban Bitcoin. Right. That's a great point. Uh, and yeah, so in this kind of gets it, um, and these fundamental paradigms, uh, potential paradigm shifts, Bitcoin, this inflection point of Bitcoin, which essentially like, what is Bitcoin now?
What is Bitcoin going to be in 10 years? Like, what are these use cases? Is Bitcoin a speculative investment. Is it an inflation hedge? Is it a global monetary network that people can use? Right? Like what is it, what is it? You've asked a very good question. What is the answer to your own question? Is all those at once, right?
So, so ultimately I think Bitcoin has the ability to be all of those. Depending on what you want it to be in that moment. Right? As a global monetary network, you have people building the layer, two solutions like whitening to make global payments accessible everywhere, instant transactions, almost transaction, uh, you know, fee free, right?
Um, as an inflation hedge right now, you know, Bitcoin is not the uncorrelated asset to the stock market that everybody hopes it will be right. As us inflation continues to rise. We're at, I think, eight and a half percent since COVID started, which outpaces other. Um, developed countries like Canada, UK, et cetera, vastly outpaces, um, as that continues to rise, does that change?
Um, you know, you can go as a speculative asset, right? Institutions are looking into, you know, ETFs Arabic when they're trying to get a spot ETF for Bitcoin. Right. Um, that's happened in Canada, for example, why has not happened yet in the us? Uh, there are multiple opinions on this. My personal opinion is that.
Essentially the sec is looking for more. They've said it multiple times that they're really worried about consumer protection. And so a lot of people think that if there is a very regulated Bitcoin specific exchange, um, not all the thousands of cryptos that are out there are not the doge coins and Sheba, just a regulated Bitcoin specific exchange, um, that.
The government understands how it works and can have decent oversight over that. A spotty ETF could be, uh, could be approved right now. Um, the sec just doesn't feel comfortable allowing that, um, there just too many unknowns in therapy. Okay. Well, like I said, I mean, Canada's done it. So there, there is a precedent for, um, the government adopting, uh, you know, spotty, ETF.
Um, I want to close on just your overall. Outlook on not the price of Bitcoin, but how they coin would be adopted in the future. We've seen over the last 10 to 13 years, Bitcoin starting off as being well, first it was used to buy pizza, uh, that it was used as a trading vehicle. Uh, wasn't until relatively recently, I say relatively in a span of the last 13 years that Bitcoin has been adopted by institutions.
Now we've seen country adoption of Bitcoin, El Salvador. There's speculation. Honduras might be next. I haven't seen the announcement of the Bitcoin conference yet, but the speculation, another company, another country, perhaps the Caribbean or Latin America could be. It could be next. So what's next for Bitcoin?
Oh, man. I mean tune into the live stream. You're about to see some unreal announcements on this main stage. Uh, I don't even know what half of them are. Um, that's how big they're supposed to be, where they're like, we can't tell a soul. Right? Um, yeah. Country adoption, institutional adoption. There's. Billions and billions of dollars of institutional money that's tied up, um, because of regulatory uncertainty, I think as we get more regulatory certainty in the space, um, you know, older people who are more risk averse institutions who are more risk averse are gonna feel more comfortable, sinking their teeth into the space.
Right now there's a real worry that you invest really heavily into before. You can get rug pulled at any moment, it could get banned. It could get over-regulated. The price could go down 80%, right? Once there's more regulatory certainty, you're going to see a lot more companies really innovating in this space.
I hope that if the U S embraces it, um, you know, we embrace that and, and engage and benefit from that innovation. The 80% drop in price, the price volatility is a big concern for a lot of people. How has regulation going out? Yeah, well, I use the word help, but change that. I mean, how is regulation going to change volatility?
Yeah, I think volatility is, is inherent to, to the network as we kind of find this adoption equilibrium, right. We're trying to find that equilibrium between supply and demand. Uh, the entire world is figuring out what the heck this thing is. Right. I don't know if there's a way to escape all toady in the short term.
Um, that said, uh, yeah, so regulation, I don't know if that changes the volatility. Um, all it does is change the, uh, tail risks for companies so that they know that. Again, be rug pulled that they won't be out billions of dollars from an investment in Bitcoin because it's gone the next day. Right? So don't buy squeaky coin.
It's basically, please don't buy square Dean client. If you're buying that and hoping that it goes up, maybe season two, maybe it's already been it's time to buy. If I was, if I, uh, what. No, no it's already been bugged, pulled up, make it a joke. Maybe season two squeaky. Maybe I'll make the squid game coin.
And you heard it here first here. The guy behind that anonymous, please, please. This is a joke I was watching. This is a joke, please. A Bitcoin magazine, please. Don't fire me. Um, yeah. Oh my God. We're already going to jail because Kelly, all this is going to be illegal at some point. Um, just on that point, do you see BDCs concern you at all?
100%. In what way? CBD sees? I think our. An extension or, uh, of, of government powers to the point of governmental overreach. Um, I think right now the Fed's powers are limited and I think that's a good thing. I think, uh, you know, a small number of people controlling the entire country's monetary system, which by proxy effectively controls much of the world's monetary system, um, because of the power of the U S dollar.
I'm not sure. That group needs more power over that system, especially in real time. And the last thing I'll say is like, our government has not shown, uh, the ability to effectively manage, um, our monetary system in a way where everything just works out smoothly all the time. We look at what happened during COVID like what happened in the great recession 2008, 2009, um, quantitative easing a lot of these practices, raising, lowering industry.
Um, quantitative easing is a relatively new practice on people think it's like, they all know, like they all know what they're doing. A lot of this, they're almost running experiments in real time on the American people. And I'm on the gold population at the point where that's true and, and I'll, I'll finish up.
You're at the point where that's true. I am worried that giving them more tools in their tool belt is simply an opportunity to add more factors into an equation that makes it more complex and more opportunities for things to go wrong is the worst case scenario here. Once effect one it's implemented, I'm just, I'm not making speculate on conspiracy theories, but just speculate on what could go wrong.
What could go wrong is the government starts deciding, uh, it becomes arbiters of truth becomes arbiters. What is okay, and what is not okay. Um, to purchase, uh, you know, what is okay to use your money and they're already doing this right. Um, in some ways where, uh, you know, in private companies are doing this as well, excuse me, like you can't use a credit card in many places to buy like a cannabis.
Right. Um, you know, there, there are many reasons for this, right? Uh, I can go down the line, but essentially like the government can become arbiters. What you were able to spend your money on. They can, uh, you know, surveil their citizens to the point where we are losing civil liberties. And a lot of people say, well, if you have nothing to hide, you know, you got nothing to worry about.
Um, but I think it's easy to say that when you are currently on the consensus, when you're on the majority, when you agree with what the majority is, right. You're not always going to be on the majority. Right. Um, it's very easy to see a world in 10 20. Where the majority now, uh, in terms of thought and opinion is not well, you know, it's interesting because cryptos started off as being this platform of decentralization, but CBD sees our editing, but decentralized it's sort of the polar opposite.
If people wanted to escape the centralized system, that's coming, that's arguably already here. Where would you. Gold Bitcoin, what would you buy to escape government oppression? I mean, what conference are we at, man? You know my answer, right? Um, Bitcoin is freedom, money. Uh, I would encourage you if you haven't to read, read up on what Alex godson is doing.
Um, you just read his new book called check your financial privilege. I think a lot of people in the us don't fully understand why non-state money or non-governmental money is important. I think looking at what happens in other countries, look at what happens to Hong Kong, protesters who are found money is going into their bank accounts.
The government sees that. They can be imprisoned, right? Um, Ugandan, feminist rights coalition, uh, you know, um, the government shut down their bank accounts because they didn't like what they're doing. They opened Bitcoin wallets and they're able to raise money. It's like freedom, money means so much more to people in authoritarian, regimes and places with hyperinflation that said the U S just because it's democracy doesn't mean we're immune to governmental overreach.
And if you're at the point where you're only using Bitcoin, or you're only learning about it, when you finally. I worry that it will be too late. I'll give you an example. Close to home. I'm from Canada in Ottawa, the nation's Capitol, there was a trucker's protest last month. I'm not sure if you've read about it.
And, uh, they were raising money through crowdfunding and the government blocked that money from being, uh, sent to. And then people started raising money with Bitcoins and the government actually, uh, Trudeau's government actually, uh, uh, the mandated, the RCMP that the Canadian police to tell the exchanges that some of the crypto exchanges based in Canada to freeze certain accounts linked to the truckers protests.
So they're already doing that grant. It's not, uh, it's not far-fetched to presume that what you're saying could happen on a larger scale, the largest scale. And on the other side, you know, if you look at the trucker protest as sort of a right-wing movement, uh, one of my colleagues, David. Um, who's the executive director of the Bitcoin policy Institute, a Bitcoin think tank.
He posits that there's a scenario. Let's say Donald Trump gets elected again in 2020, for sure. Uh, let's say he decides that the black lives matter movement is. Terrorist organization. That's what the government is, uh, using as a, as an excuse for blocking funds, locking funds. It's a, you know, we're, we're monitoring terrorist financing activity.
Exactly. So where we've got to protect citizens from terrorism. So whether it's Antifa black lives matter, the trucker movement, the whoever, whatever, right. The point is it can happen to anyone. It's just a matter of who's in. And who has control of these incredibly powerful systems. And again, uh, it's less about, you know, these conspiracy theories and, you know, it's less about, oh, it's slippery slope.
It's the principle of, you know, we are a country founded on, on personal Liberty and personal freedoms, life, Liberty, and the pursuit of happiness. Um, and ultimately you don't have to be a libertarian to, to adopt those ideals. It's ridiculous. Uh, people, the judge went on the campaign trail, you know, when he was running for president and said like, it's crazy that freedom and Liberty has become conservative talking points, right?
Like when did we get to that point in America where Liberty and freedom are now, right wing ideologies, that should be a bipartisan. That should be an, a partisan ideology. And so that's the part to me that I think worries me because Bitcoin is freedom money. It doesn't matter. Black white, uh, Democrat, Republican, where you're from, what you look like, what you believe, it's it, you are your own bank and the network doesn't care.
Uh, and to me, it's odd that there's so much push. Against what is extensive, which now we have, we've only got a few minutes left. Tell us about your work that you're doing for a while. The big one advocacy advocacy project. Um, and, uh, you've got a surprise announcement coming up. Don't give us all the details.
Just a teaser. Yeah. Um, so yes, I will be announcing the one advocacy project on Friday on the main stage 10:50 AM be there. Um, I watched the live stream, uh, Or buy a ticket.
So shameless plug, shameless plug. Look, I don't have a financial experience of merchandise by my marriage. I got it. I got a store. I'll plug it. No, no, I, I, I'm not even on like the conference sales side, you don't want to get a commission. We're good. Anyways. Yeah. I'll be announcing to Bitcoin advocacy project on the main stage, along with some projects that we're supporting and a very, very well.
Big announcement as part of that advocacy project, we're trying to build a political movement for Bitcoiners in the United States. Um, at VTC I've been interacting with politicians, with candidates, educating them on Bitcoin, uh, trying to build a movement of Bitcoiners, build a movement, an orange wave in Washington, uh, of, of politicians who understand Bitcoin.
Um, and. You know, we're at the beginning of that flight. Um, but I really, really hope, uh, that Bitcoiners who want to get engaged politically, uh, you know, by the end of this week, see that there are ways that they can get involved and that there are people not just myself, uh, plenty of others in the space doing.
Uh, really cool work, um, that we're trying to engage the community with, um, so that we can protect not Bitcoin, Bitcoin doesn't even need protection or protect Bitcoin users in the United States grants. There's a real pleasure speaking with you. I learned a lot. Thank you for coming on the show. Thank you so much.
Thanks for having. And thank you for watching Kitco news. I'm David going to say two for more from Miami. Get code news. Special coverage of Bitcoin 2022 is brought to you by going payments. Crypto payments made easy.