Rep. Tom Emmer (R-MN) on MMT, CBDCs, and crypto policy for 2022 (EP.276) [TRANSCRIPT]

 

Transcript

Nicolas Carter
So I have the immense pleasure and privilege to sit down with Representative Tom Emmer from Minnesota. He is, among other things, the co chair of the blockchain caucus, certainly one of the most vocal advocates for crypto and blockchain in the house today has co sponsored a number of bills pertaining to crypto. Very excited to have you on. So thank you so much for joining us today.

Tom Emmer
Great to be with you, Nick.

Nicolas Carter
So, we have a lot to talk about. I think the first thing just by way of context is, you know, how did the blockchain space come on your radar in the first place? What got you interested in the industry initially?

Tom Emmer
So, I’m a member of the House Financial Services Committee. And when I came to Congress, Nic, Minnesota always had a representative on that committee. It’s one of the what they call A committees, one of the four A committees in the House. And it is it turned out, there was a Minnesota member on the committee, his name was Keith Ellison, and the local financial community didn’t feel that he was serving the needs of the financial community. So they wanted a different Minnesota rep to at least join him. And that’s how I got there. At that point, though, Nic, my big attraction to financial services had to do with I believe it’s the definition of our freedom, the ability to go out and secure capital to start new ideas. And there’s some fundamental factors that are involved, right, that capital will go to the place where it’s, it’s utilized best, assuming there’s no intermediary meddling, anyway, those types of things. The Federal Reserve was a interest of mine for lots of different reasons. But once I got on a committee, I had a great staffer who’s still very involved in the space Landon Cinda, Minnesota kid who introduced me to a book called The Age of Cryptocurrency, written probably 6-7-8 years ago, now the first iteration of it, I think, the authors have put out a second. It was the beginning, once I read that I was hooked for lots of different reasons, and I’m sure we can get into those as we continue.

Nicolas Carter
So had you ever dabbled in Austrian economics or anything like that?

Tom Emmer
Now you’re now you’re starting to get to where I this, this all starts from, as Lizzie knows, as well as anyone, you know. I read a book a couple years ago – and yet the answer is yes. I mean, if you want me to, I don’t want to just suck out all the time. But the answer is yes. And more importantly, studying over over time, different authors. I came across one a few years ago called the information theory of capitalism, Nic. You’re probably familiar with it theory provides a wealth of knowledge. And that economic growth is actually the result of knowledge growth. And as entrepreneurs like yourself, take risk and learn from the risk that you’re taking. Assuming you’re working in a true free market, that knowledge will advance. And not only do you do better, but us as a society, we experienced incredible advances in our quality of life. And the result is real economic growth in the expansion of wealth. Whereas politicians like to refer to it generally – prosperity. That’s, you know, if you start to look at how the free market is supposed to work. And yes, Austrian economics, by the way, not necessarily the economics on this one, but I tell people all the time, if they haven’t read it, or if it’s been years since they read it, you might want to read the Road to Serfdom by Hayek, an Austrian economist, who wrote this to his political elite buddies back during World War Two, talking about a lot of the things that you and I are experiencing right now.

Nicolas Carter
Love it, love it. Excellent recommendation. So in terms of staying up to date with the crypto and blockchain space, you know, I feel like I’m always inundated with information, but so how do you how do you stay up to date? I mean, do you listen to podcasts? Do you read the occasional book that comes out of the industry? I mean, how do you do it?

Tom Emmer
Both? All of the above Nic In fact, I was listening to you and Walsh over the Christmas break. I think I listened to two or three of your podcasts which I found incredibly interesting and full of attitude which I love. By the way. Absolutely, I loved every second of it, but the that and books, yeah. And then what I try to do Nick is I take the, the written stuff that I’ve absorbed, the, the current stuff that you and some incredible people are putting out there, you know, content, and then mesh it with life experience, because I’ve hit this great age of 60. The financial system, as my generation has known it. Frankly, it’s been mismanaged for decades. You’ve got the Federal Reserve that’s been manipulating the marketplace controlling interest rates and, you know, near zero interest rates literally, they’re fraudulent, because you’re not pricing capital. At its actual price, you’re literally borrowing from tomorrow, for today, and I once you put all this together, and I was talking to Lizzie Fallon, who’s a great staff member that we have, to your other question, I get a lot of my information from people like Lizzie to they, you know, we’ve got a great group back in Washington DC that stays on top of this, because they know this is a passion of mine. Because all of this intersects they and I’d love at some point today to talk about an idea that I have that quite frankly, the new modern monetary theorists that litter the White House, these MMT folks who believe you can print money without any consequence, as long as the government controls its own fiat currency; isn’t cryptocurrency a direct result of that kind of behavior?

And that’s ultimately what we’re looking at, because you got the Fed manipulating the cost of capital, keeping it down, I use the term fraudulence pretty strong. But it’s it’s a tool that they use to manipulate the cost of capital. So it’s not actually the real cost of capital. So then capital does not go to the places that it would normally go. And in fact, it’s kind of like health care. If you reimburse people, a higher amount for COVID related deaths, guess what you’re gonna have more of, you’re gonna have more COVID related deaths, not that I’m saying that’s happening. But the idea is, when you incentive the marketplace, the marketplace can be very selfish and self interested. And they will, they will use that incentive for their own for their own gain, rather than allowing the marketplace to do that.

I think right now you’ve got the place where these MMT folks, which are the traditional establishment, in my mind, are now literally clashing with people like yourself and the crypto community that exists and has, frankly, has taken hold because of the mismanagement of the monetary policy. And because what happens when the next crash comes, Nick, I mean, that’s really, when you do this with the interest rates, when the next crash comes, guess what the cost of capital will actually price itself appropriately, assets will return to their real value, right? But debt will remain elevated. And what does that mean to people in the crypto community who have found a different store of value? Which, you know, people like to liken to a precious metal like gold? We’ll see. But I think that’s whether people know it or not, what they’re doing is they’re protecting themselves against the the meddling of the intermediary that’s quite frankly, distorted the marketplace.

Nicolas Carter
I think your your analysis is very astute. Balaji Srinivasan, if you know him, he also says that the the most profound battle of the next decade is effectively sound money through crypto folks versus MMT-ers. And I certainly see it that way. You know, I guess the MMTers like to say, well, we’re actually not the establishment, you know, we’re this sort of, you know, outsider group. And, we’re trying to speak our own truth to power and it’s actually sort of Neoliberals and Keynesians that have power in Washington. But I, from my perspective, when I see the rampant spending occurring in Washington, where you’re talking about, you know, I think in q2 2020, government expenditure was over 50% of GDP, you know, and so you’re looking at, you’re looking at the government, which is the is not just the dominant player in the economy, it’s actually the largest accounting for more than half of finish of total output in this country. And it looks to me, like an MMT normalization, even if it’s not Bernie, you know, and Stephanie Kelton, they’re in control. It still looks to me like covert implementation of MMT in Washington?

Tom Emmer
I don’t know that I call it covert. I mean, I actually think it’s very overt. It’s out in the open. I love that people that are MMT-ers. And I’ll use the word offended, you did not. But you know, they don’t want to be viewed as the establishment. We’re not the Keynesians, we’re not the right. Well, you are, you are the next layer, if you will, you’re like a growth ring around a tree. You’re the next ring, where the Keynesians go when they’ve gone too far. So now, rather than trying to play, you know, have one leg on either side of the fence, which is very dangerous. You’re all in as an MMTer, right? You have formulas that you can do this, and we can print and spend money to, to our heart’s desire and never get in trouble. Well, that’s like I tell him, I could tell you today, Nick, that I’m going to take a snowball out in the backyard, because we get a lot of snow, although it’s too cold right now to make a snowball, but we will. Theoretically, if we can make one, I’m going to tell you today, I’m going to throw it up in the air and it’s never going to come down. It’s just not going to happen.

So they’re just making excuses in my mind, and it’s intellectual inconsistencies. If they were to sit back and take out their own ideology, their own greed, their own desires, self interest, they would have to acknowledge that that doesn’t ever end well. Right. It’s not gonna end well. And that’s that’s literally why the battle, the battle within the crypto community is they’re going to win. The question is, what is it going to look like? Look at the evolution within the crypto community, you really don’t have much before 2008. But there was I will call it leakage my term, you can correct me, Nick, there were people out there that were already dabbling with some other form of value exchange, right, some other form of, you know, crypto, pre crypto, you have the crash in 2008, the mysterious Satoshi white paper appears, this thing starts up and you’ve got the traditional financial industry, the establishment, they don’t think much of it. Because you know, they didn’t think much of it before 2008. It’s just a fringe thing.

We’ve got all the power, we control the Federal Reserve, we’ve got all of these levers, here in this country and around the world. The dollar is still the reserve currency, we’re fine, everything’s good. Then guess what. And by the way, prior to 2008, you probably know people like Ron Paul and Congress, were already talking about these problems. But you know, they’re fringe, they’re, they were marginalized, they’re not seen as the norm, all of a sudden, you’ve got these huge financial concerns trying to kill crypto. First, they take the attitude, it’s not going to take hold, then when it starts taking hold, they want to kill it. And guess what they’re doing today. Today, they’re trying to – I sent Lizzy a note said – they’re trying to lasso it like a wild horse, so they can get control of it. And then they want to absorb it into their existing environment, because that way they can control it. And this is where Central Bank, digital currency comes in. This is where all of these, these bad things come in. And it’s, it’s going to be a very interesting time, over the next two 4- 10 years, to see this disruptive force, and who ultimately is going to win, because at the end of the day, one side really is all about individual freedom. And the other side is more whether people want to acknowledge it or not. It’s more about you turning over the very essence of your identity to a central authority.

Nicolas Carter
So I want to get into the stablecoin CBDC debate. That’s one of the most fascinating ones for me. Just quickly on on the topic of the level of expenditure we’ve seen in the last two years, you know, I was disappointed by the Republicans in Congress, who, in my view, didn’t really sufficiently push back against the, you know, enormous fiscal impulse that we’ve seen, you know, since 2020. You know, regardless of whether you think is warranted or not, we’re looking at government spending at a level equivalent to effectively World War Two, despite the fact that we’re in peacetime, not fighting a total war, although some might characterize that as such, would you say the fiscal conservatism is dead at this point? Are there any sort of prospects to revive it?

Tom Emmer
No, I don’t think it’s dead. I mean, even I was a victim of this, and I wouldn’t go back and change the vote. I think if you look at my short history in Congress, I’ve never voted for increased spending, quote, unquote, except with the Cares Act. That was the big exception that I made in the spring of 2020. And I did that Nick not based on my core values. I did that because I had a government that literally was taking away private citizens revenue streams, you know, their business. They literally stepped in and said, No, you can’t run your business, which I mean, that’s the debate we should have been having. But of course, if you stand up and say that’s wrong, and we all need to get on with living, all of a sudden, you’re against science, your you know, your, your shame. They use shame for anyone who wants to challenge their, their basic premise. So I did the one. And I know there are others, like me that I do not see this ending well.

I mean, the number for me that I think we’ve already eclipsed, and if we haven’t we’re, we’re right there is $30 trillion. He just started looking at the math, which apparently doesn’t mean anything to some of these people. It’s really hard to turn that around, you’re going to have to control government spending, you’re going to have to allow the economy to realize the the full potential that’s there. And you’re going to have to make some serious policy decisions over the next two to four years. The deal with our workforce, Nick, I mean, nobody’s talking about it. Clearly, you’ve got inflation for several reasons, but not the least of which is the current administration killed American energy independence on its first day in office.

That’s number one, energy is what drives our free economy, or what’s supposed to be a free economy, but then you throw in the fact that you’ve got, you’re flooding the marketplace with these printed dollars, you have you got pent up demand, because you’ve locked people up for a year or more, I and then you’ve got you’ve got these supply chain issues that have been created, in at least the beginning a lot by our own doing with policies where we supplement unemployment insurance, we in effect, we in effect incented our workforce, to stay off of the workforce. And now you layer on top of that what is actually coming in that is an aging population, that is going to be aging out of the workforce anyway, it’s the perfect storm, Nick, and the spending has got to get under control, we’re not going to be able to do things the way we did, it doesn’t mean we’re not going to be great. It means that people like you, and people in the crypto industry can provide a huge safety net. And and I don’t mean in terms of supporting the government, but in terms of generating new economic growth and prosperity.

Nicolas Carter
So with regards to inflation, I mean, it’s interesting, because, you know, Bitcoiners have a lot in common with gold bugs – I consider them ideologically very proximate. And, of course, the last 10 years since 2008, you know, we – speaking loosely – have been calling for inflation with the rampant quantitative easing, and turns out it just didn’t emerge. Right. We we were wrong about that. And then I think what changed is that, you know, you went from this QE, which was kind of being trapped in the financial system wasn’t making into the real economy. Now you have this direct sort of fiscal monetization with the government directly spending money into the economy direct to households. And so it wasn’t surprising there was an actual inflationary impulse. You know, what’s interesting is the MMTers always maintained prior to the inflationary shock, that inflation was the constraint to MMT was the only constraint. The MMT agenda: okay, debt doesn’t matter. The absolute level of spending doesn’t matter, the amount of intervention in the economy doesn’t matter. The problem is, is if you get inflation. Now we get inflation, and yet the MMTers are unrepentant. They’re not saying, Well, you know, okay, we were wrong. We, you know, we did too much, we intervened too much. They’re saying, Oh, no, no, no, this this is actually isn’t a real inflation, you know, it’s fake inflation, it’s transitory or its supply chain driven exclusively, or it’s because of corporate greed, or, or monopoly, you know, monopolistic action. I mean, this inflation, do you see it as, a consequence of the the expenditure or or do you see do you see merit to the the points that MMTers make about it being driven maybe by monopolies or corporate greed?

Tom Emmer
No, I mean, how do you define corporate greed to them? Any profit making business is all about corporate greed. To us, it’s about if the government stays out of the equation. It’s about capital in goods actually finding their way through human activity right through human ingenuity and heart work as opposed to government as selecting, you know, where, when and who they. So no, I don’t think it’s corporate greed. But can you make arguments? Oh, yeah, all day long. You know, it’s like when I used to practice law, you hired experts. And it’s, I was, I was always amazed, you could always find an expert. On your side of the argument, there was always somebody that could give you an opinion on your side of the argument. That’s when I think you got to go back to the things that we’ve known since before we are founders created this government. I mean, you you can go back and world history and see that this doesn’t end well. So rather than get caught up in the entertainment news media of the day, in these, you know, whether they’re self interested, Nick, or their pride is just so high that they can never be wrong. I mean, in recent history, we’ve got some folks who had the same issue with their foreign policy, right? They made certain decisions based on what they understood the truth was, and then when the truth wasn’t what they thought it was, then they just said, well, they had to do it anyway. Because, you know, there are other bad actors in the world that they got to control. So no, I, I think, and I’m not going to do what most people do, most people would be doing the name calling. I think everybody has a valid argument.

But at the end of the day, we got to take the emotion out of this, we got to take out, you know, the need to be right out of this. We got to sit down and see what what made this country what it was what made this country what it was, was not the the financial system as it exists today. It was not it was literally recognizing that Nick Carter has value unto himself. And if he decides to direct that value, with some new idea, he’s going to take a risk in the marketplace. You know what, Tom Emmer, as a consumer might actually see value in that thing being created by Nick, guess what, not only does Nick suddenly have his a prosperity boat raised, but ever got something that made his life easier made his life better, it was absolutely worth every ounce of value that I gave Nick Carter for that. So I just think you got to go back to those and you got to start to recognize the government. They’re not right. I mean, it people have used government, there’s a reason why people pay so much money on K Street to influence government is because they’re trying to protect their own self interest, their own bottom line.

And we got to have more people in Congress that start to recognize that, you know, kind of like, I don’t want this crypto issue to become a partisan issue. I don’t think it should be. But I think I have some folks in government that just believe in the old banking system, the way it exists, they’re not willing to have the discussion, Nick, about, alright, we are going to look differently in 10 years, our financial system is not we’re not going to recognize it in 10 years, based on what it is right now. Does that mean that we have to have a bunch of dinosaurs that get absorbed in the tar pits of, you know, the economy, that changing economy? No, it means we can actually put light touch policies out there, if they’re thoughtful, that allow the existing rails to evolve. I mean, those who choose not to, they the history books are littered with stories of Sears Roebuck in things like that. Certain companies that just didn’t make those changes. But we need to look forward, we can’t protect the way things are, because if we do that, then we’ll never have what could be. So

Nicolas Carter
You earlier hinted at CBDC’s and stablecoins. And, you know, I think this is another one of those wedge issues where you have kind of two opposing paths. And and we were at a nexus right now in terms of which path we’re going to take, whether it’s more of a private sector impulse with stablecoins or public sector takeover with CBDCs. I’m certainly a big critic of CBDCs. I am honestly fearful of what the US would look like if we had one. And and we gave the Fed, you know, untrammeled power to surveil and, you know, everyday retail transactions. And, you know, it seems like a lot of our policymakers are taking inspiration from China on that, which is extremely troubling to me. So, you’ve been vocal on this issue. What, what are your concerns about CBDC regime in this country?

Tom Emmer
Well, I thought, We are the greatest experiment and freedom that the world has ever known. That being the case, Nick or if that is the case, why would we ever want to emulate the Communist Party of China? In this country government should never be in the business of competing with people in the private sector, and I, just to your concern, I share it. Because I just don’t see a digital dollar controlled by the Federal Reserve or the government in general, is being the answer to anything. I, depending on how it’s designed, it could actually put the United States on the same level as China when it comes to digital authoritarianism. Again, why would we ever want to compete with China, it’s just, it’s amazing to me, that we’re even talking about it, although it does show you how deep this goes into our governments so far about people not willing to give up where they’re at, in allowing this brave new world to actually fully blossom.

If they were to do it, Nick, I’ve said this from the beginning, my office has said this from the beginning, a central bank digital currency, if you were ever going to do it has to be open, permissionless and private, it has to maintain the privacy elements of cash. Now, I’m not telling you, I know how someone could do that. I’m telling you, if you were ever going to have one, it would have to have those qualities. And we should never, I mean, this one just drives me insane. We should never allow the Federal Reserve to turn itself into a retail bank that’s able to collect all sorts of information on the American people and track their transactions and transactions. You’ve got a current Treasury Secretary Janet Yellen, who wanted language in this massive bill that looks at least for now, like it’s failed to spy on American bank accounts that have cumulative transactions of $600 or more. That’s it that should send up every red flag that we have, in my mind, you got to protect privacy at all costs.

You know, Nick, there’s two types of at least as far as we know, right now, there’s two types of potential central bank digital currencies. One would be central bank accounts, right, the central bank collects individual’s Know Your Customer Information and issues cbdc directly to the individuals, and then the central bank would be able to track all transactions, which sounds a lot like China to me. The the other one would be using our existing financial system. Our banks A is the onramps, the banks could collect it like they do collect the individual customers KYC information. But the problem would be that the central bank would still be able to track the transactions on the blockchain. So I just I don’t think either of these proposals, one, to me is China. Just the definition, the other one is not much better, because it really would be no different from the digital dollar we use today when we swipe our credit or debit cards. So I’m not a fan. And I think we should be we should be screaming about this like crazy. I’ve also said we should not be sending any athlete to Beijing. And if we do send an athlete or athletes for the Olympics to Beijing, not one of them should be crazy enough to accept any digital Yuan, which, you know, this is what China wants to do is start dishing out there. Digital Iwan to athletes, it’s one of their plans. I just all of it stinks to high heaven, in my mind.

Nicolas Carter
Yeah, that’s right. They want to pilot their there’s their CBC with the Olympics. The interesting thing I find with CBDCs. If you’ve read the white papers, and I think every Central Bank, practically in the developed world has written one. They don’t talk about recapturing the qualities of cash in a digital context. So physical cash, gives you total autonomy in where you spend it. And it gives you total privacy, the cash doesn’t maintain a record of the expenditures. And you have full discretion with whom you can transact. But you never see any white paper saying we want to create that experience and poured it into the digital realm. We see stuff like oh, we need to impregnate this system with AML. And we need to incorporate KYC into it and transaction thresholds. And above the threshold of AML. I mean, it’s it’s like we’ve forgotten what it’s like to have cash and we’ve normalized surveillance. And and so CBC to me, it seems like a different thing from cash. I mean, I’d be concerned the cash is going to disappear entirely.

Tom Emmer
You should be, although it never will, because I believe human beings. When their government commits injustice human will take it upon themselves to do what they need to, to protect themselves and their families and their communities. And I think that does mean that they will transact business in different ways. I mean, when government creates a incredibly onerous tax policy, Nick, you create a market for a cash society right? Now you create a market where people literally are doing are trading other things of value that the government doesn’t track. So, you know, it’s, I’m not advocating for that. But this is something that policymakers need to keep in mind while you were talking. I mean, you think about where we’re at right now. And I look wherever people are at with vaccines and all the rest of it. I don’t care. I think vaccines are are good. I think people should consider taking them. But I also believe that’s their choice. Right, right. Think about this. This xis almost a definition of our times, you and I are talking about a potential digital authoritarianism where our government through a central bank digital currency, like China could track our every transaction. I and literally could with the the data that’s available out there could build all kinds of information on individual US citizens. Why not? When it comes to these mandates they’ve been putting for, I mean, think about what they did in in Wuhan. And you can correct me if I’m a little off on my facts. But when they knew that they had a virus outbreak, I they just locked people down by stopping their access to their cash. You couldn’t you couldn’t rent a hotel room, you couldn’t buy a bus ticket, a train ticket or plane ticket, you couldn’t get out of Wuhan. And by the way, they tell you when you could go to the grocery store to get something to replenish the refrigerator. So is that the society that we actually strive for in this country? Absolutely not. And people need to start to have these very serious discussions and don’t let the naysayers shame us and try to marginalize us by claiming that we’re just being fear mongers, because it’s actually happening.

Nicolas Carter
I mean, frankly, I see politicization of finance as a stated goal of the far left in this country. I mean, it’s not a secret, there’s a stated goal to starve the energy sector of capital, that’s an absolute clear agenda, which is, stop credit finance for hydrocarbon extraction companies. We have seen operation choke point under the Obama administration, which starved certain key industries, like gun manufacturers from their access to payment processing. So, these things, they seem like maybe exclusively Chinese ideas, but then they’re also in practice. And then, you know, you see rampant financial deplatforming, it’s not just at the social media level, it’s at the financial level, too. And so this stuff is already soft implemented in this country, which, which I think, I guess, brings us to stable coins.

So there’s $150 billion of stable coins that exist now. And certainly, they’re not all perfect, you know, some of them occasionally break their peg. But I in my mind, I see that as kind of a reaction to the politicization of finance. If you look at why stablecoins are created is because exchanges – crypto exchanges – were exiled from the bank sector. And so stablecoins were created to facilitate their relationships with their clients outside of the banks. And obviously, that raises eyebrows, but it’s also direct reaction to the highly sclerotic and exclusionary bank sector. So now the proposal is to bring stablecoins back into the bank sector and force them to get bank charters. It does that kind of strike you as ironic and what do you make of that idea?

Tom Emmer
It’s kind of funny. Our discussion this morning is kind of following a circular theme. We keep coming back to the same thing all the time. It’s no different than when crypto started. What happens? These guys, the establishment, those that want to keep things the way they are they in people like Gary Gensler, which I really don’t understand what he’s doing other than it’s just purely about power. They try to exclude crypto from the traditional marketplace, and they try to find ways to create obstacles or friction. So you can’t you can’t transact but you know what? The beauty of this whole community, Nick is, that’s how it got created in the first place. This community finds solutions finds ways to move value, no matter what the government tries to do to stop it.

That’s why I’m really bullish on the future stablecoins. You’re right, they are a reaction to bad policy. And now, when the community comes up with the solution, and to your point about they aren’t all perfect, no, they aren’t. And by the way, whether it’s cash, whether it’s crypto, whether it’s healthcare, whether it’s you name it, you’re always going to find some bad actors somewhere, right? But the idea because of one or a small group should not be immediately shot down because of there might be a bad actor that say experience. Remember, when you take risk, you get knowledge. When you build knowledge, you’re able to improve on the solutions, you’re able to improve on whatever it is you’re offering in the marketplace. A stable coins, I think, have a bright future. I would recommend that all of my colleagues in elected colleagues in their staff in Congress, if they haven’t already started to take a very close look at this area is being a potential solution. When it comes to the future of cryptocurrencies and how they’re traded and how they’re negotiated.

You know, Nick, that recently there was a quote unquote, presidential working group that issued a report. And I just have to complain a little bit right now, because the last administration was not as favorable as I would have hoped towards this community. I was hoping that this administration would, you know, bring some new life into it give us some new champions that actually understand the potential in that it’s already arrived. And it’s it, we need to help help it grow in or at least allow it to grow, because government really doesn’t help you with anything. It just gets out of the way. What do they do? It they just, they disappointed us again, this presidential working group issued a report that recommended that stablecoin issuers be treated like banks, right. Think about that Nic. We hardly have any startup banks these days anyway, because it’s so difficult and expensive to start a bank and comply with the regulation that’s out there already. So why do we not understand that this recommendation would kill innovation? From our standpoint, rather than trying to jam stablecoin issuers into the existing bank framework, I think we should be a lot more creative about any regulation or regulatory framework. And maybe, maybe we need an option similar to the OCC FinTech charter. Maybe.

Nicolas Carter
Yeah. And some people characterize stablecoins is unregulated. I mean, that’s the case for some of the offshore ones, but onshore ones are issued either under MTLs, which is maybe not that suitable, but then you also have the New York trust charter, and then you have the Nevada trust charter. And and those include certain disclosure and audit requirements. They treat issuers as fiduciaries. So you can’t invest in crazy stuff. You there’s certain liquidation provisions there that depositors have privileged in liquidation. So there are protections there. Are you would you seek to go over and above and then create some sort of federal legislation or federal model that would give stable stable coin issuers? You know, kind of certain oversight?

Tom Emmer
Yeah. So I want to be very careful with this. Because I think one of the complaints, I have people like Gary Gensler, as he makes public statements, that then, you know, people in the community have to take is this, this could be a problem, regulation by public statement is just as bad is regulation by enforcement, etc. Granted, I’m just a member of Congress. So if I say something, it’s not like, it’s gonna happen tomorrow. But I would say two things, one, to your point about regulation, remember people who are ignorant about the community, or they just have, you know, their whole financial experiences based on the traditional financial system, as we’ve come to know it, as opposed to this new community? That’s the fastest growing thing that we’ve seen in decades. The first thing they say, you know, Nick, is it’s totally unregulated. It’s the Wild Wild West, there are no regulations out there. Well, I think that’s a full argument. There are areas certainly you can always find something. But for the most part, as you just noted, they make this argument because there’s not some all encompassing federal law that it fits neatly within by instead, the community is working to make sure that they comply with existing regulatory frameworks out there at the state level, and frankly, doing it amongst themselves. With stable coins.

The one thing I would say is, maybe we could talk about some reserve standards for stablecoins. And then I know that we’ve been told that Cynthia Lummis, our friend over in the Senate is talking about. We haven’t seen the bill yet. She hasn’t provided text and she hasn’t given detail, but she’s talking about some new regulators specifically assigned to this community. I don’t know that I’d be in favor of that. But I’m also not going to say I’m opposed to it until we start talking about what it might look like. The problem we have right now is that every regulator out there thinks that they have some jurisdiction over this community and it’s just it’s wreaking havoc. It creates problems. And from my standpoint it, it drives capital offshore. And I, I think before I leave it, Nick, I’ll stop with this. I think our federal government has to work with the industry in a way that will allow stable coin issuers to innovate, while at the same time ensuring that Americans are protected. You can’t just do it on your own is what I’m saying. The elected officials, the policy makers have to work with the industry to make sure that that we’re doing the right thing. I just don’t think legislation is the most expeditious way to do that. So I think we got to think about, you know, a standard setting framework or a federal charter option, or something else, because what the feds are doing right now, I think you would agree it’s not helping anyone.

Nicolas Carter
Well, it’s been interesting to see that you had certain constructs like the special purpose depository institution in Wyoming, which a couple issuers actually did obtain that license, but then they’ve been stonewalled in terms of their Fed master accounts. And so they weren’t able to get Fed access that way. So it’s, you know, it’s interesting that, you know, stable coin issuers have been trying to, to obtain these charters, but largely unsuccessfully, so far.

Tom Emmer
It’s, it’s gonna break Nic, it has to – and by the way, another example of our federal government, I’m assuming ignoring the concept of federalism, which is what this country was built on.

Nicolas Carter
Right? Yeah, that’s part of the reason I moved to Florida actually, was I felt that the policymakers are more crypto friendly, and I wanted to encourage them. So maybe you’ll have an influx into Minnesota as well.

Tom Emmer
I hope so!

Nicolas Carter
So one thing I find interesting about stable coins is it flips the script a little bit, because crypto is often portrayed as this sort of anti American thing by certain critics, you know, oh, you’re competing with the dollar? How dare you, the dollar is, you know, our exorbitant privilege, as they say. And it allows us to do sanctions and project power and allows us to monetize our debt cheaply, sort of maybe less true today. But, you know, stablecoins, on the other hand, are almost all dollar denominated. And they’re almost all backed by treasuries. So they’re actually a big source of buying power for treasuries, where, frankly, foreign central banks are not buying treasuries anymore. Is this has this narrative or idea that actually the crypto industry is proliferating dollars to all four corners of the globe? Has that caught on at all in Congress? You know, are your colleagues aware of that?

Tom Emmer
I should never paint with a broad brush, or some of my colleagues aware of that? Yes. Is that a majority understanding? No, not at all. There’s so many things out there, Nick, as you know, I mean, I’m going to suggest that you just asked me a rhetorical question because you knew the answer. We are in the stages. Right now. The we’re kind of getting to the end of the educational phase. And I think this is this is a topic that I’m still trying to understand I listened to you and Walsh talk about it. The idea that crypto can actually generate a huge pluses in our energy sector, which, you know, this kind of stuff.

This type of information is positive about the industry, and it would actually promote the industry well beyond just a source of value exchange, right? Or a method of value exchange. It is about growth of our economy and growth of wealth, which we kind of get back to doing. We haven’t been doing that in this country for a few decades. It’s all been about growing debt. But we gotta be creating things again, and these types of ideas. We’ve got some work to do. I mean, even myself, when it comes to the energy thing, when you when you were talking about that, what maybe two weeks ago, it really caught my ear about what this could mean for different state economies, what it could mean, in different places in this country, with the job market, etc. That those are things now that we have to go to the next level with the education and then I think we’re going to be transitioning with our congressional blockchain caucus that I think you’re familiar with. We’ve been growing it. It’s now over 40 members. I think Lizzie was telling me when they do updates with staff, it’s staff from both the Senate side and the House side from all different offices. They’ve had 100 or more attend different briefings. We’re going to go from that education phase and we’re going to transition hopefully over the next few months and into the next Congress into the policy phase, which I think it’s going to be very important, again, if we’re going to have a legislative branch that directs the executive branch, again, as opposed to an imperial presidency, where they’re running it. And hopefully, it can help us help this community. I don’t like calling it in, it’s in industry, but this community grow and provide all these amazing possibilities that are out there.

Nicolas Carter
While Lord knows we have took some Ls, as they say, in 2021. from a legislative standpoint, we’ll see if we can reverse those this this year. Before we talk about your legislative agenda, when you talk to your Republican colleagues, because I know we try to not you know, characterize crypto as a partisan issue. Seems unfortunately to shake out that way all too often. So when you talk to your Republican colleagues, what are their main objections to your your crypto advocacy, what? What is it that they come back to in terms of not being fully convinced?

Tom Emmer
Well, we’ve already covered one of them. It’s the unregulated part, and these folks, will go unnamed. It’s really interesting. The more that I hear from traditional banking, folks, they’re moving in our direction, by the way, I think it is still nonpartisan, I can point to half a dozen–eight Democrats on the Financial Services Committee, that are not just playing politics with it. I think they’re literally trying to learn it on the fly. And they want to be a source of help, not traditional political garbage, where people grab an issue just to advance themselves.

I think they literally want to be part of the solution, which is really exciting to me. And I think it’s coming faster than you know, because I eat while my conversations are much deeper with Republicans, I just I’m seeing the same things. On the other side with traditional finance guys, Jim Himes from Connecticut participated in a some type of podcast that I did, Lizzy would know better what it was, I didn’t realize they were going to have a sign at the same time, Nick. It was clear that he was coming from a different place, a place where he’s, this is a really smart guy, and he’s just learning it. So he’s got some of the same concerns that some of my guys have. And I could hear it in his answers because he wasn’t willing to commit in certain places. And that just told me, that’s because he’s not ready to commit because he doesn’t know enough about it. So the two main issues that I hear on the Republican side, which I’m going to guess, are the same ones, that a representative like that might have one, it’s the regulatory issue. And two, it’s the sanctions issue. Those are the two biggest ones that I hear on a regular basis. Now, I that in the other issue that I have, personally, is convincing them that a central bank digital currency is not the answer. Right. And I and I think we’ve got a ways to go on that yet. Because, you know, the traditional banking folks don’t have as big a problem with the traditional banking system. Let’s face it, right?

Nicolas Carter
I actually think having worked inside one of these large financial institutions that was very pro crypto, I actually see a lot of alignment between Wall Street and in the crypto industry, I think they see it as a profit center, frankly, they can still earn very, very robust margins from crypto products. But I see primarily as a battle between people that have government takeover, all finance, and then people that want to have the private sector have a role. Speaking of bipartisanship, so you’ve done work with Ro Khanna, Florida’s Darren Soto, you have a bill that you are sponsoring, I believe called the securities clarity act. Is that right? Yes. So that’s one of your sort of your key agenda items for this coming year.

Tom Emmer
Yeah. Well, I’m going to continue to promote it. We actually did this in the last Congress as well. Again, I told you it’s education, in turn it into policy, right convert to policy, and that’s what this is all about. The Securities Clarity Act would create a new definition, the investment contract asset that allows the SEC and token issuers to easily distinguish a token when it’s offered as part of a securities contract, as opposed to when it isn’t, and it’s it’s such a basic change. There are some other proposals out there. The reason why I think this one is the the appropriate direction to go. And I my pride of ownership is not that great. I’m willing to adjust and modify based on what the industry is. suggests based on what my colleagues might suggest, but I look at this as we got to be more flexible, they in terms of understanding that where we’re going is going to happen very fast. And if Congress creates a rigid standard in place of what we have now, I don’t like what we have. Now. I don’t like the idea that every time it’s full employment for lawyers Nic,

Nicolas Carter
You should be celebrating!

Tom Emmer
My whole life was, God bless lawyers. I and I support them. Free societies need lawyers. It’s interesting that when tyrants take over authoritarians in history, the first people they want to get rid of the people who understand the law and justice. But that that part aside, I don’t believe in creating work for lawyers where you don’t have to have lawyers involved. And the Howey Test is literally just government punting in the courts saying, alright, here’s the Howey Test. Why don’t you you know, this was applied to an orange grove long before they decided it was going to be used in in crypto. And I just I don’t think it’s the right answer going forward, Nick, and I think it creates too much uncertainty. If every time you’re you’re going to make a business decision, part of that decision is alright, I am going to get sued by the government or I’m going to have to get into a legal dispute with the government. How long is that going to last? And how much is that going to cost? And what’s it going to do to my overall idea? I am I’m gonna bet if I’m making that decision, more often than not, I’m finding a different venue to start that project. That’s my concern.

Nicolas Carter
And we’re absolutely seeing it. We’re seeing startups go overseas, no question about it. They’re shopping around for jurisdictions, which is unfortunate, obviously, as a US based firm. So I know, we’re almost out of time here. I promised I’d let you go by 11. Just in terms of I know, you’re involved with the NRCC in terms of your outlook for the midterms, assuming things go well there. And you know, maybe we see a red wave, who knows, we’ll we’ll Congress’s ability to pass more pro crypto legislation change, when would you kind of expect from that?

Tom Emmer
I believe it will. But let’s let’s talk about the election first. You know, I try to caution my colleagues, it’s a lot like sports. If you pay attention to sports where or maybe the stock market where everybody’s gaming and try to tell you, Well, this could happen. And that could happen and on paper. Look, there’s a long time. If we got 10 months to go till the next election, there’s a lot that can happen. I I do think the momentum for Republicans is there. I mean, to win elections, Nick, you gotta have great candidates gotta have the right message, and you got to have enough money, I think Republicans will have all three. The other thing that we can’t control, the other side doesn’t appear to be listening. You know, if you look at Virginia, you look at New York, you look at other jurisdictions with the elections that were had a little bit more than a month ago.

Those elections if they tell you anything, they tell you that the Democrats that are running, are not listening to people on Main Street. They aren’t listening to them when they say we want to be involved in our child’s education. They’re not listening to them when they say you’re doing the wrong things with the economy, and you’re driving prices up at the gas pump and the grocery store everything. They’re just not listening that way. That’s why I think there will be a change in leadership. But I don’t I don’t tell anybody. I think it’s offensive. When I used to practice law, and I try a case, I think it’s offensive to tell the jury what they should do. The jury will tell you what they’re going to do. You just got to make your case to the jury. And I think we will make a case. That’s a good one. But once we win, Nick, then we got to govern. And part of governing is addressing issues like this. So do I think it’s going to change? Yes, I do.

But when it changes, and I think you’re going to see new leadership, obviously in the House Financial Services Committee, you’re gonna see some renewed new leadership on the Democrat side, because there’s a huge transition taking place. Keep in mind, the top three leaders, for the Democrats in the House, Nick, they’re all in their 80s. They’re all leaving. I you know, I don’t care what people say. And this isn’t a partisan statement. And Nancy Pelosi, Steny Hoyer, James Clyburn, their era is ending. And as they leave the building as they leave the institution, there’s a whole new group that’s going to be coming into leadership, and there’s going to be a whole new group that’s coming into the membership of both the Democrat Party in the House and the Republican Party in the House. And do I think that bodes well? Yes, I do.

I think you’re going to see some policy that’s going to come out of Congress in the next two, three years, that directly addresses some of these bigger issues. I don’t know that it means a regulator for the industry, I would prefer that it’s addressing some type of light touch framework that allows this community to grow much like the internet, you know, 20 plus years ago, 30, I guess, I’m aging faster than I think. But the the point is, yeah, I do think good things are coming neck and I just before everybody starts fighting with each other at, you know, the next family get together, about their politics, understand, we all have different politics. But at the end of the day, there’s some basic things that we all want to do. We all want to make our own decisions that best impact us, we all want to have the opportunity to chase our version of the American dream. And that really is, whatever level you want to achieve this in this community, I believe is that next generation of entrepreneurial growth that we could see in not just crypto not just the way we exchange value for value, Nick, but more important, how it’s going to impact energy, how it’s going to impact healthcare, how it’s going to impact transportation, just how it’s going to impact an already has education, if we are willing to look at the forest, instead of being focused on just a tree or to the sky is the limit on this thing.

And I do think you’re going to see that from Republicans and Democrats going forward. Because remember, the institution lags behind Main Street. We are the voices of Main Street all across the country. But the problem is, I don’t know, the Ask somebody who’s a better expert. It’s at least 10 years behind Main Street, you know, you got to have these two year elections and six year elections in these new voices start showing up and they’re more reflective of the current day. I think our founders did it, right, because you don’t want this thing changing in an instant. But it’s going through that natural course of change. And I think good things are gonna come much better here than in China as long as we don’t emulate China.

Nicolas Carter
Okay. Well, on that note, I think we’ll leave it I could definitely chat for another hour. And we didn’t even get through all the pieces your agenda, but I will link your various pieces of legislation to the extent it’s available in the show notes. Mr. Emerr this has been a real privilege. I thank you for coming on. And also, I thank you for being our advocate in Washington, because we’ve got relatively few of those, but they really matter. So thank you so much for the work that you do.

Tom Emmer
You’re kind; keep doing it and keep promoting.