Christopher Giancarlo served as the 13th Chairman of the U.S. Commodity Futures Trading Commission (CFTC). He is also a member of the U.S. Financial Stability Oversight Council, the President's Working Group on Financial Markets, and the Executive Committee of the International Organization of Securities Commissions. Giancarlo is also the author of the book "CryptoDad-The Fight for the Future of Money", which tells his views on the world's first regulated Bitcoin derivatives market and the upcoming digital network transformation of financial services. Forbes recently interviewed Christopher Giancarlo. In this interview, we discussed the current regulatory landscape of cryptocurrencies, the prospects for new cryptocurrency legislation, whether the United States is lagging behind the rest of the world, and how the Trump-Biden presidency will affect the cryptocurrency industry in the next four years. Forbes: How do you evaluate the current state of the cryptocurrency industry? Giancarlo: A lot has happened recently. This change is happening not just with startups and innovators, but also with traditional companies, such as Fnaility in the UK, which tokenizes central bank deposits, and China's digital yuan, which already has 260 million wallet users. The Atlantic Council estimates that 138 countries are studying central bank digital currencies, accounting for 98% of the world's GDP. The development of privately issued stablecoins, especially dollar-based stablecoins, is accelerating, and if anything comes out of this Congress, it will likely be stablecoin legislation. I recently had dinner with Senator Tim Scott, and he was optimistic about the passage of stablecoin legislation. So, I believe stablecoins will continue to grow. I just joined the board of Paxos, which is an infrastructure provider for stablecoin development. I'm very excited about this change. In the cryptocurrency space, despite fraud like Sam Bankman-Fried and what seems to be some kind of coordinated crackdown by the Biden administration, Bitcoin continues to grow in vitality and usage. So decentralized tokens and value systems continue to grow. The current suppressive stance of the United States is an exception, and that's an exception in global development. I think it's an anomaly in the historical American approach to innovation because it seems to be limited not just to one party, but to a small part of the Democratic Party.And it's not sustainable. I think if the November election threatens this faction of the Democratic Party, you'll see the policies of the last few years that have been hostile to crypto innovation being completely abandoned. Forbes: People think that if Sherrod Brown, the chairman of the Senate Banking Committee, is replaced by Tim Scott, that will pave the way for more crypto-friendly legislation, what would that look like? Giancarlo: I think Tim Scott is very enthusiastic about the potential of this innovation. He was kind enough to show me my book, CryptoDad, and I was flattered by the fact that he had marked up and underlined many of the pages in the book. But it also tells me that he has taken the time to read my book to understand crypto. So I think he can be a real leader in this space. Forbes: Have you ever talked to Trump about crypto? Giancarlo: Earlier this month, I gave a speech at the Washington Blockchain Summit, and I said that Trump could rightfully be named the first crypto president of the United States. That's not because of anything he has said or done in the last two weeks, but because of what happened in the first year of his presidency. That was the launch of Bitcoin futures by the Commodity Futures Trading Commission. Why do I say that? I laid this out very carefully in my speech, but I will say this: by approving Bitcoin futures, we ensured that the world's first digital commodity would be denominated in U.S. dollars. This is important because the U.S. dollar has many advantages, but one of its main advantages is that most of the world's industrial natural commodities, oil, gold, iron, and soybeans, corn, and wheat are denominated in dollars. So the world needs to hold dollars to buy these critical mineral, agricultural, and natural commodities. Commodities are not priced in the spot market, but in the futures market; the price of oil is not determined at the gas station. It is determined in trading venues such as the Chicago Board of Trade. By approving Bitcoin futures, we ensured that the price of the world's first digital commodity, Bitcoin, would be denominated in U.S. dollars. Did the Trump administration say, "CFTC, go do this?" No, but did they stop us?No. Are they as resistant to developing a healthy, thriving, well-regulated market as our current administration is? No, as I explained in CryptoDad, we were very careful to make sure that Secretary Mnuchin was aware of everything we did, "Listen, the policy of this administration is not to create a healthy market, it's not to have strict scrutiny regulations or principles." If things go badly during the president's term, they get blamed, which may be unfair to some extent, but they also get credit when things go well. I'm not saying that the White House has made a position, but I'm saying that I think they can make a case based on this step. So, are there other possible missteps? I'll leave that topic for others to debate, but I think the development of Bitcoin futures, by the way, if we hadn't done Bitcoin futures at the CFTC, there would be no Bitcoin ETF now. I don't think Trump is particularly concerned about cryptocurrencies. I think he has his own problems, and he has carefully laid them out. He has to deal with immigration, oil, energy use and other issues. So I don't think he bet on cryptocurrencies in his campaign, but I think 20 years from now history will recognize that Bitcoin futures were indeed an important step. Forbes: The total market cap of stablecoins right now is about $150 billion. Tether accounts for 80% of that, and then there's USDC and all the other stablecoins. Paxos was a big player before BUSD was shut down. I know they provide the backend for PayPal and their own stablecoin. How much room is there for more private stablecoins? Do you think USDT is currently dominating and cannot be shaken? Giancarlo: There is a very large demand for the US dollar around the world. In fact, from South America to Africa to Southeast Asia, the demand for the US dollar is still very strong. I've said before that unfortunately, in many countries, the national currency is not even worth the paper. The US dollar is still a very important hard currency. The problem with the US dollar is that it is difficult to obtain US dollars in many parts of the world. Therefore, I think the global demand for a digital version of the US dollar will be huge because of its practicality and efficiency.I think the passage of stablecoin legislation in the U.S. will allow well-run, compliant stablecoin operators to meet global demand. Once you have well-regulated U.S. players, the opportunity to take market share from Tether is going to be very large. So I'm excited about that. I think Circle has done a lot of things, PayPal has a huge distribution network. So I think there's an opportunity for U.S. companies that are licensed now, hopefully under legislation passed by Congress, to meet global demand. That's ultimately good for the U.S. Forbes: What do you think is the balance between yield-generating stablecoins and non-yielding stablecoins? I know the current legislation is about non-yielding stablecoins, but at some point, I think token holders will get tired of handing their money over to Tether and making these people billionaires. Giancarlo: I agree. Similarly, around the world, if you're in a country like Argentina, where inflation is at historic highs, the demand for dollar-backed yield instruments is going to be very large. I don't think domestic demand is the driver, it's overseas demand. The dollar is an export. Forbes: Do you think stablecoin legislation will be passed and become law this year? Giancarlo: It’s an election year, and we’re really three, four, or five weeks away. Once we get to July 4, nothing is going to happen in terms of legislation, or historically, nothing is going to happen in an election year after July 4. Unless there’s a crisis or a market crash like we saw in 2008. So, I’m not bullish, but I believe that in the long run, stablecoin legislation will pass. I think there’s bipartisan support for it. I think the biggest driver is creating more demand for U.S. Treasuries. Sadly, one of the main drivers is that we’re a country that lives on credit cards, and we need more people to buy our debt, and that’s what stablecoins will provide. Forbes: Even though there’s a good chance that President Biden will veto SAB 121, the first piece of legislation specifically targeting cryptocurrency has passed both houses of Congress. What are your overall thoughts on that? What does that say about the legislative climate for cryptocurrency right now? Giancarlo: I think it shows that Elizabeth Warren is a shrinking iceberg.When Senate Majority Leader Chuck Schumer signed the condemnation of 121, it was a very good statement. Now, Machiavelli might say he could have signed it because he knew the White House would veto it, but I think it was a very good condemnation and you have to think the banks were on board with this as well. While some parts of the banking system may resist digital asset innovation, forcing them to hold 100% of their holdings effectively means that the banks can’t participate in this innovation. So the White House might veto this, but I think that would leave them out in the dust. It’s also a generational thing. This anti-crypto view often comes from octogenarians and the next generation doesn’t need to embrace this innovation. One of my favorite authors is Doug Adams, who wrote the Hitchhiker’s Guide to the Galaxy series of books. Adams has a quote, and I’m going to paraphrase it here, “Anything invented before you’re 35 is cool and worth a lot of your time and effort and maybe even your life’s career. But anything invented after 35 is a dangerous suspect and needs to be suppressed.” I think there’s a lot of generational hostility to cryptocurrencies for people who grew up in the traditional banking system who can’t understand cryptocurrencies and think they’re dangerous. Forbes: What are your thoughts on the 21st Century FIT Act? When you spoke to us three years ago, you mentioned that the CFTC historically did not regulate retail markets. It appears that the CFTC has a responsibility in this bill. How will this play out? Giancarlo: My thoughts on this are evolving as well. One of the things that I thought about when I was at the CFTC a few years ago, and I still think now, that makes the CFTC both unique and very capable, is that it primarily regulates wholesale markets rather than retail markets. The reason it is primarily a wholesale regulator is that it regulates futures markets, which for the most part have professional traders. The CFTC does not regulate spot markets, which have a large number of retail traders. This bill would give the CFTC market regulatory authority to regulate the cryptocurrency spot market, not just the derivatives market.Therefore, the CFTC will be involved to some extent in regulating retail markets. My thoughts on this have changed, in part because the CFTC already has certain areas of retail regulation and it has proven itself to be able to handle them well. Second, at the end of the day, we as a country need to regulate the retail cryptocurrency market, and someone has to do the job. The CFTC launched Bitcoin futures back in 2017, proving it is a very capable cryptocurrency regulator. I mean, the market today is deep, liquid, transparent and well regulated. I'd go so far as to say that the only part of Sam Bankman-Fried's empire that didn't collapse was the part that was under CFTC regulation. I think the CFTC has succeeded in that; I think it's up to the job now. Congress will have to provide it with the resources to do the job. With the proper resources, I think the CFTC can do a good job doing this. I have great respect for the SEC, but they have been unwilling to set regulatory standards for cryptocurrency regulation. They said the rules that apply to stocks also apply to cryptocurrencies. That's like saying the same rules apply to rail and air transport. They are both vehicles, but they are very different technologies. The SEC has different rules for municipal bonds, debt, and stocks, and there’s no reason why it can’t have a tailor-made set of rules for cryptocurrencies. But the SEC has been reluctant to enact those rules. Forbes: The Chicago Mercantile Exchange (CME) is evaluating offering spot trading for Bitcoin and Ethereum. What impact do you think such a highly regulated market would have on spot and derivatives markets? Did you discuss this issue when you were leading the CFTC? Giancarlo: I don’t want to share the conversation at the time, other than to say that CME is a very serious participant. Not only are they a business training platform, they are also a self-regulating organization. They take compliance very seriously. They have demonstrated the ability to successfully establish a Bitcoin futures market. I think among those players who can enter the spot market and build a very confident and successful spot market, they will definitely be included.We have several very strong market operators in the U.S., like Nasdaq, Intercontinental Exchange, the New York Stock Exchange, and others like CBOE. But I think CME is a very good candidate. Forbes: An interesting counterargument is that its competitor, the Chicago Board Options Exchange (CBOE), recently closed its spot market. What does this mean for CME's prospects? Giancarlo: I would say that building a new market is a bit like catching lightning in a bottle, which is very difficult. The fact is that for every 10 new products that are launched, maybe only one or two will last and gain traction. Exchanges are constantly launching new products, and they are a bit like venture capital funds. For every 10 products, they hope that one or two will stick. Sometimes it's about catching the right timing and setting the parameters of the product correctly. When they launch, you hear about them, and then many of them quietly shut down three or four months later. They never gain any traction. I haven't seen the CBOE product or talked to anyone about it. So I don't know why it didn't gain traction. Forbes: I wanted to ask you about Bluprynt because disclosure is important and there's a perception that the SEC is trying to force teams to file disclosure and registration documents that are incompatible with cryptocurrency. Do you have anything to add to that? Giancarlo: That's going to be interesting. I want to stay within the scope of what Professor Chris Brummer said and not go beyond that. As an investor, I shouldn't talk about Bluprynt. Forbes: Just in general. Giancarlo: The need for disclosure is going to be part of the future of digital assets, and it's not just happening in the United States. We have our own unique approach to disclosure, and other countries like Europe have now implemented MiCA (Market in Crypto Assets Legislation) that requires disclosure. I don't think the United States will lead in the way that we would in a similar world. We've missed the opportunity to lead in setting global standards for crypto disclosure because we've been reluctant to set the rules for how cryptocurrencies can be traded publicly.I think it will most likely be Europe, which now has laws in place and has the opportunity to set global standards. I think the opportunity for Bluprynt is not limited to the United States. Forbes: In addition to Bitcoin and Bitcoin DeFi, one of the big themes this year has been Memecoins. What do you think of them? Giancarlo: I’m not a critic, and some people think Memecoin investors are stupid and that these tokens are a waste of time and energy. I do think they fit the spirit of the times we’re in right now. By that spirit, I mean the reckless printing of money in the United States, which has made it impossible for many young people to own a home. Add to that the massive promotion of gambling, not just by commercial actors like the NFL, but also by states and governments through lotteries, with a disclaimer. Beyond that, you can bet as much as you want. And yet, somehow, we should criticize young people for speculating in Meme stocks, as if this kind of gambling is irresponsible, but betting on football games or betting on state lotteries is a responsible gamble? I think Meme stocks and Memecoins are a product of our times. Forbes: Do you have any conclusions? Giancarlo: I think the dam in the United States against this innovation of cryptocurrency is about to break. Whatever happens in November, it will break. Once the levee breaks or the gate is ajar, it will open wide. I believe this because I have traveled around the world from London to Tokyo, Dubai, Singapore, and Paris. The world is saying, "Let's plant our crypto seed now and try to make it grow." All the very smart, savvy regulators in these countries think that the United States will turn around in the next 24 months and people will flock to Brooklyn, Silicon Valley, and Austin, Texas. They want to make sure there is some kind of staying power in their jurisdictions. I think they are right. They have seen the United States do this before. Winston Churchill once said that the United States will always do the right thing after trying all the alternatives. I think we have been trying alternatives. These measures are not sustainable, and the United States will come back. We will lose some opportunities, and I mentioned one of them is to develop global disclosure standards.But I think that eventually the United States will come back, and it will come back stronger.
