In the analog world, paper money reigned supreme, powering consumer transactions – from big ticket items to bread – as well as every conceivable industry, government and small-to-medium size business. But optimizing for the digital economy requires a distinctly different type of currency — one that is free of intermediaries, secure and capable of crossing borders instantly and on-the-go, argues the former chairman of the US Commodity Futures Trading Commission (CFTC).
In an interview with Yahoo Finance, Christopher Giancarlo, also known as ‘Crypto Dad’ for ushering in the first Bitcoin futures products during his tenure as head of the CFTC, comments on the upside of digitization, explains why it’s a logical next step for money and why modern society needs the online marketplace digital equivalent of being able to fork over paper money at the local drugstore.
Says Giancarlo,
“In the analog human world when you go to the corner drugstore to buy a package of candies, you use dollar bills, and you’ll exchange it, and you’ll pass a dollar over. The recipient will have a dollar, know they’ve got a dollar – you’re out a dollar – but there’s no intermediaries involved.
But when you shop online, you engage in retail commerce in the new digital world, which is online. You can’t use fiat currency. You can’t exchange a dollar, ten dollars, a hundred dollars. You need a credit card. You need an intermediary to vouch for your identity, for your credit worthiness, for their credit worthiness. And each of those intermediaries’ steps takes a percentage out of the transaction. They also mine your data. They also collect information.
When we talk about a digital dollar, we’re talking about, in the virtual world, to have that same immediacy of payment that we have in the analog human world.”
He adds that a digital dollar is a complete change in architecture.
“We very much believe a digital fiat would still sit alongside bank payments. There still will be a need for credit card transactions for those who desire to have the 30-days credit, who desire to have purchase price protection. So there is a lot of need for existing infrastructure providers in the system.
Banks are still terribly necessary to provide lending functions – the multiplier effect. A digital currency doesn’t provide that. We don’t view it in exclusion of other means of payment. We view it as in addition. So there will still be dollar bills. There will still be coins. There will still be credit cards. There will still be bank functions.”
Regarding the creation of a digital dollar, Giancarlo confirms that there are a lot of conversations and projects going on behind the scenes among a number of players in both the public and private sectors, including universities and the Federal Reserve.
As the space matures, a nuanced assessment of the different types of digital assets reveals that cryptocurrencies are not all the same. These programmable currencies can serve a variety of functions.
That’s a good thing, according to Giancarlo who believes that markets are always better when there’s lots of competition.
“A Libra coin based on a basket of currencies may have its own value proposition. An instrument like Bitcoin might serve – to the equivalent of a digital dollar – might be the equivalent of digital gold.”
Giancarlo would like regulators to take action and recognize that society has changed.
“I recently joined the advisory board of the Chamber of Digital Commerce, and it’s put forward a call-to-action for US regulators to recognize this digital transformation of markets, of finance, and to respond with a national policy. I think there’s a lot of value in considering that. We have 80-year-old, 90-year-old statutes – at the CFTC, the Commodities Exchange Act; the SEC, the Securities Exchange Act — go back to the 1930s. They were put forward in response to a financial crisis that took place then. And their structures, their core policies are sound – disclosure, material disclosure, registration. Those all make sense. But how do we reinterpret those in a new digital era?
This digital era, the digitization of things of value, is a fundamental change in the way we look at assets, whether they be monetary assets, financial assets, physical assets. And it’s going to change things dramatically, and our laws need to evolve with that, as they’ve done over the 90 years. Now they need to evolve again.”
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