- Christopher Giancarlo advocated for blockchain technology when the industry was in its infancy.
- In an interview, he said the nature of currencies and financial institutions is rapidly changing.
- He says the dollar carries with it social values that need to be inserted into the changing system.
Crypto investors and enthusiasts may tense up at the thought of policy regulators coming for their sector. But Christopher Giancarlo, a former chairman of the Commodity Futures Trading Commission and senior counsel at Willkie Farr & Gallagher, says it would be somewhat naive to think that this wave of innovation would take place outside of a regulatory framework.
And that’s not a bad thing, he notes. Giancarlo told Insider that during his term as chairman between 2017 and 2019, he worked to make the regulatory framework hospitable for the development of blockchain technology.
In 2016, when the sector was at its infancy, he promoted the “do no harm” regulatory approach to distributed ledger technology and blockchain. He reminded policy makers that the same model was used for the internet in the 1990s, resulting in the creation of millions of jobs and a transformed economy.
And in 2017, the CFTC, under his watch, allowed bitcoin and ethereum futures trading despite public pushback. Thomas Peterffy, the chairman of Interactive Brokers, and Walt Lukken, CEO of the Futures Industry Association, were among those who wrote open letters with their concerns.
Giancarlo, who is nicknamed Crypto Dad because he advocated for digital assets relatively early, said regulators and the crypto community must accommodate one another in order to protect investors. In doing so, they could build a financial system that is more inclusive, less expensive, and less time-consuming than our existing one, he added.
The theme of regulation is one of several that Giancarlo tackles in his upcoming book, “CryptoDad: The Fight for the Future of Money,” which is written for a general audience. It sounds the alarm on the rapidly changing nature of currencies and financial institutions, a shift everyone needs to be paying attention to, he said.
“My book is written to tell people very simply, ‘hey folks, hey friends and neighbors, money is changing right before our eyes. And if we’re not careful, we may not like some of those changes,'” Giancarlo told Insider. “We need to make sure that it changes for the good and not for the worst. And if we do, it can actually provide a lot of opportunities.”
His remarks, and book, come at a time when the too-big-to-ignore crypto industry is in the crosshairs of regulators. There have sure been some wins, including the first-ever bitcoin futures exchange-traded fund that launched this week. But Congress’ pending infrastructure bill that could tighten tax requirements, and ongoing clampdowns on lending platforms, prove that the showdown is far from over.
The changing nature of money
The race to a digital currency has some excited, while others are nervous. Both reactions are correct. The digitized world can be a doorway to an inclusive monetary system with fast and easy transactions but it can also erode economic privacy. That’s why it’s important that we understand this technology and assert our values during this transition so that we reap the benefits and not the pitfalls, he added.
“It’s going to change virtually everything we know about money, and society needs to engage itself in that development because at the end of the day, money carries with it social values,” Giancarlo said.
In the case of the dollar, Giancarlo maintains that it has values associated with the rule of law, free enterprise, free capital markets, and very importantly, economic privacy. And, the innovation that digital currency and blockchain technology bring could very well be used to advance these values.
On the other hand, these ideas may be in conflict with other economies that are tied to different social values that are also using this technology to assert their interests, he noted.
“Other economies with different social values, like China, are advancing to digital money very rapidly, and they’re bringing different values to bear, values such as party control over economic activity, state control over economic activity, the lack of individual economic privacy, or at least privacy rights subsumed to government rights,” he said.
He points to China’s social-credit ranking system that’s tied to how one can spend their money. For example, a consumer can either be rewarded or punished for the wrong behavior or use of their money, he said.
In other words, the underlying technology is neutral, but how we choose to implement it and the regulatory policies that govern it will determine whether it’s a positive or negative outcome.
For those reasons, Giancarlo also took a jab closer to home, at President Joe Biden’s $3.5 trillion budget plan which includes a proposal that would allow the IRS to monitor bank balances, payments and receivables of transactions over $600. This level of surveillance, combined with a digital currency, could erode economic privacy.
“It could very well be unconstitutional,” Giancarlo said. “And hopefully a court somehow will see it that way. But in the short-term, I’m very concerned about that.”
In a recent Reuters op-ed with Jim Harper, a nonresident senior fellow at the American Enterprise Institute, Giancarlo wrote that crypto users had already been “canaries” of financial surveillance in 2020. He added that Biden’s proposal, when combined with digital currency, would be devastating to the development of the sector.
As for his advice to the crypto sector, he says be courageous, keep innovating, and be undaunted because the future of currency is digital. But don’t cut corners.