A National Bitcoin Strategy ft. Matthew Pines - FED 88

In this episode of the Fed Watch podcast, CK and I had the privilege to chat with Matthew Pines from the Bitcoin Policy Institute. He recently wrote the fantastic and comprehensive Bitcoin essay for policymakers and the general public, Bitcoin and US National Security: An Assessment of Bitcoin as a Strategic Opportunity for the United States. Our conversation focused on a summary of the essay, digging deeper into quality vs quantity adoption, stablecoins, ways nations view CBDCs differently, and we end with talking about the Federal Reserve and their predicament right now over rate hikes with an inverted yield curve. Fed Watch is a podcast for people interested in central bank current events and how Bitcoin will integrate or replace aspects of the aging financial system. To understand how bitcoin will become global money, we must first understand what’s happening now. Report Summary We started out by discussing who was Matt’s target audience and did that affect the structure of the paper. I was curious because it is very comprehensive, covering bitcoin’s technical mechanics, recent monetary history, and then ways bitcoin could be used to the strategic advantage of the United States.  Matthew Pines responded that he anchored the structure of the paper around Biden’s recent executive order. As people are taking a closer look at these topics, and as they are writing reports themselves in response to that order, Matt wanted to give them an analytical primer and a summary of how bitcoin can address the concerns specifically of the administration about national security. Bitcoin Adoption Next, we get into some specifics from the report. He mentions that 16% of US adults own bitcoin/cryptocurrency. However, this is an overall figure and doesn’t speak to the quality of that adoption. For instance, it could be a lot of gamblers buying scam tokens on Coinbase. I wondered if he had insight on adoption by the politically powerful, i.e. business leaders, government officials, influencers, millionaires and billionaires. In essence, I asked Matt to speculate based on his unique knowledge set.  Matt has a great line, “the power of selective high-value orange pilling can’t be overstated.” He says that is kind of what we all want, but it can turn out badly. He also warns against concentrating too much on politicians. In other words, let bitcoin’s incentives do the work. Staying on the policy front for one more question, we ask if adoption is closing the window for possible devastatingly bad policy decisions. If 16% of the public own bitcoin now, how much will that be in 1 or 2 years? If 50% of people own bitcoin, and most of the politically influential class own bitcoin, does that make it nearly impossible to get bad policy? Once again, asking him to speculate on this question. Matt’s answer is very constructive. He points out that the window of policy is moving in a positive direction, citing Senator Lummis’ recent work. He makes the distinction between the legislative and executive branches and says each have a different relationship to policy. The lawmakers are obvious, but an average employee of the executive branch could perpetuate misunderstanding because