Date: unknown
Location: therecord.media
Last week, President-elect Donald Trump’s social media company, Trump Media & Technology Group, filed a trademark application for a service called TruthFi, which is described as a cryptocurrency payments platform that, among other things, trades in digital assets. The 2008 white paper that gave rise to Bitcoin envisioned crypto as the ultimate democratic currency, the thing that allowed you to buy things without “the man,” which makes the TruthFi announcement, at the very least, ironic. Trump has no formal role or title in Trump Media, but he does own some 53% of its stock. His eldest son, Donald Jr., is a member of Trump Media’s board. Trump and his family also started their own crypto business, World Liberty Financial. What’s odd is before his most recent run for office President Trump would be best described as a crypto skeptic. Now he appears to be all in. Bloomberg News reported that he’s considering creating a job in the White House for a cryptocurrency advisor, and he has mused about adding cryptocurrency to the nation’s reserve fund. So Recorded Future News’ Click Here podcast decided to ask DePaul University professor Lamont Black how something like that might work. Black used to be an economist at the Federal Reserve Bank in Washington, D.C. and now teaches a course on the blockchain and cryptocurrency at DePaul. This interview was edited for length and clarity. CLICK HERE: Tell us a little bit about this blockchain and cryptocurrency class you’re teaching? LAMONT BLACK: It started a few years ago, and originally it was a class for graduate students about business applications of blockchain — like supply chain management and healthcare. Now I teach crypto and blockchain to graduate and undergraduate students and just finished teaching a group of 40 senior finance majors about crypto and all the amazing things in that ecosystem. I require the students to buy some cryptocurrency at the beginning of class. There's no textbook, so I tell them it's basically their textbook fee that they're putting into crypto. And I do that so that they can get a feel for it. It's hard to really understand something if you're not involved in some ways. CH: So they have some skin in the game. They must have come back to class on the Wednesday after the election with decidedly mixed feelings. LB: We’re in downtown Chicago [a reliably Democrat voting city] and I'm hanging out with a bunch of 20 year olds. So it wasn't exactly a party after the election, but they were very excited about bitcoin prices. [Editor’s note: bitcoin went from almost $69,000 per piece on Election Day to more than $75,000 when it became clear that Trump had won.] So it definitely was a silver lining, I guess. CH: Right. A hedge against their depression. LB: Yes, exactly. I came in and one of my students — he said, “so professor, your bag's pumping,” which is a phrase in crypto for when your value and price is going up. So, it was a good day in that sense. CH: Your bag's pumping? What’s that from? LB: It's a very inside crypto term. Like a bag is just your holdings of crypto and a pump is like a price pump when the prices are going up. CH: We wanted you to explain this other thing that President-elect Trump has been talking about … the idea of creating a strategic bitcoin reserve. What does that actually mean? LB: So the idea of a government reserve is a very old idea and a very old practice. A government holding gold reserves goes back to even the early civilizations. So I think what President-elect Trump has in mind is holding bitcoin as one of those assets in the federal government reserves. Typically reserves are in other fiat currencies [that aren’t backed by gold.] A lot of other governments hold U.S. dollars as reserves. That's part of why we talk about the dollar as a global reserve currency, but the conversation around bitcoin is shifting towards this idea of bitcoin becoming a global reserve currency. So I think his idea is, you know, that becoming part of the mix of the federal asset reserves. I think it's more bitcoin as a financial asset and as that financial asset changes in value, there are governments that are looking at that as a way to store value and potentially increase in value. CH: So it's more like a savings account with a mix of currencies including bitcoin. LB: Yeah. So for instance, other governments will hold dollar reserves and they will sometimes spin those dollar reserves to support their currency or other domestic initiatives. And so it's not unheard of for governments to hold an asset for those types of purposes. CH: You used to work at the Fed and you looked at lots of different strategies like this. Do you think it's a good idea? LB: I do think it's a good idea. The devil's in the details. I think it's going to come down to what kind of amounts we are talking about. And I'm probably somewhat unique as an academic, as an economist, to say that I think it is a good idea, but I think crypto is a good idea. I'm not suggesting that the federal government start betting on bitcoin in the sense of investing it as a speculative asset, even though it will rise and fall in value. For me, I see this as the evolution of gold reserves. So if you think historically gold was viewed as a hard currency and so in this world today of floating currencies where values are continually fluctuating, where governments can print money at will, gold, because it's scarce, is viewed as a hard currency that can hold value during different periods of financial distress. And I think bitcoin could move into that category. So I don't think we're there yet, but I think this is a way to look at bitcoin as that future store of value. And whether it's a large amount or small amount, I think this is taking us one step in that direction. And I do think this is the future. And so, it's a forward thinking move for the government to consider this. CH: The state of Pennsylvania has already introduced a bill that will allow the state to invest up to 10% of its general and rainy day funds into bitcoin. By some accounts, that could be as much as $5 billion dollars. What do you think of that? LB: 10% is a large amount. CH: (laughs) LB: (laughs) CH: That's what it sounded like to me, too. LB: My guess is that they put out that number just to give themselves some flexibility. There's people who talk about 5% for crypto as an alternative asset, just like people might put 5% in the international stock market, some people put 5% of their portfolio in crypto. So it is a similar concept, even when you're looking at it from a state government perspective. So it's really a question of their long-term ability to hold and retain those assets. But again, I think this has potential. A lot of people look at the future of Bitcoin as this technology that could be transformative and Bitcoin's been around for over 15 years now, and it has that track record. So I think many people like the state of Pennsylvania are looking at this as a way to invest in the future. CH: This isn’t a completely new concept. Developing countries with less stable currencies or less stable economies have been using cryptocurrencies to shore up their reserves for years. LB: Right. El Salvador has had a strategic bitcoin reserve since 2021. And what was fascinating was when they decided to do that, there was so much skepticism about whether this was going to drive them into some type of sovereign default. And when we went through that crypto price cycle in 2022-23, and bitcoin prices fell below 20,000, a lot of people were laughing at El Salvador and their foolishness. But now that we've come back into the bitcoin bull cycle, there's certainly reason for them to have the last laugh. We'll see how things play out, but again, this is not unheard of. And for a country like El Salvador, looking at the global economy, looking at this conflict or competition among the U.S. dollar, the Japanese yen, the Chinese yuan. There's just a lot of questions about where fiat currencies are headed. And so other people are looking at bitcoin now as an alternative. CH: Cryptocurrency has always been seen as a way to sort of get around the regular banking system, right? To have a currency that is separate from the man. So, had you expected Trump to embrace crypto on the campaign trail? LB: So first of all, you're right. That's very much part of the ethos of crypto. Some people talk about it being censorship resistant. It really is created as a currency that does not rely on the government. It can exist apart from government, apart from the banking system. That's part of the big idea introduced with the Bitcoin white paper in 2008. But I would say over that time, certainly over the last five years in particular, we have seen more and more institutional involvement. So large financial institutions are starting to invest in digital assets, which is a common way of referring to crypto now. CH: So the next step is regulation? LB: There are so many things pointing in this direction. And I think government is now facing this decision: do we try to shut it down? Do we try to ignore it? Or do we try and put in some guardrails and play along? And I think we're likely to end up in that third scenario. So it's not that surprising that the Trump presidency is talking about this. I do worry like many people that it's just one more constituency that he's trying to rally. CH: So do you think the mere idea of politics and cryptocurrency mixing is giving some cryptocurrency advocates heartburn? LB: I think the irony of this current run in bitcoin prices is crypto investors are happy because you know, their bags are pumping but this idea that crypto somehow gets aligned with a certain party, and even if it was the Democratic Party I think either outcome would not be good because crypto ideally is apolitical, it is not government. For some people, it's even anti-government or anarchist. But for many of us, it is this alternative to this system that we've built of the federal government's taxation and debt ceilings and all these things. And so the idea that this now becomes part of the government, I think many of my students would be very skeptical. CH: It seems like you are lamenting that the raison d’etre for cryptocurrency is getting lost in the shuffle. So I know an asset or money can't have a soul, but it sounds like you're kind of worried that crypto loses its soul. LB: Yes. So I would agree with you that money and assets do not have a soul, but people do. And ultimately, money and assets are about people. Because crypto isn't just zeros and ones, it's a community. And to the extent that community thrives, crypto will thrive. Money is really a social phenomenon. Crypto doesn't have value. The dollar does not have intrinsic value. It is the only value that we associate with it as a community of people. And so my hope is that that community continues to thrive, which will then mean the thriving of this digital ecosystem. Some people say that crypto is democratic money because no one owns the system. Blockchain is decentralized, there's no corporation, there's no tech company out in Silicon Valley that's running it. Bitcoin is for the people. CH: And you want to preserve that idea? LB: And so I want to protect that. That's my highest incentive.
Get more insights with the
Recorded Future
Intelligence Cloud.
No previous article
No new articles