2020 Traditional Banks Meet Crypto: USA Acting Comptroller of the Currency | LA Blockchain Summit

Hello Brian. Thinking music. There we go. You think we do enough of these then coronavirus? I would know that. But so here I am. The biggest thing is that it's been happening for the place where you work at, so it's extremely so I can set up the cheapest. Sociopathic, does he expect to do I would say that nothing in the last 4 months have been just as any of us expected. You know, the way I told his story is, I was asked to do this job that back around the holidays when we have three and a half percent unemployment benefits social calm and nothing but clear sailing

ahead which goes to show that you can never take the status quo for Grant. It will always always changing. Everybody's Got A Plan until they get punched in the face. So I would say, no, it's not what I expected. On the other hand, the great news is that you do in America. We have a super strong Innovation culture and risk tolerance culture in this country and even things like pandemics don't throw innovators off their game, right? So I came into the shop with a very clear vision of what the future was going to look like not that I wanted to make it. I want to make sure the government

would get in the way of the future and suddenly, we had to deal with these day today. Exigencies of, hey, we got it. Wow, innovators to do what they do. So we've tried to do both of those things with the OCC to keep the banking system safe, while also envisioning a 10-year out a 25-year a future. That's going to look a lot different and making sure we don't miss the opportunity to help construct a framework that left all that happened in the safe and sound kind of a way so crazy times. I know it's been for all of you with your viewers too, but I think we're

going to get through this. So you're off to see you previously being popcorn Banks and now you moved into the well, there's no way anybody can actually make a considerable impact on the whole industry. Do you believe that insight and Innovation that brings brings it simply is It's the future of what we are trying to build right now. And how long do you think it will take for that to your to your first point? The bath tub? You know, all that, all the change influence, I can have in this job. I think the most important insight about this country is it supposed

to be markets in consumer. That site of the future, looks like not, not government government to do to make sure the people are protected from fraud, to make sure that, you know, violence is contained. Make sure that there's a set of rules in which we can all pursue happiness. That's kind of what the decorations. Right. And so why didn't you, is that companies that are building stuff. They're the ones who created future future formed by 67 years in various fintech roles including and

my view. Is there two big things going on the government needs to wrestle? And understand better, one of them, which I've written a lot about is is the concept of unbundling with which says that once upon a time before the internet, it made a lot of sense for us to be bundled with all the pieces together. So you have your checking account at the same place where you had your mortgage at the same place where you had your credit card. Consumer Behavior has shown us that that may not be what people fully want anymore. You know, there's certain deficiencies, bunny yourself a deposit.

Don't necessarily apply to other kinds of businesses and that's why you are not operating at a banquet for Standalone basis. Flying out there was pushing in the direction of Intex, being more important than the past. And then there's the other big macro Trend, which is decentralisation. And that is the idea that that you may need Central authorities at a time when there's no good way of Connecting People peer-to-peer, but it's as the technology that allowed that you

suddenly don't need the internet to your single, you used to. So I always get the analogy of the post office where once upon a time, not that long ago. The only way you can send information from a person to another person through the organizing principle of the post office. Everybody has to live her all their letters. And that's central location would sort everything out and then send it off to the people that you were trying to connect with but then the internet came along and now we have all kinds of direct communication technologies that rely on that works. They don't rely on Central

Authority. Vast a very apt analogy to what's been going on and answer over the last several years and I am crypto in particular with the notion is that once upon a time, you know, if I didn't know you, I needed a bank to decide whether you work right at where the administer, the loan I make my make to you to decide the interest right now with network of computers that are affecting blockchain news with each other is now actually possible to do some of those kinds of things without a need for that thing. Is that it asked me one day? Look a lot like communication. It will go on a network.

The central intermediaries may not be performing the same role that they play today and I don't advocate for that, but I also don't resist. But the point is, those are probably on Star Wars level and we just need to put a framework around. That means the people don't get scammed in that future State any more than they get scammed today that message. What do you say? So framework. Stand up now because we do still see a lot of bad behavior. Simply, we saw that I may be in Sims, like, scale on the web. Web will

be able be able to get in. So I can see three five years from now. I don't either overweight or underweight the amount of bad behavior that we see in in in Tech businesses or crypto. There's absolutely money laundering, and criminal conduct other things. Go on in to do something about that, you know, clearly and aggressively. But at the same time believing that there's a future state where we can eliminate criminal activity or risk. Another way it's been at least is foolhardy. There are criminals among us as a species. There are good people and bad people and the

bad people are going to exploit whatever system is out there. So there's a lot of money laundering that goes on in the bank. You and your viewers will have just seen the headlines last week about two and a half million suspicious activity. Reports that got a leak in the in the banking system, there were two and a half million in Fairbanks criminal activity was going. So, you know, there's a little bit I think of status quo bias going the current system you know the devil we know is acceptable and any change from the current system is a risky, but the truth is there's a risk of the

current system and risk and future system and all we need to do is way the cost of benefits. As opposed to just looking only on the cost and risk Simon the letter, we don't do that very well as a society but I think that markets in the end or going to get what they want and so I come back to the idea of what we need to get rid of that. We need to pull understanding of criminal activity into Human Society will never go to zero but we need to put a framework around it while letting people have the things that they want. I've been some sort of switch off three systems so that

I can check in the traditional. Do you think those will eventually merge or one will replace the other? And if this process going to be like, so gradual and smooth, or is it going to happen? I'm going to California Berkeley then fast and and we seen that with a lot of thing. You know, there was kind of Internet 1.0. If you remember, we didn't seem all that revolutionary. I mean, I'm old enough to remember. Traveling the country is a lawyer with a, with a big heavy, laptop in my bag and an ethernet cable and the beetle 1.8 dial-up, no cable. And the best I could do was connect to a very clingy

email connection. And that's what it look like. We expect to be able to run our entire lives. We're doing this thing right now on an internet-enabled video, Text or crypto it. If those two things really are somehow, you have materially different, I don't know. And I don't want to reinforce the traditional banking model because most are basically do with banking things are just better or faster cheaper, whatever you know. So if you take the plants in the

world or whatever they sit on top of banks, they make the data a little bit more accessible to make it easier for people to shop around for loans. Easier for banks to Market Lonestar that's all great to make the banking model. Better at the reports it has a little bit of a different philosophy which is but one day we may not need Bank as we think of them today. I believe they're still need to sort of say what the model should be. Like, my job is not to protect. The company is also not to advocate for Insurgent. It's to make sure that I'm

creating a system where Marcus. Yes, if you look at the way that our Equity markets work, the New York Stock Exchange brings finans, both to General Motors and other purple line car companies and also a radically different Challenger. Is Argent weather Tesla, which is more expensive and you don't harder to find jewelry chargers for and everything will succeed because the luxuries amazing and incredible or will General Motors Global gas. But on the other hand is very easily. Accessible, who can say, the reason we allowed both to be brought before the market is because Mark is get to

decide overtime, and then need a people's choices will I'm not speaking of recent developments that came from your office. Recently Alessa make headlines are side roads around stablecoins was innocent of what do you say hooks in the federal banking system? The what's the next big step in your opinion? I would say, first of all, you might think that those letters of which there were two were modest steps, but I think they were in in some ways, really big steps because the point was to say, hey, if you'll see, see, we

advocates for crypto here but nor are we opponents? Listen to the old different kind of like in times of high volatility of inflation. People are going to be buying right in time with low volatility, people are going to be buying treasury bills. Some people will have stock certificates from the old days, or whatever and bankroll isn't to tell customers what own bankroll to intermediated, facilitate customers ownership of Alaska, whatever those things maybe over time. And so the point we made was there 40 or

50 million Americans really did she if you want but that's really messed up. And it's the national banking system is going to play its role of providing a safe haven for people to store and transact value than that has to include whatever Financial assets people are holding it. Stablecoin things a little bit different so we are we came out with the letter talking about gangs authority to hold deposits that support, you know, Fiat, tax table points is a little bit. It is that hate stablecoins, represent a new form of payment this month, right? So normally

you have Fiat dollars that are being transacted according to messages, Samsung Gear S, peanut networks, like the twit network or the automated Clearing House system has however transact natively on a blockchain, you know, could be the theory of blockchain, the alberon blockchain, what, whatever those things have different characteristics in terms of user interface and user experience. Even though the value of them is pegged to the dollar has been reserved for. There is overtime. These blockchain really may just be that might be the best analogy for what they are

and if that's the case and we need to start providing some clarity about the circumstances. They can support this project be potentially use those blockchains as alternative Payment Systems to the status quo to make sure that there's a clear exist, a message from those are questions that need to be asked. First point about the Christmas Hogan, do you believe banks are reluctant to engage with customers as things stand? And do you think this will change in the near future?

We will try perspective has been an assumption that you know, the government is generally hostile, the crypto just as a category because people's minds crypto is held up as the alternative Financial system and Alternate the riskier than that quote, as the status quo by 5:32 or earlier, I think it is. I saw some survey today saying that something like 63% of Bankers in Stockbridge, You of the underlying after the technology, I think he was going to Super clear that we're not in favor of money laundering in the, anybody in crypto

has to have good bank. Secrecy act controls to prevent crime, and you want, but that shouldn't mean that this is more dangerous than traditional banking. Personal banking also has those risk and also, I guess it's the one right there, either going to be an opportunity to develop organically. Also wanted to pick up on the second poem. You made about stablecoin payment systems being passed the feature. Do you believe that a digital dollar, the one by by the max coming from the girl, who is the competitor

to the stable. With that fact, the Dollar on Sunday with government-backed digital currency up a little bit. Like asking if you do flying cars are competitive Warriors out in the last 50 years. It somehow we never quite like that place. So he should ask me that question again in 4 5 6 years when there is a dollar You know, there isn't such a war 5 months, the curve of stablecoin market. Capitalization is really big and dumb poopy with that tells us is that is the digital. So when people talk about

something that's backed by the government versus not backed by the government, you know the point of our stablecoin letter was to say we don't want Banks involved at least not at the moment. The door was unlocked for study and Sable Point project. They're not fully Reserve dollar-for-dollar or Zero to Hero. We don't want is like that because we don't want runs out the back but These things do exist, they do transactions of heinously across watching penises on a global basis. And doing the right now, I'm eating my personal view is the role of government

isn't issue. Government is really, really good at establishing rules and a tall building products. Let's marry those two things up, our framework their Coke. And then I think we can catch up for the rest of the way Beyond. So why you saying the other countries are ahead of the US right now, in terms of Regulation or government says, there were four years away at a minimum from issuing, a test version of a u.s. nickel back digital currency. So I don't think that's a matter of opinion, you know. I'm even going further than that. The EU

put out a draft stablecoin framework talking about 2 weeks ago. We are working on that right now with our other agency partners and I think will fix that but still the EU is out in front of us. We are supposed to be the Global Financial leader or at least, we have them the last 50 years. And I want to make sure that we would satisfy me, even as other countries are looking to catch up, that are required to move faster. Show me talking about so big right now and changing things around. What do you stand on this

whole sector emerging below its actual featuring that house in sex will what are they going to great service? Already Cutting Edge area. Then I'll say that. We think it's important enough. Do we actually have the founder? One of the most important be by project come in and refuse executive committee on their project and you said it was just a few weeks ago so we certainly take it, seriously. I think that in the future if they're going to be as there are and everything, they're going to be early adopters and late adopters, my guess is, I will be a doctor of the first

level but it's a very interesting. I used to the idea is how much in all our use the word interest, but how much return on that investment and what other things you can do with that replacing version 1 Is very probable here and do. At the end of the day, I don't know when and whether they will replace our traditional, but what I do know, my core thesis is networks are more resilient and faster than Central points of failure. And so if that is the main

thing device doing, which is replacing Central authorities, and human ability with algorithms, that are inherently fair and their optimizing be deposed. I want to talk to you about the National Bank, charges for the payment companies are some issues. Do you think those solute solution is necessary given ready valuable? And so that systems are being developed even by the US government lights at now. Yeah, well, I mean, I again, on US Government debt. Now, I think it will be great if that thing comes to pass, but, but again, I just got to remind your viewers when the government

promises. You something for years, our weather sort of thing, we doubt any of you were going to remember that we said, this is the worst kind of see what happens in four years. That's a super long time Horizon. Nobody, who is a private sector product Builder with say hey, we're going to deliver you a cool new product for years, right? Cuz you can't deliver the six months. Probably, I probably waited too long. So I just any any question that begins with that, now that's her

before I start. But I'll need to chartres what we're really trying to say. With the chartres is a lot of activity that used to happen in the banking system and the customers used to have confidence that would be super vised, right? Is no longer happening in the bank to pay Missouri. Probably the best example. Once upon a time, can you go 100% of payment processing activity happened in the hamper and you might love a big bags for hate them but what you know is right? And so you could know that there was some cop on the beat some

Watchdog was paying attention was making sure that there was liquidity and capital rules so that those phrase would settle and making sure that they were customer disclosures that people understood the fee structure in this element time. Everything else. Now, that's happening on platforms that aren't supervised with the same rigor that we supervise them. And so, I can't make any guarantees to the American people about what's going on there to me. Since those activities were always regarded as banking services. It's important that there be an option that those companies select a bad

starter. And why would they want subjective state? I think the answer is two. When your state-regulated, you have to be licensed in all the states. And it turns out that state laws on all kinds of things, for the maximum interest rates that the marketplace weather weather, this specific customer disclosures or limitations on another kind of people you can transact with whatever those rules vary from state-to-state and really fun of other ways to such an extent that they're literally activities that are mandated in some states and

prohibited in other states. The National Bank Charter alleviates that it says that as long as you suggest yourself to OCC supervision, you can operate across state line without regard to state laws that we can flirt with the exercise of your bank account. So, there's a real reason that these companies would want. And the other reason why they might want this, of course, is there is a certain customer confidence and Prestige that comes with the national bank charger because it's like we've been a lot harder to get. So if we Charter a boat Signal to

the market that this company is mature enough and has a rigorous enough risk management protocols to survive our scrutiny. And they're not every company to do that and typically it takes years to build do that. Once you've done it, don't you want to send a signal to your customers that you are so I can for those reasons. What's the status of the situation? Because they putting blocks essentially by Authority, doesn't take deposit. What I would tell you is going to the judge declined to enter an injunction and so he's ever legal ruling against us and that's on

appeal, in court of appeals in New York. I expect that we will Feast on the back of the OCC in. The Supreme Court has always been and yet, every single time I say something about the way to thanks and adaptive physical always been challenged by the state's music. I'm comfortable with that case, it would be a big deal. So I would just say there are in fact other Charter types that are not legally under challenge, right now that don't involve those issues to prevent but we

have a number of things which don't require insured deposits and yet are statutorily created and there's no legal question about the reliability. So, you know, in my view this is all fine. We're open for business. If and when somebody comes and your boyfriend are we would consider it on the merits. And in the meantime, people talk to us about Trust Bank. No problem. Just ask you one, last question about the nature of the industry and the 5/8 decentralized. Stop to send a problem

for you in your car or any of that. You said regulates this isn't even approach needed. So you work with such. Stick figure this out in the same way that there are other things we need to figure out. How do we regulate artificial intelligence underwriting outgrew its artificial intelligence sex. If we're going to get the benefit of these radical new technologies will make for the more accessible that will help those people who have not been included in the old system. We got to figure it out, right then? Simply

saying it's different. So we have to drop her hand as you can probably tell. That's not my style. I'm glad it's not well. Thank you bro. And thank me. Thank you very much. Thanks so much. Always supposed to be here.