FED, Mr. Van Valkenburgh, ICO discussed on Public Affairs Events
Warren. Thank you. Mr chairman. So virtual currencies are an interesting innovation that at least theoretically could provide benefits to consumers, but they also at the same time could empower scammers and criminals and the challenge here, I think is for us to try to figure out how to nurture the productive uses a virtual currencies while protecting consumers from scammers and other sorts of threats. Now, one argument I often hear is that crypto currencies are decentralized that anyone can mind new currency. Unlike our current system, which relies on a central Bank to perform that function. John Trevor beanie, I know you're a skeptic of that client, could you just say a word about why. First of all, I mean favor of digital payments systems, but we can have digital payments systems without having currencies. And as I pointed out in the US in China in India in Africa and Europe, the tons of digital payments them the do billions of transactions every day. They're used by these people at low cost. So it's not the question of being in favor of only casual digital payments. Is the fintech allows you to do that. I'm asking you that about decentralisation the claim that crypto currencies had the benefit because they are decentralized. And I said you're skeptical of that it's it's falls that minors are all centralized, and it's a problem because you want you can have fifty one percent attacks and those kinds of attacks have occurred every day on smaller cryptocurrencies, so you can still the money and gone forever that those kinds of such attacks and people say, well, if you do it on bitcon your this throwing bitcoin, but if you have an poli what doesn't do they increase the prices increase their margins prophets. If you look at the transaction cost in this space, they've gone through the roof as miners arriving Shortlands option the last that have gone up by two hundred percent because they're using that all ego power to impose higher fees. It's an oligopoly. That's why is inefficient New York University. Professor Nouri a Rubini. Should about the consequences of this this concentration that you're you see is that inherent in the crypto currency. Or is it something that government could do something about it's inaccurate? And because there are economies of scale in mining and these economies of scale, the tar improve of work become worse. Once we get to scalable systems like proof of stake where wherever is a great state to begin with can do more of the mining. So there is massive concentration already improve a work. People say that's not scalable, we're gonna move to proof of stake. The proof of stake is going to become even more concentrated I finished. Then you need massive mining factories all over China Iceland to do the scale of transaction. He cannot do it on a laptop. That's why you need to concentrate on Nellie Gopal is. Okay. So you're saying it is inherent here. You know, these new technologies create these new opportunities. But if we're not careful they can follow the. Same old patterns of they make the rich richer, and they leave everybody else behind. I wanna ask about another one. And we'll see if we can get these together because I want to ask Dr van Valkenburgh, according to reports more than one point one billion dollars of crypto currency was stolen in the first half of twenty eighteen why is crypto currency so easy to steal? And what should we be thinking about security? So those thefts were primarily with regard to newer crypto currencies who had experienced massive price increases, and we're being secured by exchanges or businesses usually overseas who didn't scale their security in line with the value. That was rising that was a speculative bubble. I would not disagree with Docker opinion on that account. I was irrational, and it was triggered by this ICO market, which is largely fraud or unregistered securities issuance which. Of course, not permitted. So bitcoin was not involved in in the majority of the amounts that you're talking about there. It was these tiller bitcoin it was other. You know, I worry that. Because a lot of small investors get into the virtual currency markets through initial coin offerings or ICO's, which allow companies to raise money by creating and selling these new virtual currencies, and you've just described two huge bubble around one of these in twenty seventeen companies raise more than six billion dollars using ICO's a record that's been broken by April of this year. So let me ask you, Mr. van Valkenburgh? A study came out earlier this year that said that eighty percent of ICO's in twenty seventeen or scams SEC chairman. Jay Clayton has suggested the right approach uncovering the scams and protecting investors is to regulate ICO's security. Offerings. And I just want to ask if you agree with that approach. I know we're over time. But if I could just permit the witness to answer, I do agree with that approach is I said, the majority of ICO's have you there've been unregistered securities issuance or scams as chairman Clayton has said, the SEC has made very careful and deliberate policy here. I think they've done an excellent job. They released a report helping people understand these things they created a website, helping them understand them in a visual physical way. And they've brought targeted enforcement actions that I think has started to chill these markets and make them more rational. That said I think you can do a token sale and comply with securities laws as you should. And we're seeing the emergence of companies doing that selling only to accredited investors or and I think this will happen in the near future even doing public registration and offering tokens to shareholders. But what are you saying at its core is that an unregulated market lets consumers at risk, and what's critical is to get the right regulations in place. Often often our current regulation securities laws work well for the last hundred years or almost and I think they'll continue to Peter van Valkenburgh with coin center. Thank you. Thank you both for being here. Senator Chris van Holland Rabin. You mentioned your support for digital payments systems innovation fintech clearly has reduced inefficiencies in the payment system. It is not yet succeeded in getting the fed though to move to a real time payment system, something I've been pushing hard for because the current system where it takes time still the clear checks has really been hurting a lot of lower income people who were living paycheck to paycheck. I was pleased to see the fed recently announced that it's going to try and accelerate this effort, you have an opinion on using innovation to get to a real time payment system is the fence moving toward I hope. Yes, I'm all in favor of it. And our technology can be used to achieve that particular result in principle. You know, the banks have access to the balance sheet of the fed, but you can have a system where every corporation individual has access to that balance sheet. You don't need to have a blockchain for that. You have it on one ledger is secured by the fed. And if you do that, however, you have consequences because right now the deposit in the banking system are essentially former money. That sent to the payment system. If you go to a central Bank digital currency, and you have everybody accessing that one then that'd be massive is intermediation of private deposits, and then the banks have to find themselves in a different way. So talk about going in that direction of opening up the balance sheet central Bank, everybody important consequences for the financial system. The point is that you can do all these things, but you don't need blockchain, or if you're not going to be a public one where a bunch of minors in China going to verify transactions our financial system that doesn't make any. I'm not disagree with you. Dr just been pushing I've been disappointed the fed is not move more quickly to implement a real time payment system. And I think the fact is a drag on a lot of consumers while I've got you here, though, I do want to ask you a question of where you see the economy going because you are one of the people who predicted the two thousand eight financial. The crash not only predicted it, but you predicted mechanics and economic and financial forces behind it. And you have written about your concern about the economy in around twenty twenty a concern, I share, and I just want to know your article of September eleventh is the next financial crisis already brewing. Question Mark, where you talk about the fact that the stimulus which was the sort of tax cuts, which added one point eight trillion dollars to our debt was ill-timed that it will create a drag on the economy in a number of years and the EUFOR for C difficult economic times ahead given that you predicted the two thousand eight financial crash. I thought I'd take the time to get your opinion on where we're headed right now. William brief. I would say these year growth is going to be because of the stimulus close to three percent is going to be less than three percent next year. My concerns about two thousand twenty one because we'll have a fiscal cliff. This is a replay of C span radio programming from Monday. Secondly, because the fed rightly overeating a Konami as to garage will increase interest rates short rates are gonna go higher long. It's gonna go higher. The dollar's going to strengthen credit spreads are gonna why. Then that tightening of financial condition is gonna throw economic growth. I worried about protection has been trade wars slowing down Kinama growth and also worried about other stagflation ary policies like Listrik thing migration, resting capital, inflows, and outflows and FDI restricting investment in the environment and not having any infrastructure plan, reducing growth and increasing inflation. We also know that asset prices are frothy. And if there's a shock to growth that could be significant correction so there was. Combination of factors may may lead to a stall of economic growth by two thousand twenty. Well, you you summarized it very well. And my question to you. If you could just take a moment talk about something, many of us have said is likely to happen. Which is when you have a an economy that was already on a rapidly rising trajectory, and you add to that huge amount of that how that creates a fiscal drag and crowds out private investment down the road and actually slows down the economy. After the overheating period is over can you just talk about that for a second. Yeah. Briefly. It's first time we have two trillion dollars fiscal stimulus in peacetime without the recession that leads to a higher longer short and long term interest rates deletes overheating forces the fed to hike more soon and faster leads to a stronger dollar, and he also leads to a larger current account and trade deficit if the savings of the government use our trade deficit two percent of GDP go towards three percent. And therefore the protection is pressure may increase over time. So it's an ill advise fiscal stimulus. Thank you. I appreciate. Senator Cortez maskco. Thank you. Thank you gentlemen for being here. I would like to go back to Senator Jones conversation with you. When it comes to. Identifying sex trafficking, drug trafficking, money laundering. And I just want some clarification Mr. van Valkenburgh does bitcoin or any similar platform have a protocol in place to detect when it's cryptocurrency is being used by individuals to facilitate sex trafficking, drug trafficking, money laundering. Is there a protocol in place? So bitcoin is a peer to peer network of persons. Running software around the world, and that software is developed itself by people around the world, it's a voluntary system if you will. So there's no corporate form to set and guarantee policies across all users. That said there are several intermediaries were building their businesses on top of bitcoin. Just as you saw several companies build their businesses on top of the shared an open internet back in the nineties and those businesses especially those that are based in regulated here in the US do have those policies for identifying and policing elicit use of the network, and they do file suspicious activity reports..