The X-Factor — Week 2: Who Is Responsible When the System Changes? | Halloween Edition

[00:00:04] [SPEAKER_01] Welcome back to the X-Factor with the Crypto Hipster. My name is Jamil Hasan, the host of the Crypto Hipster Podcast. Thank you for joining me today. Today's week two of the revamped, revised, rejuvenated X-Factor with the Crypto Hipster.

[00:00:25] [SPEAKER_01] Now last week, we began examining the cryptocurrency industry through four principles. Trust, Protection, Consensus, and Stewardship. This week, those principles, they take us into some fascinating territory.

[00:00:48] [SPEAKER_01] We have a hardware wallet manufacturer continuing or confronting a failure in its own authentication system. I can't even say that word sometimes, authentication system. That's how complex it is.

[00:01:10] [SPEAKER_01] Governments attempting to define the boundaries of stable coins. A crypto community questioning how much money its institutions should control. Regulators debating whether autonomous artificial intelligence can participate in financial markets autonomously. Recordings and questions about political transparency.

[00:01:39] [SPEAKER_01] Recordings and institutional leadership. At first glance, these stories appear unrelated, but I believe they're connected by this question. Who is responsible when the system changes? So technology has always moved faster than the institutions built to govern it.

[00:02:10] [SPEAKER_01] It's not harder to move. It's harder actually to move any slower than some traditional banking institution, right? So crypto makes that tension really, really visible because it changes and it challenges assumptions about ownership, authority, accountability, trust.

[00:02:41] [SPEAKER_01] But technological innovation does not eliminate our responsibilities, right? It changes where the responsibility resides, how it is exercised and what happens when it fails. Sure. But this week and Halloween is coming up this Saturday.

[00:03:03] [SPEAKER_01] So we're going to look at 10 developments, not simply to understand the horrors and the other opportunities that happen, but to consider what they reveal about the systems that we are building and the institutions that we are becoming.

[00:03:29] [SPEAKER_01] We'll begin with trust and we'll move on to protection and then we'll go to consensus and then we'll go to stewardship. We'll conclude with stewardship. Because the real test of a financial system, you know, it's not simply whether it functions, whether it works, right? And everything goes according to plan. We want it to go according to plan. Of course they do.

[00:03:59] [SPEAKER_01] It's whether the principles can survive. The principles, when things don't go according to plan. Part one is trust. And the keystone there is question is, when can verification no longer be trusted?

[00:04:33] [SPEAKER_01] So our first story comes from Keystone, right? Which is a hardware wallet manufacturer. And it raises a fundamental question about trust. On October 20th, attackers compromised Keystone's website through a third-party monitoring tool. They obtained customer information and, more significantly, authentication keys.

[00:05:02] [SPEAKER_01] Authentication keys used to determine if some keystone wallets are genuine. So the validation authentication keys were compromised. So what does that mean?

[00:05:22] [SPEAKER_01] Well, it means a customer could purchase what appears to be an authentic hardware wallet, run the verification process, and receive confirmation that the device is genuine, and still potentially be holding a counterfeit wallet. You think it's genuine.

[00:05:52] [SPEAKER_01] It's supposed to be genuine. But it could be counterfeit. So Keystone now plans to destroy 18,835 devices containing the compromised key.

[00:06:07] [SPEAKER_01] Nearly 26,000 buyer records were also potentially exposed, including information that should have, well, been deleted under the company's retention policy. Should have been. Keystone says existing private keys and recovery phrases were not compromised. And that's very, very, very important. Right? It's an important distinction.

[00:06:38] [SPEAKER_01] But through the trust principles that I have provided in my book, The Lambs Lie Down, which I no longer have here next to my computer. I ordered the author copies. It's going to take a few weeks. I see something deeper here. Right? You can get the book on Amazon or IngramSpark or wherever you buy your books. Trust is not simply the belief that a system works.

[00:07:08] [SPEAKER_01] I believe the system works. I'm on Zoom right now. I believe that at the end of my speaking into Zoom, we're going to have an episode to share publicly. Right? It's confidence that the mechanisms that are used to establish truth are themselves reliable. Reliable.

[00:07:29] [SPEAKER_01] When verification becomes vulnerable, the problem, you know, extends way beyond one security breach. It's not in a silo. Right? It changes and challenges the relationship between evidence and confidence. Crushes confidence. And there's a stewardship obligation here. Right?

[00:07:56] [SPEAKER_01] Protecting consumers and customers includes protecting their information. Maintaining reliable authentication. And acknowledging when those protections fail. Keystone's decision to destroy inventory demonstrates the seriousness of the response. Companies just don't arbitrarily destroy important inventory.

[00:08:25] [SPEAKER_01] Whether the response restores confidence, however, remains to be seen. And that leaves us with our first question. If the mechanism designed to provide and to prove something is genuine, can itself be compromised?

[00:08:48] [SPEAKER_01] What does verification of the genuineness actually mean? You're verifying something that could be disingenuous. And that's where trust begins. And that's exactly where it could unravel.

[00:09:25] [SPEAKER_00] Article 2.

[00:09:26] [SPEAKER_01] When political transparency goes offline. So the second story takes us from the security of a hardware wallet to the integrity of American political transparency. American political transparency. To me, those two words, the political and transparency, don't belong in the same sentence.

[00:09:55] [SPEAKER_01] Let's talk about it. Because it is in the same sentence. The Federal Election Commission experienced an electronic filing system outage. Just days before the midterm elections coming up. This Tuesday, November 3rd. Following the reports of a possible cyber attack.

[00:10:22] [SPEAKER_01] Existing campaign finance records remained accessible. But new disclosures could be delayed at precisely the moment political spending was accelerated. What does that mean? Cryptocurrency interests have become significant participants in that spending.

[00:10:46] [SPEAKER_01] Industry-aligned political action committees, PACs, have committed tens of millions of dollars to congressional races. I should run. Tens of millions. That'd be good. But the supporting and opposing candidates, based on, partly at least, on their positions concerning crypto digital assets.

[00:11:15] [SPEAKER_01] From somebody who's working in and alongside and with the industry, I would vote for a candidate who is pro-crypto. Other people would not. Personal preference. But political spending is neither new nor unique to crypto. This has been done before, of course. You know. Organizations across industries participate in elections.

[00:11:43] [SPEAKER_01] And lawful, lawful political advocacy is part of our American system. But transparency is supposed to allow voters to understand who is financing political messages before they cast their ballots. Supposed to. That's where our principle of trust becomes important. Real important.

[00:12:08] [SPEAKER_01] Trust in democratic institutions does not require everyone to agree with the decisions that are being made. Consensus is not consensus by everyone. It requires confidence that the rules governing decisions are visible, consistently applied, and, most importantly, enforceable.

[00:12:33] [SPEAKER_01] So an electronic filing system may appear to be administrative infrastructure. But when that infrastructure becomes unavailable and goes offline, the consequences extend into public accountability. We should distinguish between the reported cyber attack from the confirmed outage. We don't yet know everything about the cause.

[00:13:03] [SPEAKER_01] And it will be presumptuous to assume any wrongdoing. Right? What we do know is that the timing exposed a vulnerability in the disclosure process. And that brings us to a question extending far beyond crypto.

[00:13:24] [SPEAKER_01] If the public cannot reliably see who is financing political influence when that information matters the most, how can transparency fulfill its democratic purpose? Trust depends not merely on having disclosure rules.

[00:13:49] [SPEAKER_01] But it depends on maintaining the systems that make those rules meaningful and valid. Part two brings us to protection. That was all about trust, the first two articles.

[00:14:07] [SPEAKER_00] The third is about protection.

[00:14:15] [SPEAKER_01] It's going to be, we're going to talk about Binance and the price of regulatory participation. Because we now, we started Brazil. Let's go to Brazil. Okay? Binance has applied for a cryptocurrency service provider license through its Brazilian entity, be Brazil, ahead of the country's October 30 regulatory deadline.

[00:14:39] [SPEAKER_01] The application would allow Binance to seek participation in one of Latin America's largest crypto markets, Brazil. But that participation comes with changes, right? The exchange is delisting 22 crypto assets for Brazilian customers and restricting services, including lending and margin trading. Margin trading has been very popular.

[00:15:10] [SPEAKER_01] Binance says it hopes continued discussions with Brazil's central bank will eventually, eventually allow it to restore some discontinued products. I don't know if I have a list of all the discontinued products here, but it will be interesting to see which ones they are. It's important, though, to distinguish an application from approval. They applied. Okay? Binance has submitted the paperwork. But that doesn't mean the license has been granted yet.

[00:15:40] [SPEAKER_01] Okay? What interests me is the relationship between regulation and access. Because we often talk about financial innovation as though progress means offering more products, more opportunities, and having fewer restrictions. But through the principle of protection, the question that comes forward are going to be more complicated. They're not just that simple, right?

[00:16:08] [SPEAKER_01] Does responsible innovation mean giving customers access to everything a platform can technically provide? Or does it mean accepting limits when those limits are intended to reduce risk? There are reasonable arguments, you know, on both sides. Restrictions may protect customers from products they don't fully understand. Research can do that, too, right?

[00:16:38] [SPEAKER_01] They might also prevent sophisticated participants from accessing services that they can responsibly use. Not everybody uses just the bare bones basics, you know? Compliance itself does not guarantee good outcomes. Every company has a compliance department. You think, and all companies experience good outcomes, despite having that compliance department. A regulated institution can still make really bad decisions.

[00:17:09] [SPEAKER_01] Let me say that again. I'll come from the world of AIG. A regulated institution can still make really poor decisions. The deeper issue is whether the rules establish responsibilities that are clear, proportionate, and consistently enforced.

[00:17:28] [SPEAKER_01] Finance's Brazilian experience illustrates to us an industry that is adapting to institutional expectations rather than operating entirely outside of them. It seems as though we stop saying the institutions are coming.

[00:17:51] [SPEAKER_01] The fact that we now say institutions are here, let's adjust to what they want and need. Well, I published a book called The Lambs Lie Down. And at the crypto hipster X Factor, we don't lie down. So, here's the question.

[00:18:14] [SPEAKER_01] When a financial platform must reduce what it offers in order to continue operating and appease financial institutions, or tradfire governments, whatever, are we witnessing a loss of innovation? Or are we just beginning a more accountable form of innovation?

[00:18:44] [SPEAKER_01] That's the billion, trillion, quadrillion, quintillion dollar question to be answered as we go forward. So, let's get out of Brazil. Okay? Although, I do want to have some good Brazilian food, maybe a steakhouse this weekend. But, you know, I digress.

[00:19:10] [SPEAKER_00] Segment four, Canada.

[00:19:17] [SPEAKER_01] We're going to go to Canada, where regulators are considering how stablecoins should operate within the country's financial system. The architecture. Canada has opened its public consultation on proposed regulations for stablecoin issuers that are not financial institutions.

[00:19:39] [SPEAKER_01] The proposals include redemption within three business days, limits on redemption fees, registration with the Bank of Canada, and restrictions on issuers paying interest or yield. That one, not a surprise. Right? The government is also seeking consistency with regulatory approaches in the U.S. and other jurisdictions.

[00:20:08] [SPEAKER_01] Implementation is expected in the fall of 2027. So, next year we have about a year or so. Meaning these proposals remain part of an evolving regulatory process. Right? So, let's consider the purpose of a stablecoin. From a retail crypto bro perspective. I'm not a crypto bro, but from a price go up perspective. It doesn't make any sense. Right?

[00:20:36] [SPEAKER_01] A stablecoin promises a digital token can maintain a relationship to an underlying currency or asset, which is a lot of times mostly the dollar or Canadian dollar or some kind of stable currency. But maintaining that relationship requires more than just technology. Right?

[00:20:54] [SPEAKER_01] It requires reserves, redemption mechanisms, operational discipline, and confidence that an issuer can meet its obligations. This is where protection becomes an architectural principle rather than simply a regulatory requirement.

[00:21:20] [SPEAKER_01] Protection means designing a system around the consequences of failure. If a stablecoin cannot be redeemed when its holder needs liquidity, the promise of stability becomes questionable. A stablecoin has to be liquid. It cannot be illiquid.

[00:21:45] [SPEAKER_01] But the proposed restrictions on yield, which I said was unexpected, was expected. I expected that. It raises another issue. Should regulators determine how a stablecoin may be used? Or should they focus on ensuring that the issuer can fulfill its financial obligations? Those two are not the same thing.

[00:22:12] [SPEAKER_01] Canada is attempting to establish boundaries while coordinating with other jurisdictions. And that coordination may reduce complexity for international users and issuers, but it may also create common limitations across markets. The central challenge is finding a balance, right? I want to find a balance between protecting users and preserving meaningful innovation.

[00:22:40] [SPEAKER_01] And so we're left with a question here. When governments regulate financial stability, how do they distinguish from protections people genuinely need from restrictions that simply preserve the existing financial order?

[00:23:16] [SPEAKER_01] Segment five. And I just got some glass, I just got a cup of water from my refrigerator. We're going to talk about refrigerators. So this to me, the next story sounds like science fiction, but it raises one of the most consequential governance questions of the week. The Commodity Futures Trading Commission Chair, Michael Selig,

[00:23:47] [SPEAKER_01] recently suggested that autonomous artificial intelligence could eventually allow your refrigerator to purchase groceries using money earned from staking Ethereum, staking Ether. Could arbitrarily say, okay, you're low on this. It looks like there's only three or four eggs in here. Let me order that. I guess it places an order on Instacart.

[00:24:17] [SPEAKER_01] I don't know how that works. He even raised the possibility of a refrigerator launching its own meme coin. That'd be interesting. You know, crypto hipster, you don't have enough steak in the refrigerator. Let me order some filet mignons. And I get the bill for it. You know, I don't know.

[00:24:42] [SPEAKER_01] So the refrigerator is an illustration, but not an announcement of a new financial product. I'm not here trying to sell you an LG or whatever the brands are today. You know, refrigerator, GE. But the underlying issue is serious. AI agents are becoming capable of holding, not only holding assets, identifying trading opportunities,

[00:25:08] [SPEAKER_01] and executing transactions with limited people intervening. Traditional financial regulations were developed around identical people and organizations, right? So what happens when the participant making a financial decision is autonomous software?

[00:25:31] [SPEAKER_01] It's your refrigerator or your oven or your toaster or whatever other electronic devices. What happens? So Selick raised the possibility of know your agent requirements. Like, you have a friendly refrigerator or you have a mean refrigerator?

[00:25:56] [SPEAKER_01] Like, extending identity and accountability concepts into machine-driven finance through the principle of protection, that is fascinating to me. Because if an AI agent executes a harmful trade, who bears responsibility? Right? The person who deployed it? The developer who designed it?

[00:26:24] [SPEAKER_01] The platform that processed the transaction? Or the refrigerator itself? Wouldn't need more junkyards, ladies and gentlemen. What happens when thousands of agents use similar models, reach similar conclusions, and react simultaneously to market conditions? Hmm.

[00:26:52] [SPEAKER_01] Speed and efficiency can create enormous benefits. But they can also dramatically amplify mistakes. Protection cannot depend entirely on human intervention when decisions occur faster than we can reasonably respond or even think. And that means that responsibility must be considered before autonomy.

[00:27:23] [SPEAKER_01] And before autonomy becomes widespread. Not merely after something goes wrong. By the time something goes wrong, there are thousands of other possibilities of things going wrong. So here's the question that I want us to think about. If we give machines the authority to act independently in financial markets,

[00:27:46] [SPEAKER_01] can we also build systems that ensure human accountability, our accountability as individuals, never disappears?

[00:28:01] [SPEAKER_00] Part three.

[00:28:17] [SPEAKER_01] Segment six. Consensus. Segment six. Consensus. Who has the authority to govern prediction markets? Now, our sixth story brings us to a confrontation between federal and state authority over prediction markets.

[00:28:39] [SPEAKER_01] The Commodities Futures Trading Commission against CFTC has sued Utah officials following the state's legal action against prediction market platform CalShe. Utah argues that certain event contrasts constitute unlawful gambling under the state. Well, we covered that last week.

[00:29:03] [SPEAKER_01] The CFTC maintains the contract's fall within its federal authority over driven markets. Utah is seeking a recovery of up to $60 million in allegedly unlawful profits. And this is not simply a disagreement about CalShe.

[00:29:27] [SPEAKER_01] It's a dispute over which institution has legitimate authority to govern an emerging financial activity, which is prediction markets. That brings us to consensus. It brings us to the statement I said earlier. Not everybody agrees. In my book, The Lambs Lie Down, consensus is not merely agreement.

[00:29:53] [SPEAKER_01] It is the process through which institutions establish legitimate authority, resolve disagreements, and create rules that people can reasonably recognize. But what happens when two authorities claim jurisdiction over the same activity? We've seen this before, arguing who's in charge of crypto-pending the SEC and the CFTC.

[00:30:22] [SPEAKER_01] The federal government argues that nationally regulated derivatives markets require consistent oversight. States, meanwhile, have longstanding responsibilities enforcing their gambling laws and protecting their residents. Lotto. So, you know, both positions, well, yeah.

[00:30:51] [SPEAKER_01] I wonder how the mega and power, I know they work and people can gamble in pretty much every state, but I don't know the law between those versus the state lotto. You know, both prediction, you know, both positions raise legitimate questions about the boundaries of governmental authority. Of course.

[00:31:16] [SPEAKER_01] And those are all legal issues, but prediction markets complicate those boundaries because, you know, contracts can resemble financial instruments while also allowing people to speculate on sporting events, the elections, and other outcomes. If you bet the brewers are going to win a five, I bet you made some money. You know?

[00:31:40] [SPEAKER_01] Calling something a derivative doesn't automatically settle every question about its social consequences. And calling a gambling doesn't necessarily resolve its treatment under federal financial law. The courts, so there's a legal issue, will ultimately have to decide and address those competing claims, and they got their work cut out for them. I do not, I am not jealous.

[00:32:10] [SPEAKER_01] I do not envy them in any way. But the larger issue extends beyond prediction markets. The larger issue is when technological innovation creates activities that cross established legal boundaries, who gets to decide what rules apply? Is it the federal government? Is it the state? Is it someone or something else?

[00:32:40] [SPEAKER_01] Consensus cannot mean simply the most powerful institution wins. That would be right. It requires a legitimate process for deciding where authority begins, where it ends, and how conflicts are resolved.

[00:33:08] [SPEAKER_01] Segment seven, do American voters actually want cryptocurrency? So, the seventh story concerns voters and our attitudes toward financial technology. In a new loop survey conducted by the DeFi Education Fund, 72% of respondents considered it at least somewhat important for political candidates to support financial technology development in the U.S.

[00:33:39] [SPEAKER_01] 72%. 72%. That sounds about right. That sounds like a powerful endorsement of innovation. But the details tell a little bit more complicated story. So, only 13% considered encouraging growth in blockchain, crypto, and decentralized finance very or extremely important.

[00:34:05] [SPEAKER_01] And just 9% reported familiarity with cryptocurrency at all. 9% reported familiarity with cryptocurrency at all. But 72%? What? You know?

[00:34:29] [SPEAKER_01] So, the survey included 1,545 respondents in September ahead of the November midterm elections next Tuesday. Okay. So, what should we conclude? Numbers to me at least seem inconsistent. So, first of all, supporting financial technology is not necessarily the same thing as supporting cryptocurrency. Ah. Okay. That's the 9% support cryptocurrency.

[00:34:57] [SPEAKER_01] 72% support financial innovation. So, what's the difference? AI. AI and others. Right? Secondly, broad approval of innovation does not automatically translate into agreement about specific regulations. We're seeing that. And third, public opinion deserves to be understood rather than selectively interpreted.

[00:35:27] [SPEAKER_01] A lot of data gets selectively interpreted through a biased lens nowadays more than ever before. And this is where consensus becomes really, really, really important, right? A political system cannot establish meaningful consensus merely by identifying a popular phrase and assuming that everybody attaches the same meaning to it.

[00:35:58] [SPEAKER_01] Financial innovation can mean faster payments, better access to banking, lower transaction costs, the existence and investment of digital assets, or entirely new financial infrastructures. People may support some of those developments while opposing others. I know some people who oppose AI, who support crypto. You know?

[00:36:24] [SPEAKER_01] I know some people who support crypto, who are afraid of AI. You know? That's not necessarily inconsistency, you know? It may reflect different priorities, experiences, and levels of familiarity. Familiarity.

[00:36:48] [SPEAKER_01] The survey also reminds us that industry participants often inhibit a world of specialized language and assumptions that the broader public doesn't have or know or share, right? So if crypto advocates want meaningful public engagement, they must explain not only what the technology can do, but why its consequences matter.

[00:37:15] [SPEAKER_01] So here's the question.

[00:37:47] [SPEAKER_01] So real consensus begins with understanding the difference. The last part of this show is part four, which is stewardship.

[00:38:02] [SPEAKER_00] I have three articles for you on stewardship. The eighth one is Zcash and the Responsibility to Stop Funding.

[00:38:14] [SPEAKER_01] It's a fascinating debate about institutional stewardship, actually. Zcash co-founder Sean Bowie has proposed ending the automatic funding stream to Zcash Community Giants, which is a program that supports the development within the ecosystem.

[00:38:37] [SPEAKER_01] The program currently receives 8% of newly issued Zcash, Z-E-E-C-C, Zcash listing, through the network's block subsidiary, subsidy, subsidy. Thank you.

[00:38:57] [SPEAKER_01] Bo suggests and argues that the grants program already controls more than $125 million in funding and was never designed to manage resources at that scale. So maybe a few people actually thought Zcash would be at the price level it is today.

[00:39:17] [SPEAKER_01] So his proposal would redirect future allocations into the network sustainability mechanism while leaving the grants program's existing treasury intact. No more growth for you. The proposal is not to eliminate community grants, of course. It is to reconsider whether automatic funding should continue when substantial resources have already accumulated.

[00:39:49] [SPEAKER_01] Now, this is interesting to me through the lens of stewardship. I mean, it's interesting through the lens of investments. But to me, it's interesting through the principle of stewardship. Why?

[00:40:03] [SPEAKER_01] We often measure institutional success by growth, revenue, larger budgets, greater reserves, more employees, or used to be at least, more influence. But growth and responsibility are not necessarily the same thing. I come from AIG. I know. An institution can accumulate resources faster than its governance practices.

[00:40:34] [SPEAKER_01] Oversight mechanisms and strategic priorities evolve. An institution can accumulate and it can grow faster than that. But at some point, continuing to provide additional funding may become less important than demonstrating that existing resources are being used responsibly. So, there are counterarguments, of course.

[00:41:03] [SPEAKER_01] You know, developing funding supports experimentation, long-term research, and projects that never might attract conventional investment. Reducing future funding could constrain valuable work.

[00:41:20] [SPEAKER_01] And that's why governance matters here because stewardship requires asking whether resources remain aligned with their original purpose, whether decisions are accountable, and whether the institutions can justify what it controls. And the value of Zcash also fluctuates dramatically. I mean, meaning that, you know, the dollar value, I mean, dramatically.

[00:41:47] [SPEAKER_01] Over the past year, it went from, what, less than $100 to $1,300. $100 is crazy. Something crazy. Kind of like the old Bitcoin days, right? Ultimately, the debate is not simply about $125 million because next, because in a few months, it could be $1.25 billion. It could be. It could be.

[00:42:08] [SPEAKER_01] The 10X is, it's about whether institutional responsibility can include recognizing when enough resources have been entrusted to one organization. And maybe that's the most difficult question, right, is this.

[00:42:28] [SPEAKER_01] Can an institution demonstrate its commitment to stewardship by voluntarily limiting its own future funding? Not being forced to have its future funding limited, but by voluntarily limiting its future funding, which might be something they haven't even talked about yet.

[00:42:55] [SPEAKER_01] But, again, segment nine, community banks enter the stablecoin economy, which is pretty cool. I had conversations back in the day at Consensus 2024 where we talked about local banks, the importance of the incoming or upcoming importance of local trusts and banks.

[00:43:25] [SPEAKER_01] So let's explore this a bit. The office of the comptroller of the currency is encouraging American community banks to consider becoming permitted payment stablecoin issuers under the Genius Act framework. So that could mean issuing stablecoins directly or through eligible stablecoin subsidiaries subject to applicable regulatory requirements.

[00:43:53] [SPEAKER_01] What's remarkable is that the institutional shift this represents. Maybe it's time. For years, much of the conversation centered on building financial infrastructure outside of traditional banking.

[00:44:15] [SPEAKER_01] Now, a federal banking regulator is inviting established community institutions and long-term institutions and local institutions to participate in that infrastructure, which to me is great. I would love to see Main Street here. But there's a complication.

[00:44:40] [SPEAKER_01] Community banking organizations have also challenged aspects of the OCC's approach to cryptocurrency companies, arguing that certain regulatory arrangements could create unequal competitive conditions. So the relationship is not simply one of banks embracing cryptocurrency. It's an ongoing negotiation over responsibilities, privileges, and competition.

[00:45:10] [SPEAKER_01] Through stewardship, I see an important question about institutional purpose. Community banks traditionally serve customers through relationships, right? Local knowledge. And establish responsibilities to depositors and borrowers in the local towns and markets. Stablecoins introduce different technologies. Operational risks.

[00:45:41] [SPEAKER_01] Potentially new business models as well. Should community banks participate in all of that? Perhaps. But participation alone is not the measure of progress. The more important question is whether entering the market strengthens their ability to serve customers responsibly.

[00:46:09] [SPEAKER_01] Does it strengthen their ability to do it? A bank should not issue a stablecoin merely because competitors are doing so, especially at the local trusting level. And a crypto company shouldn't receive regulatory advantages simply because it operates through new technology. The responsibility should reflect the activities and risks involved.

[00:46:36] [SPEAKER_01] And that is exactly what responsible institution adoption requires. The genius act may help establish a common framework. But legislation alone cannot guarantee good stewardship. Institutions must still demonstrate that they understand the obligations that they are accepting. And not just accept them.

[00:47:06] [SPEAKER_01] You've seen what happens when they do. Through Silvergate. Through other banks that failed around the same time FTX did. In 2023. And that brings us to our next question, right? When traditional banks enter a financial system originally designed to challenge them. Are they transforming the technology?

[00:47:34] [SPEAKER_01] Or are they allowing the technology to transform what banking means?

[00:47:47] [SPEAKER_00] Things that make you go, hmm. Segment 10.

[00:47:59] [SPEAKER_01] Christine Lagarde. And the institution beyond its leader. I saved the best for last. I saved the best photo for last, maybe. It was. We're going to talk about the European Central Bank. I'm not going to make any further comments about. My cover art for this show or this segment.

[00:48:28] [SPEAKER_01] Christine Lagarde has announced that she will step down as ECB president on February 7, 2027. I saw her once speak. At the World Bank Summit a couple years ago. She's a great, great speaker. Who's been against Bitcoin. But who's recently launched a Euro crypto, Euro digital asset. I wonder why she was against Bitcoin. Just a question.

[00:48:58] [SPEAKER_01] I had. So it's going to be right before the scheduled conclusion of her eight-year term. Lagarde has done some really great stuff. She has. She's led the institution since November 2019. She's navigated the pandemic. She's navigated inflationary pressures. She's navigated geopolitical instability.

[00:49:24] [SPEAKER_01] And significant changes in the European financial system. We must give her credit. Credit is due. Her tenure also included work on the digital euro, which I just mentioned earlier. And infrastructure for settling tokenized financial assets and central bank money. That is also honorable and worthy of acknowledgement and recognition.

[00:49:54] [SPEAKER_01] Now, leadership transitions are a normal part of institutional life. But they provide an opportunity to provide, really to examine something really fundamental. What exactly makes an institution durable? Is it the authority of its leader?

[00:50:24] [SPEAKER_01] The strength of its policies? The competence of its people? Or the systems that allow it to continue functioning when leadership changes? And we're going to get that change in February. Through stewardship, I would argue that an institution's responsibilities must extend beyond.

[00:50:50] [SPEAKER_01] Beyond any individual who temporarily leads it. Leaders inherit structures they didn't create. And if you don't believe me, please, I ask you to read this book. If it comes up on the screen properly. It's called Inheriting Saturn. I would slowly pull back.

[00:51:20] [SPEAKER_01] What happens when a founder steps away? Every successful system eventually outgrows its creator. Inheriting Saturn explores how organizations, communities, and ideas survive through stewardship rather than ownership. Blending memoir philosophy, organizational behavior, and conversations with founders from around the world, Jamil Hasan examines leadership, governance, succession, and the responsibility of carrying systems forward. This is not a book about cryptocurrency.

[00:51:46] [SPEAKER_01] It's a book about what every enduring system eventually requires someone willing to inherit it. I'd be happy to come into your role, lady. I'm not qualified to be there, I don't think. I think maybe I am, but that's the burden of stewardship. Leaders inherit structures they didn't create. Lagarde's successor will inherit an institution confronting questions about monetary stability, financial innovation,

[00:52:16] [SPEAKER_01] and Europe's place in an increasingly digital economy. And the digital euro is just one example. Its future should depend on careful consideration of public needs, institutional legitimacy, and financial consequences. Not merely the personal preference of whoever occupies the president.

[00:52:42] [SPEAKER_01] And we've seen that repeatedly in other nations all around the world. We've seen it in Argentina. We've seen it in El Salvador. We've seen it everywhere. The same principle applies to cryptocurrency, organizations, decentralized networks, companies, governments, everything. An institution depends entirely on the one person.

[00:53:12] [SPEAKER_01] Its continuity is inherently fragile. A responsible leader should leave behind something capable of functioning without them. Is she going to? We're going to find out, right? Final question is this. When a leader departs, does the institution merely survive the transition? AIG didn't. Angry Murg is gone.

[00:53:41] [SPEAKER_01] Martin Sullivan came in. Credit default swaps happened. By Benoche. He became CEO. He built the company back up. Then we had some jokers come in. We had Hancock come in. Drive the company to the ground. It didn't survive. That's my example from years working at AIG. Or does the institution merely survive the transition?

[00:54:06] [SPEAKER_01] Or has that leader built something worthy of surviving? You're talking about Steve Jobs and Apple. You're talking about some great leaders over time. That distinction is the essence of stewardship.

[00:54:31] [SPEAKER_01] And for my crypto friends out there, in my book, Jupiter is all about relationships. And Saturn is all about carrying it forward. And if you want to know more about stewardship systems, at least that one, or I come from one, and please get my book.

[00:54:55] [SPEAKER_00] Okay. That's enough pitching of me. You know. Closing synthesis.

[00:55:05] [SPEAKER_01] It says, who is responsible when the system changes? I'm coming to the end of the X factor for this week. Ten stories. Four principles. And one question that connects them all. Who is responsible when the system changes? We began with trust. Keystone reminded us that verification mechanisms must themselves be trustworthy.

[00:55:32] [SPEAKER_01] The FEC outage showed you how public accountability depends on infrastructure that people really notice until it fails. Then we move to protection. Brazil, Canada, and CFTC's discussion of autonomous artificial intelligence and refrigerators demonstrated that protecting financial participants becomes more complicated

[00:56:00] [SPEAKER_01] as technologies and markets evolve. Then we examine consensus. All right. The conflict between Utah and the CFTC raised questions about legitimate authority. While the Ipsos survey reminded us public support for innovation cannot simply be assumed to mean support for every cryptocurrency policy. And finally, stewardship.

[00:56:26] [SPEAKER_01] Zcash confronted the responsibility of managing accumulated resources. Community banks were invited to consider new financial obligations. And the European Central Bank is preparing for a transition beyond its current leader. These stories reveal something very important. Technology changes the tools available to us. It changes the speed of transactions.

[00:56:57] [SPEAKER_01] The distribution of authority. And the possibility of participation. But it does not, it does not eliminate the need for our human judgment. Trust still must be earned. Protection still requires responsibility. Consensus still depends on legitimate processes.

[00:57:22] [SPEAKER_01] And stewardship still demands that we consider what we're leaving behind. We're considering inheriting Saturn. The future of cryptocurrency will not be determined solely by faster networks, new tokens, or more sophisticated financial products.

[00:57:41] [SPEAKER_01] It will also depend on whether the institutions surrounding these innovations can develop the judgment to use them responsibly. And we have seen many, many lapses in judgment across the board everywhere. Because the question is not simply, what can we build? That's the easy question.

[00:58:10] [SPEAKER_01] It's what can we be trusted to preserve? I'm Jamil Hasan, the crypto hipster. Let me know your thoughts. Enjoy Halloween. I'll be back on Monday if our weekend wrap up. And I'll see you next time on The X Factor with the crypto hipster.

[00:58:37] [SPEAKER_00] Thank you for tuning in.