Chris Giancarlo, former chairman of the U.S. Commodity Futures Trading Commission (CFTC) and author of "CryptoDad: The Fight for the Future of Money," discusses crypto regulation and stablecoins.

A former CFTC chairman has commented on the current phase of rapid innovation and competition in the cryptocurrency sector, noting that the market is still expanding and has not yet reached a stage of consolidation. He highlighted that stablecoins, particularly those pegged to the U.S. dollar, are increasingly being used in countries with failed currencies due to their accessibility and resistance to local government controls. The chairman suggested that stablecoins could functionally replace failed currencies in various parts of the world and also provide a more efficient means of transferring money globally compared to traditional financial systems.

He also addressed concerns about the sustainability of aggressive crypto investment strategies by some companies, warning that leveraging fiat currency to buy crypto assets carries significant risks. The chairman emphasized that while currency debasement is a historical threat to economies, the use of leverage in crypto investments could be particularly dangerous, even as the demand for stablecoins and digital currencies continues to grow.

Stablecoins to replace failed currencies, says former CFTC chairman

Every new technology explosion begins with an early stage where you have many, many different forms. And then eventually at another point comes the consolidation phase. But we're not in the consolidation. We're in the Cambian explosion phase. And what's happened in the United States policy-wise is the gates have been opened up for that type of explosion of competition. And that's a good thing ultimately for technology innovation, because ultimately the competition will lead us to separate the wheat from the chaff, as you say, and we'll find out where the value is and where it's not. But before we get there, we need this explosion of competing instruments. In terms of the building sets of crypto, the Ethereums, the Solanas, these are cryptos in which you build on, there are still new versions of that coming forward that have greater speed, have greater transaction capability, and we need that competition. Ultimately, however, absolutely, do we need hundreds, if not thousands of different cryptos? No, we will find that, but we're in the expansion space right now. Chris, I've got two questions, I'm gonna ask one. Okay, I'm actually listening to in the car I'm driving at the moment, Ray Dalio, and a lot of what he's saying just makes so much sense and is worrying me again. How countries go broke is his latest tome. I don't know if you've visited it, but you know the premise. If ever there was a reason to like crypto, and I've been skeptical, I hold my hands up as well, it's because of what's going on with fiat currencies globally as well. Do you think what's going on with governments and central banks is actually going to hasten the advent of crypto as a means of exchange? Yeah, look, the threat to our way of life is not new technology. The threat to our way of life is debasement of our currencies, the dollar especially. I think one out of every four dollars has been created in the last five years. That's unsustainable. And if you look at great historians of monetary policy like Neil Ferguson, they talk about this. Great societies, reserve currencies are destroyed by debasement throughout history. And unfortunately, our modern societies are doing it again. Chris, let me ask you about how stable coins could feature in the geopolitical tensions between the U.S. and China, because we know China has big hopes for its digital yuan. At the time, they're trying to reduce dependence on the dollar, certainly in some form or another. So how could stable coins feature in the next leg of this relationship? Yeah, you know, stable coin, what we've seen so far with stable coins, just observed factually, is that in failed states with failed currencies, the ability to just upswipe a digital form of currency in the form of dollar-based stable coins to one's mobile device is very, very attractive and very hard for those local governments to control or to suppress. And dollar-based stable coins are going to functionally replace failed currencies in many parts of the world. But that's only one use. They're also gonna supply in many parts of the developed world a 24-7, 365 ability to move money around the globe. And let's face it, our existing traditional financial system has done a terrible job of providing low-cost, fast ability to move money. If I were to fly to London tomorrow and I needed to get $10,000 there, it'd be much quicker for me to stuff the cash in a suitcase than it would be to wire it to London. And that's just a failure of the existing system. And that's something that stable coins have very much in their crosshairs. So this is coming. So yes, if I've got a competing reserve currency, especially one that's non-convertible, like China, I'm concerned about this dollar replacing currencies in many of the countries they do business with. I think it will create tensions. But technology always creates tensions. And I think at least in the next short term, this is going to create a lot of demand for dollars in a lot of part of the world and maybe suppress demand for other reserve currencies. And it's part of the reason why I see Japan and Europe and others that have reserve currencies now moving forward with yen-based and Euro-based stable coins. Chris, I get it. And I'm not anti what you're saying in the slightest, but I'm worried that some people are taking out strategies that are gonna endanger them and their shareholders as well. And people who back them. And I'm thinking about Bitcoin treasury for one. Now I know it's worked brilliantly for Mr. Saylor as well, but there are hundreds of copycats on both sides of the Atlantic now as well. And basically the practice seems to be, I'm gonna borrow a load of money, I'm gonna invest it in crypto, and my shares are gonna trade at a multiple, even though I do something completely different as a company, because I have an aggressive treasury buying strategy of Bitcoin. That doesn't sound sustainable to me, Chris. Steve, look, somebody's put it very well to me. They said the whole theory of crypto treasury companies is number go up. And as long as number continue to go up, that's a very jaundiced view of it. Actually, what it's really based upon, it's based upon continuing debasement of fiat go down. And that's probably not a bad bet, but when you combine that with leverage, that's really where the danger is. When you take these treasury companies, they lever up in fiat to buy crypto in the bet that one goes up and the other one continues to go down. It's probably a better bet that debasement continues than it is a bet that the cryptocurrency number continue to go up. Nothing goes up forever. Everything that goes up eventually comes down. So I share some of your concern.

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