WBD477 Audio Transcription

Bitcoin & National Security with Matthew Pines

Interview date: Friday 18th March

Note: the following is a transcription of my interview with Matthew Pines. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

Matthew Pines is a Fellow at the Bitcoin Policy Institute specializing in national security. In this interview, we discuss modelling complex systems, current US national security priorities, and how Bitcoin can help maintain US hegemony.

“A legit Central Bank, with a material amount of capital moving into Bitcoin, it was entirely a theoretical proposition. I think what’s happened in the past two weeks has made that now plausible… you could see it in the next year or two – that is kind of a game-changer.”

— Matthew Pines

Interview Transcription

Peter McCormack: So, Matt, how are you doing?

Matthew Pines: How's it going?

Peter McCormack: Good to have you here.

Matthew Pines: Yeah, thanks for having me.

Peter McCormack: No, thanks for coming.  You wrote quite the document!  My brother's a researcher on the show, I'm going to give you a big compliment to start with.  He said it's the best thing he's read about Bitcoin since the whitepaper.

Matthew Pines: Yeah, wow, well that's certainly a compliment.

Peter McCormack: You should take it.  Okay, give me the background.

Matthew Pines: Certainly.  So, I'll start with myself, since not many people probably know about me or my background in this area.  So, I actually started in a more management consultancy for about ten years now, more as a Bitcoin lurker than necessarily very public about it.  But about a year ago, as Bitcoin really became relevant on a macroeconomic and geopolitical level, I started to engage more publicly on Twitter about those sorts of issues, the intersection between Bitcoin and national security, just to get my thoughts out there.  I wasn't really intending to make much of it.

Then, just a few months ago, some folks reached out to me and said, "Hey, we want to put together this thinktank, called The Bitcoin Policy Institute, and we want to represent your ideas as to what this means for national security".  I had some ideas bouncing around in the back of my head about how to articulate this in a way that would be relevant, and speaking the language of the folks in the DC national security kind of community, the folks that I'd spent the last ten years working with, and felt that that bridge needed to be built, how to articulate the value of Bitcoin and the benefits to America, through that lens. 

So, that's what I set out to do in the past month or two, was really to put together this document to sort of, okay, if I was going to write something for my former bosses, the people that I worked with the past number of years, who were not going to be naturally inclined positively to Bitcoin, but probably don't know much about it, how would I write something to give them a primer on this, and also make a clear argument for how it actually is beneficial for national security?  So, that's how started, really just writing it on my own time.

Then, when the news about the Executive Order came, as it was going to come out, I was like, I had to actually put some finishing touches to this thing and get it out there to help shape the broader conversation, that I'm certain is going to be brough up as the Executive Order starts to roll out with all these different reports.  So, that's that specific paper, where that came from.

My background is in more the security preparedness world.  So, I did undergrad in physics and philosophy, didn't really know what I wanted to do with life, thought I was going to be an academic.  Sort of took a hard turn away from the PhD track, after realising being an academic was not my cup of tea.  Stalled for a year over across the pond in your neighbourhood, did a master's at the London School of Economics, bridging from my philosophy, the more public policy background. 

I came back to the States, did two years at the National Science Foundation, supporting a cluster of programmes in economics, decision risk, manage sciences, science of organisations.  I really saw, from a bird's eye view, how the government makes these funding decisions for research, and that was really useful and valuable for two years, then I figured, "Okay, this has about run its course", and ran into buddies who were connected to this small start-up in management consulting in DC, and I was like, "I'll give that a try".

It was a 12-person company at the time, and it was young and fun, and really got involved in some really interesting work, essentially trying to help the government answer the question, "Are we prepared for bad things?" and try to answer that question in a rigorous way.  So, I've supported a number of projects in that area over the years, both in the quantitative side, so doing quantitative analysis of the question of preparedness for the government and for the whole country, how do we answer the question, "Are we prepared for different scenarios?"; but also doing more practical, what we call exercises, which are literally war games. 

So, you have a bunch of hypothetical scenarios, and you construct them, you try to base them on what you think is likely under different conditions, and then you roleplay them at different levels of government, or the private sector, or both, and you try to figure where your gaps are, how you should improve this.  So, those are both man-made threats, so standard things like terrorism and cyber attacks, biological attacks; but also just bad, normal natural disasters, like hurricanes and tornadoes and pandemics.

So, I spent a number of years just gradually getting more and more paranoid about all the bad things that could happen, until I reached just a level of zen, and that was a really valuable experience, understanding just how the government works, different parts of the government, how they perceive the world.  And then, when I got more interested in Bitcoin, that's where I felt I could value-add, a certain connect, sort of understanding how the government thinks about things and how they're naturally disposed to think about things more as a threat than necessarily as an opportunity.  Just the nature of our geopolitical position is, we're the top of the mountain, right.

So, we're more, I think, worried on net about things that could threaten that position, than necessarily opportunities to bolster and strengthen that position.  I think that comes through as the natural gut reaction to anything that's new; it's inherent suspicion, and it's incumbent on folks that think that Bitcoin is valuable to help them understand it's really not a threat actually, that it's actually net-net good for the United States, as long as we recognise what it is and accurately assess how we can leverage it and not control it, but take advantage of what it means for our country on the world stage.

Peter McCormack: And, is there a risk with seeing every possible threat that you become, policy-wise, super-negative and paranoid, it leads to things like the NSA and potentially ideas around foreign policy that seem super-hostile and aggressive towards other nations, which are the kinds of things that have pointed criticism at the US over not just recent years, but decades?

Matthew Pines: Yeah, and I've been mostly focused on the domestic side, than necessarily foreign policy per se.  But I think that also speaks to, one of the things that is a challenge with the government is that it is massive.  There are silos and stovepipes everywhere, and the left hand doesn't always know what the right hand is doing.  And sometimes the right hand's doing stuff that is counterproductive to what the left hand's trying to do.

So, I think people think of the government as this monolith that has this inherent malevolent attitude to things; and mostly, it's just either ignorance or incompetence, or people not knowing exactly what to say about a certain thing that's new, because it's just not in their institutional framework.  But yeah, there is that history of the US as a global power that you need to honestly reckon with, the economic forces that we've leveraged to sustain that power, the various military activities we've engaged in to try to maintain that power, and what that means going forward.

I think the conditions that led to America's success over the 20th century are not just going to inevitably obtain into the future, we can't just coast on the things that sustained that power in the 20th century, and especially recent events have, I think, cast some of those inherent constraints and weaknesses into sharp relief.  So, yeah, I think that is something I think the policy community hasn't really been forced to reckon with.  You think, when you're top of a mountain, you don't have to think too hard about your mistakes, you can just print the money and paper over it.  But when you don't have that capacity anymore, you actively have to make good choices.

When you have scarcity, when you have constraint, you're forced to actually recognise mistakes, and I think that's part of the lesson of what Bitcoin is, that mistakes have consequences, and that forces people to have personal responsibility.  I think that applies at the national level too.

Peter McCormack: And, how much of this modelling work involved modelling economic infrastructure, economic challenges, energy policy, markets, international markets, etc?  So for example, we're seeing energy as a national security issue right now; was that involved in this?

Matthew Pines: So, the government would like there to be some master, all-seeing model of the world, and I think there's been some ambitious efforts in the past to try to construct some machine-learning, AI models, that try to plug in all the data and figure out where the flashing red lights are.  I think the lesson that I have is just that that's never been successful, and it's almost impossible to do something like that. 

So, what they've tried to do in the past is chunk things into buckets, and every agency does that in a different way, and this is part of the problem.  For example, CISA, the Cybersecurity and Infrastructure Security Agency, has a responsibility -- it's a new agency, and their responsibility is in the name.  It's cybersecurity and infrastructure security on the domestic side, so they're focused on keeping the lights on, keeping the water system functioning, keeping the internet working. 

They have 16 critical infrastructure sectors defined.  And they tried to do risk assessments of each of those 16 sectors.  But when you actually try to dig into any one of them, like oil and gas, or the internet, it's massively complex.  These things are impossible to even get the basic understanding of, let alone try to model.  You're just trying to -- how many critical nodes in the grid are there?  And, what's that critical node that could create a cascading failure point?  And that's just one of the critical infrastructure sectors, and that's just domestic, and it's almost impossibly complex.

So, I think the idea that anyone has any reasonable or rational approach to try to map how, say, a supply shock in a certain commodity's going to translate to domestic economic or social instability, you just don't know.  These things are just chaotic systems.  Bad things can happen that maybe you never thought about, but that can quickly propagate and cause cascading consequences.  And that's one of my lessons, "Don't try to predict, don't try to think your mental model is going to map onto the world in anything that's going to be useful".  It's more a matter of constructing a range of possible scenarios that you have some basis to decide between them, like this is more or less likely than this; and then understanding, well why, is this the likely scenario?  What are the trends or forces that are going to make something like this happen versus this?  I think that's the best you can do.

Then the other lesson is also a lesson for Bitcoin, is trying to be antifragile.  When you have this massively complex system of interdependencies, where one failure point can cascade, your approach shouldn't be trying to find all those possible weak points, because you're never going to find it; it's just designing the system such that one failure doesn’t propagate and take everything else down.  I think that applies to the monetary system, applies to certain government systems, it's about making all the systems that we rely on in our daily life, which includes the monetary system, more robust, to first order; and ideally, more antifragile, that it's actually going to improve over time, as it gets stressed and strained. 

That's the opposite of the systems we have right now.  Our systems across the board are very fragile, with all these interdependencies tied together.  So, that's one of things that Bitcoin is trying to bring up as more of a conceptual level, is the systems we've designed are these sort of just-in-time supply chains, everything is optimised for financial return, everything is one bad unanticipated trigger away from total collapse.  You can do that for so long, and you can pretend that you can fool yourself into thinking the system's stable when it's not stable, and I think you see this in things like the Treasury market.

Actions that we just saw with the Russian central bank, I think reveals a kind of, you could call it hubris, or you could just call it a false sense of security, that the system that has been stable for your professional life is always going to de-stable; and that, you'll be able see marginal weakness and respond in time before it spirals out of control.  And I think the lesson I draw from my professional background and other studies is just, that is a mistaken kind of analytical approach, that you're not going to see those failures coming, and you're not going to have the warning and so you need to think ahead of time and think through the what-ifs.

What if the Treasury market wasn't as stable as we thought it was; what's our back-up plan?  And I think if you don't have that back-up -- my work in the government was all about the what-ifs, what are the bad scenarios.  Even if they're not likely, what are we going to do?  How do we proactively address those?  And I think that's for me why Bitcoin is not an alien concept to bring in, it's one of those options on the table that we should look at, especially as we encounter a geopolitical situation that's, I think, bringing these tail risks more to the centre of the probability distribution.

Peter McCormack: Did Bitcoin click for you straightaway when you discovered it, because you mentioned earlier that you studied at LSE, and I'm going to make an assumption that you didn't study Austrian Economics, so did it click for you straightaway; did it take some time; did you dismiss it and then come back to it?

Matthew Pines: Definitely, it did not click for me the first time.  I think I had a typical Bitcoin story, where you have that one crazy friend, back in 2013, who tells you about it and you're like, "This is your drug money, this is your weird magic internet money".  So, I totally dismissed it then, and then again in 2015, that same friend who was getting into it, had started getting into it more seriously.  I think he even started some sort of crypto hedge fund, I'm not sure how legitimate it was.  But I remember having a…

I was on the other side like, "This is a scam, this is going to blow up in your face", and he was trading all those ICOs and everything else that was happening.  So, it was kind of hard to figure out what the signal and the noise was.  And it really wasn't until early 2019, I got more intellectually curious about it.  I was like, "This thing hasn't gone away".  Obviously, I was wrong to think it was just going to go "poof".  So, I started reading more about it.

Then, the pandemic hit and shifted my reading away from Bitcoin to being, "What is this emergent virus in China?"  So, from January to March, that was my intellectual focus.  Then March happened, and I realised there was a fundamental shift now that was taking place in the economic system, and I think I went through a similar journey maybe which Michael Saylor went through, which was the magnitude of the response, both fiscally, monetarily, but also just the social response, just for me made Bitcoin now front and centre.  It was like, "Okay, stop reading about epidemiological studies, and now read about what are the second- and third-order consequences of this going to mean for the global system".

That's when, I think, for me all the pieces came together, as a geopolitical issue.  Before, it was just like, "What is the inherent value proposition of Bitcoin?" this sort of abstract state-independent money system.  But then I thought about it in 2020 more, and I was like, "This is going to be a real macroeconomically relevant, geopolitically relevant phenomenon", and that's where I started to see, "Okay, well someone needs to start thinking about how to translate this to that audience so that, as I think it's going to become, we need to understand this to have a proper approach to it, a proper strategy for it".

Peter McCormack: But you also think it's an asset for the government; I don't mean an asset like something you hold, there's a benefit to the US Government for having a positive Bitcoin set of policies, set of regulations?  But do you have a personal thesis, because Bitcoin has a wide spectrum of speculators, adopters, companies ranging from libertarians, anarcho-capitalists, people who think Bitcoin will end the state, people who think Bitcoin is an asset to the state, people who think it's a check and balance on the state; it is a wide group of people with a wide group of considerations.

Even more recently, I've started to see more moderates and left-wing people come into Bitcoin, not just come in, but actually have their own personal thesis on why liberals should like Bitcoin.  So, do you have a personal thesis?

Matthew Pines: Yeah, and I think there's merit to, I think, almost all of those perspectives.  I don't think they're hugely contradictory, and I think Bitcoin first and foremost, it's a neutral tool, but it forms an anchor point for different layers of social consensus, so that basically our social consensus that's anchored on, like the technical rules of the protocol, are the things like the supply cap, the block size, etc, not political.  They may be political in the Bitcoin world, there have been factions in the past that have split off, like Bitcoin Cash, BSV, etc.  Those are political divisions within the first layer of social consensus about what Bitcoin is.

But I think we all agree that there is now sufficiently hard and social consensus on that, about what Bitcoin is.  The core features of Bitcoin that we all agree on are the things we agree makes Bitcoin.  But then, there are other layers of social consensus, other political attitudes, political philosophies, motivations for constructing social arrangements, that people then anchor to that layer.  I think that's where people start to bring in their existing social and political attitudes, and that's perfectly -- I'm a pluralist at heart.  I think those are what makes democracy great; people can have divergent views, it's just a matter of constructing an arrangement where people can have those divergent views.  I think Bitcoin is a delightful manifestation of that.

You can have anarcho-libertarians and progressives all find value in this tool and think that it's going to be a good thing for their political objectives, and I saw the more the merrier on that.  I came from more of a progressive background, I voted Democrat most of my life, despite being more in the national security world.  But I think there is an argument to be made that this does align with some of the progressive values.  And so, there are some folks in the space that have articulated that quite well.

But I don't think that Bitcoin is a replacement for your political advocacy on those topics.  If you think there's a certain social programme that you want to advocate for, your job is to convince your fellow human beings that that's a good thing.  And, just like we try to convince other people that Bitcoin's a good thing, if you want to engage in political discourse, you have to convince other people that your ideas are good.  So, I don't claim any mantle to have a special unique political insight on that.

But also to the point about whether Bitcoin's good for the US Government, that also comes back round about to, the government in our democracy, in my mind, is a manifestation of political will, political consensus.  We make our own government, we vote them in, especially our system.  Huge swathes of the US Government are political officials that come in with each new administration.  And there is that civil service kind of core bureaucracy that doesn't really change; but in our system, unlike in some other governments, the huge number, thousands of people come into the US Government every administration.

So, you do have a lot of power to shape who those people are, what their views are, and if you think, that's the privilege of living in a democracy, is you can try to articulate your preferred objectives and convince someone in a position of authority to follow that.  That's the job of bitcoiners now.  It's like, "Hey, I live in a democracy, I want where I live to be successful, I want us to be strong and secure and have an abundant economic society, I want Bitcoin to succeed here.  I'm an American, I want America to have Bitcoin be successful here".

Peter McCormack: I recently read the book, The Fifth Risk, which explains what happens every time a new administration comes in, and how all these roles have to be filled.  That completely blew my mind how this works in each transmission from one administration to the next.  I don't think a lot of people outside political circles understand this.

Matthew Pines: Yeah, and it can be a real risk, as I think happened during the Trump Administration, where they were not prepared, I think, to actually win.  Usually, part of the campaign process is you -- this is the downside of the system, is there's lots of patronage, lots of backscratching, lots of, "You support me and you'll get that Deputy Assistant Secretary job that you've been angling for your entire life", and there is that kind of cronyism.  And it's, how do you balance?  Is that truly meritocratic; are those people actually experts in that job, or did they just work the angles?  And that happens in every system of government.

But it does also mean that there's a lot of turnover, it does also mean that, if you are thinking in timescales of 4, 8, 12 years, it's not implausible to think you could have pro-Bitcoin policymakers and officials in positions of national leadership in these bureaucracies, if you engage systematically in political advocacy.  And that's why people think US Government is this impenetrable entity that is in permanent opposition to us, or whoever us is, and it's actually not; it's a very permeable membrane.  That entity that you think the US Government is, is on a reasonable timescale that you can influence, quite open to things that can evolve, if given the proper pressure.

But yeah, it does expose our system to risk, where if an administration comes in and just puts someone in a position that has no idea what they're doing, they can mess things up.  So, that's the upside and the downside of having a system like that.

Peter McCormack: And it does mean when, I think it's 14% of American citizens have crypto broadly, that in the next administration, there's almost certainly going to be some people in there who have access, hold, trade, but almost certainly have some access to, or exposure to Bitcoin.

Matthew Pines: And, I think that came out on the Executive Order.  You can look into the weeds get into precise technocratic analysis of what each particular report is going to mean; but I think for me, the biggest takeaway is that they're waking up to this thing as real, it's not going away, they need to actually understand it, and part of that's built on the fact that Americans have adopted it.  If Americans hadn't adopted it, there'd be no digital asset Executive Order, and that's how these things happen.  They happen from the bottom up, they generate sufficient social and political reality that politicians have to respond to it.  Then, it's a matter of how you shape those policies in a way that makes where you live, a conducive jurisdiction for you to engage in the activity that you prefer to engage in, and that's the whole part of politics.

You can always exit, you've got two options: voice and exit.  You can voice, you can try to articulate what you want through the mechanisms you have at your disposal, to influence the rules that you're subject to; and you can exit, you can go somewhere else, and I think that's the other half of it I think bitcoiners have emphasised a lot of.  I can just pack my Bitcoin up and leave.  I just need 12 private words and a passphrase, and I can post up shop somewhere else.  That works for some people, other people are, "I like where I live, I like my neighbours, I like my schools, I like my friends and my family and there are a lot of social and political costs that I don't want to have to take if I don't have to", so that's where the voice comes in, and I think you need to leverage both aspects of what makes you a force in your local politics or your community.

Peter McCormack: Okay, so the Executive Order, what was the TL;DR for it?

Matthew Pines: I mean, TL;DR was Bitcoin's here to stay, digital assets are here to stay, the government has to get smart on these things and when the government tries to get smart on things, it means writing reports.  So, what you're going to see over the next few months are lots of different agencies, all essentially hustling to try to put out these reports.  I've supported some of those types of reports in the past, and when you see a deadline that says six months, you mean that you have two months to write the report, because it's going to take four months to go through all the different review processes.

I guess it's sort of the starting gun for the government across the board to get smart on these issues.  I think there are risks that they move too fast, they use bad sources, they use biased sources.  So, part of our objective at BPI, Bitcoin Policy Institute, is to ensure that there's accurate information at the disposal of the government in these different agencies that are going to be writing these reports, and just trying to help ensure that they have access to the right facts.  So, there's things like Bitcoin and climate, energy, Bitcoin and illicit finance, the broader relevance of crypto assets to financial stability.  These are going to be some of the hot-topic items, as well as things like central bank digital currencies, CBDCs.

So really, there's a lot in there.  It really touches pretty much every major topic that you can think of that digital assets would bring up.  So, I think it's a net positive sign, but I think we have to be cognisant that these are going to be relatively quickly produced reports, and they're probably going to be just the beginning of a long process, as the government starts to engage on these different issues.

Peter McCormack: And so, to bitcoiners in general, there is a risk that the government becomes paranoid about these assets, puts in quite onerous regulations, surveillance; but there is also the flipside that they see the benefits to the country, the economy, the geopolitical situation, and become supportive of this.  They could pull an El Salvador.

Matthew Pines: Yeah, actually I'm reserving judgement and I'm cautiously optimistic on net.  I think there could be areas where you see just bad, bad policymaking, the government has done that before.  But I also think Bitcoin in particular, I don't think there's a whole lot of latent hostility in the majority of those regulatory bodies, to Bitcoin.  I think mostly, there's ignorance, there's neutrality and now they have to figure it out.  But I also think they have to get smart on disentangling these issues that have now all been bundled together. 

You can just throw a headline together of like, "Bitcoin Russia Sanctions", and you just think, "Oh well, Bitcoin is going to be helpful to the Russians to escape sanctions", without actually analysing the issue.  I think, if they actually analyse the issue, they find that it's actually not useful for that.  The same thing with climate, "Oh, Bitcoin bad for climate".  Well, if you actually analyse the issue, you realise, "Oh, wait, Bitcoin mining exceptionally helpful to incentivise the build-out of flexible load on the grid", which is what we need in order to meet our net zero carbon emissions.

So, I actually think if the government does study these issues, they'll do like what we did which was like, "Oh, wow, I didn't know Bitcoin could have that positive impact".  So, I encourage all of that type of activity, because what you don't want is kind of the cognitive inertia of just latent misperceptions, or preconception bias, to filter into policymaking.  You want them to study the issue, and I think bitcoiners have nothing to gain, but seeing good analysis happen on these different issues, because I think the truth is a good story.

Peter McCormack: And, what's the process for this?  So, a report is read in, you have two months, it goes into the review process, and then is it just made public for consultation?  Does it come public with suggestions on policy for debate?  What's the process on this?

Matthew Pines: So, the Executive Order doesn't explain all of those details, and I think each agency that's been tasked with these specific reports may approach it differently.  So, I don't know if there's going to be an official open comment period per se.  But I do know that agencies are often receptive to input.  If you send them a white paper, they'll read it.  So, there's an opportunity to help provide good information, or just provide a place for people writing those reports to go and get accurate information.  And there's no shortage of good information in the Bitcoin space, it's just getting it into a form and a format that a government bureaucrat can easily cite.

So it's like, "Oh wait, great, that Medium post has the best argument", but the government are maybe not going to cite a Medium post.  But if you put it into a nice template with some good branding, they can cite it or they can use it.  It's just about giving it in a good format.  So, I think it will probably be agency by agency, depending on the timescale.  Some of them are really quick, like 90 days.  Others they have more like six or nine months. 

I don't know, in the majority of cases, that you're going to have an open comment period, because they're not making rules per se.  The government has all sorts of processes they have to follow if they're going to make a new rule, and there's rule-making and open comment periods.  If they're just writing a report, just, "Here's a report on this topic that you asked us for, Mr President", they typically just publish it once it's done.  So, you really have to make sure that the folks writing the report have access to good information.

But yeah, it's called a Concurrence Process.  It sounds arcane, but that's how it works when you have these reports written by usually one small group of people in one agency, and then they get routed to all the different agencies.  So, anyone in those agencies and that's in that process can review it, provide comments, and there's just this churn of, "What are we going to say?  I've got an extra comma I want to add in here", and then once everyone agrees, then it passes concurrence and it goes out the door.  So, yeah, I don't think it will be too much open comment period, but it will be a useful, I think, indicator of where these sorts of agencies are coming down on these issues.

Peter McCormack: And, we would hope that these people, in preparing their reports, would be speaking to people like yourself, or anyone within the industry, who understands the key issues that are being dealt with here.  Speaking to the wrong person, reading the wrong Medium post, could lead to an article which misinterprets parts of Bitcoin, or misinterprets what the risks are, and that could lead to a report that would be damaging for Bitcoin.  Is that just a natural risk, or do you trust these kinds of people who are assigned these projects have the ability to find the right information?

Matthew Pines: I really don't know how to ascribe the probability to that, because these are a lot of different agencies.  Some of them I think know Bitcoin and crypto pretty well, and they've been studying it for their authorities for a while, but some of these agencies have probably not studied it, so there is a risk that you could find someone just sort of get this dropped on their desk, and they've got to do some quick googling, and that quick googling leads them to some bad sources.

Now, I do think there's enough usually due diligence inside the government, that even if there's some shoddy work done in the first draft, there are so many people that have to review this thing, and they know it's going to stand up to a lot of scrutiny, that it would be embarrassing for the government if they presented this report and had an obvious factual error.  If it cited like the poor transaction CO­2 cost, that would be so obviously disqualifying for its analytical rigour.  But I think the small-ball errors would be corrected, but it's more the strategic level things that we don't really know about, like what's the bent going to be?  That's where, I think, it remains to be seen. 

I'm cautiously optimistic on net, but I think you could see certain reports that just come out and you're like, "Where did that come from?" the sort of leftfield.  Then there's going to be so many of these reports pushed through so many of these different agencies all in the next six months, the government just usually isn't that efficient, so to have to push those things that quickly, you could have maybe mistakes get in their process, so we'll see.

Peter McCormack: And so therefore, your report, is this like a pre-emptive strike to lay down some ammo, some information, that you hope the kinds of people writing these reports would have access to or see?  Can you ensure they reach these people; how does that work?

Matthew Pines: Yeah, I mean exactly.  So the first is putting it out there, and then getting eyeballs on it, and folks then can read it.  And then there's, "Hey, there's someone inside the Department of State, I'm going email it to them", for example.  And, "Hey, send this to whoever you think might find it valuable", so there's no problems with that; that happens all the time in the government, where people submit good ideas, white papers, even op-eds that are helpful to shape the conversation.  So, that's something that I think we're definitely going to try to do. 

Specifically with my white paper, it was first geared towards that, but also more at a larger level, trying to frame the strategic view of Bitcoin in some of the more critical national security questions that even the EO itself doesn't even address.  The EO, I think, takes a very narrow technocratic address, which are the specific issue areas that align to the certain bureaucratic structure of these agencies, the SEC, the Treasury Department, etc, to write a report on this specific topic. 

But really, there isn't anything in there, except for maybe the commerce report, on kind of a national strategy, that is really at that 10,000-foot level like, "Where is American power in 2022?  How does that stack up against the challenge we're facing in the world?  How do those result from the structure of the monetary system that we've been coasting on for 50 years?  What are these friction points that might be turning into fractures in that global order, that are going to challenge the American power structure?"  The whole point of the EO is to -- or isn't the premise of the EO in the first place.

So, that was kind of the point of my paper, was to zoom out more and really call for a national Bitcoin strategy, which the EO doesn't call for.  It's a more technocratic issue by issue, getting smart on what Bitcoin or crypto assets mean in any one of these different areas.  I was trying to zoom out and say, "We have some more fundamental issues we have to understand and address, and then understand how Bitcoin could play a role in helping support the national security of the country, given a really dynamic global environment that's not necessarily the one that we thought we were going to face a year ago".

Peter McCormack: So, when you started producing this, were you naturally drawn to any specific topics, you thought, "Yeah, this is a big win", economics or energy; where were you drawn to first?

Matthew Pines: So, if you've been following the national security conversation for a number of years, China is always at the top of the list, and that's one of the few topics in DC that gets somewhat loose, by partisan consensus, is a belated recognition that China is a serious geopolitical competitor, and we now have to engage across all the fronts and resources we have, instruments of national power, to counter China.  So, that was one element, thinking through and putting some analysis together as to what extent does Bitcoin support American policy objectives to counter China, and I think there's a clear story there, so that's one we can unpack.

The other is just economic strength.  We have to be strong economically, we have to have a strong economic system if we're going to sustain power for the next several decades.  It's pretty clear that the current economic model, the current economic system, the global economic system, the dollar-based US Treasury reserve system is frail, and not exactly a firm foundation upon which you could imagine projecting American power for decades to come.  So, those were the two aspects that really drew me to it, were countering China and then reinvigorating sources of enduring national economic strength.

The third, which I think is also an important story, but is softer, is the values story; how does Bitcoin align with American values that we often haven't always met, or lived up to, but that are aligned with the national ethos, the political values that we have at least put forward as the things we stand for: private property rights, individual liberty, rule of law, freedom of expression.  So, I think there's a compelling argument to be made that Bitcoin aligns with some of those three key national security objectives, so counter China, improve enduring sources of national strength, and promote our values around the world.

Peter McCormack: And the US hasn't been particularly successful at exporting those values to other cultures over the past, certainly two decades.  It's the one I'm least interested in, but at the same time, I understand the alignment of those with Bitcoin.  But I mean, even private property rights, that's been exposed more recently as something that isn't entirely respected, but we can come back to that.  Let's unpack the China thing.  What is the risk with China; what is the risk to the US?  What do you think policy people are considering?

Matthew Pines: Certainly.  So, this has been a trend in motion for a number of years, and it has both international political dimension, and it has an economic dimension.  And really, you can go back to, in my mind, it starts with the Nixon trip to China in the early 1970s which, not so coincidentally, was the same time we shifted from the gold-backed standard to pure fiat floating exchange rate system. 

If you think about where the US was in that period, China and Russia, as strategic powers dominating Eurasia, were used to being in a pretty close partnership, but always had a sort of frenemy status.  And I think Nixon's trip to China was a major strategic victory peeling China off of that Russia strategic partnership, which is a critical strategic victory for the Cold War, because it divided Eurasia.  And while China was relatively weak, it allowed us to focus our collective efforts on a counter-Soviet strategy, which worked essentially outspending them, and leveraging the dollar system to outspend the Soviets, essentially spend them into the ground.

Then, what you saw in the 1990s was kind of a hyperpower era, where the US was the only power really that could run the world system.  So, you had the Soviets in hyperinflation, total collapse, China was strengthening, but was still very, very weak; and 2001 was really the major pivot, because you had China coming into the World Trade Organisation, we gave them Most Favoured Nation status, and between 2001 and 2021, the story of the last 20 years has been the story of both a rising Russia and a rising China.  I think that is a key area where Russia and China are now becoming increasingly converging in how they approach confrontation with the western system, and we've only belatedly woken up to that.

So, China has really been the dominant partner driving that strategic long-term objective, and two key things that they've done in recent history to drive that objective have been the Belt and Road Initiative, whereby back in 2013, they made a fundamental shift in how they engaged with the dollar system.  It used to be they would take the dollars that they'd get from us, when we'd buy all the goods we import from them, running these massive trade deficits, and they used to recycle them into US Treasuries. 

That was a nice virtuous circle, where we were able to keep our debt funding costs low, but in exchange we had to outsource our industrial base, our manufacturing base; the classic Triffin dilemma.  But in this case, it had a geopolitical aspect to it, because it was strengthening this major power in Asia, giving them factories, giving them expertise, giving them intellectual property and really allowing them to build their military. 

In 2013, they made a pivot from essentially, that's when their purchase of US Treasuries peaked, and they redirected those dollar flows into overseas dollar-denominated lending.  It was part of this massive campaign, called the Belt and Road Initiative, to spread their influence round the world, and to buy up and secure strategic access to hard assets, ports, land, natural resources; but also to do political corruption in weak governments, right, spread the money around and bring governments into the Chinese political order.  And they were using our dollars to do that.

So, not a really great strategic move, the US dollar system essentially being weaponised against us.  And so, that was the first move, was the BRI.  Now, the second move is the digital yuan.  So, this is basically a key element of a longer-term objective the Chinese have to disentangle themselves from the dollar system, to not make themselves, as Russia has seen, one click away from having your foreign exchange reserves just deleted from your account.  And I think this is now going to accelerate a move that had been under way, but more in kind of a latent fashion.

But their directives with the BRI plus the digital yuan is essentially to create a new sphere of influence that can leverage their technology suite, of both monetary technology, the digital yuan, as well as the export of their surveillance technology.  So, to run a country like China and maintain unitary control as a communist party, you need to have invested in a lot of technologies of control and surveillance, and so that's what they've done, and they're really good at doing facial recognition and tracking everyone and monitoring everyone.  Those are technologies that lots of governments around the world also want to install.

So, there's a compelling authoritarianism as a service that China is offering to governments around the world, essentially a whole kit of monetary technology, surveillance technology, as well as this financial support.  You can get it all in one package, and essentially that's what they're trying to essentially sell around the world which, if you're the United States, you could see there's just another country playing the same game that the British played, that the Americans played; but now using 21st century technologies is a game of neo-colonialism.  And if you're the United States, that's a threat to you, because that's a strategic competitor on the global stage, not just a regional competitor.  So, that's the China threat, if you're thinking it from a national security perspective.

One of the arguments we make in the document is, people around the world don't really want the renminbi.  You have to either force people, or bribe their leaders, to get them to buy into this system.  But it's not as if there's a whole lot of people around the world screaming for the yuan.  A lot of people around the world like dollars, they want dollars, they actually don't want their local currency.  But it's very difficult to get dollars in a lot of these countries, and this is where the Strike and crypto dollars and crypto dollarisation is a compelling private, organic development, not an instrument of national state power.  The US Government has not designed this as part of their objective, or strategy, to counter China; it just happened organically that people find value in these dollar-based stablecoins, which have a symbiosis with Bitcoin.

So, to a certain extent, dollar-based stablecoin proliferation in the emerging market is a tool for those countries to both disentangle themselves from this encroaching digital yuan system, but also to do it in a way that's not necessarily tied to an equivalent US system; it's not a US CBDC versus a Chinese CBDC, it's a third independent, dollar asset that they can hold.  And they can now exchange it in peer-to-peer ways, and participate in an ecosystem.  And I think as Bitcoin monetises, it greases the skids, greases the rails, for that crypto dollarisation.  So, there's sort of a natural symbiosis between as Bitcoin spreads and Bitcoin's adopted, and the industries in those countries become more sophisticated around Bitcoin and the different financial tools that are available, apps like Strike, that the dollar just comes along for the ride. 

You can look at a country like Nigeria as a good example of these two systems starting to come into -- this is kind of the battleground.  And because the leadership in Nigeria, and I'm not an expert on Nigerian politics, but China has made Nigeria a pretty priority target for BRI, and Nigeria has their own CBDC, mixed success, but they have strong relationships with China, they have bilateral currency swap agreements.  So, at the elite level, there is an alignment with China, and obviously a strategic objective of trying to get the digital yuan more formally tied in with the Nigerian CBDC.  But the organic individuals in the population don't want that.  They're using Bitcoin, they're using stablecoins. 

So, it's going to be interesting to see how that evolves in a country like Nigeria, where you have those two phenomena happening.  One is a top-down, imposed from the government, more China inserted in this organic dollar Bitcoin, kind of phenomenon.  So that's I think, for me, going to be a test case for how these systems are going to compete with each other.  And again, entirely independent from any US initiative, it's just happening on its own. 

Part of my point is, it's fighting the fight that you're not fighting, and it's doing it in a more effective way than you could probably ever try to do.  If you tried to come out with a CBDC and sell a CBDC to the Nigerians, I don't know, are they going to take that versus the one they've already been using for years, that's already working, that already has market penetration and already has a bunch of apps and is effectively adopted?  Just let the private sector do its thing, and it's winning the fight on its own.

Peter McCormack: Is that why there hasn't been too much overregulation of digital dollars, Tether, USDC, etc, because there is a recognition that it's doing this job internationally?

Matthew Pines: I think, again, the government is not a monolith.  So, there are some people in the government who, their job is counterthreat finance and anti-money laundering.  And, when that's your job, that's all you care about.  You don't care about a counter China dollarisation ten-year strategy; that's not your job, that's not in your performance review.  Your performance review is, "Stop sanctions of Asia, stop money-laundering", and for you, if that's your job, then Tether is maybe a problem for you.

Now, I think there's a mixed story there.  I'm not an expert on Tether, but I think it's been castigated for certain of those nefarious uses, but I also think it's been used very positively in supporting some of these crypto dollarisation efforts.  So, I don't know, it's what your perspective is in the government of what your job is; what you're rated on and what you're concerned about is usually going to be a very narrow slice and usually the problem of today, as opposed to more of a strategic longer-term objective.

I think that's part of the thing I'm trying to point out in the paper, is we need to think more strategically about these things.  Yes, there's going to be these problems, these issues you have to understand that may be more tactically relevant to particular agencies, but what is your approach to this phenomenon at large?  And, how can you take advantage, or at least not hurt the sort of organic forces that are trending in a positive direction? 

But yeah, I think things like stablecoins are top of mind across the board, when it comes to regulations, much more so than Bitcoin per se, because of those very issues, because it is a form of the dollar that is outside the control of the US Government.  And it's not exactly a new thing.  The whole Eurodollar system, which basically was birthed in the 1950s, because the Soviets needed to trade with dollars and they had bank accounts in Europe, so it allowed them to store their dollars and trade, and those weren't routed through a US bank.  So, there's always been offshore dollars, and the majority of dollars have always been offshore through banks. 

But I think, after 2008, one of the major reforms was to try to clamp down on dollar proliferations for crazy derivatives and offshore leverage that ultimately, if it blew up, central banks would have to come in and bail it out.  So it was like, "If we're going to have to bail this system out, we need to control it".  And so, they've tried to put in mechanisms to limit proliferation of offshore dollars, and stablecoins are now a new version of that.

So, I think what you could see is regulation of stablecoins, especially in the United States, where they're essentially forced to hold cash equivalent, basically Treasuries, on their balance sheet.  And this is another thing I point out in the paper, which if you think that the US Government's fiscal position is not going to improve any time soon, you're going to need to find more buyers for US Treasuries.  Russia's not going to buy anymore Treasuries, China's probably not going to buy any more Treasuries, euro area, they've got their own issues. 

Hedge funds will buy Treasuries as much as they can trade it, and so you've got a bunch of entities like pension funds and insurance companies that you can force to hold Treasuries, like banks, because they essentially have to have a certain amount of "safe and liquid collateral".  Well hey, look, there's stablecoin that is like another buyer; you can force them to buy Treasuries.  So, as another entity you can sort of cram Treasuries into, stablecoins are great. 

So I think they're going to regulate stablecoins in some fashion, and I don't have a crystal ball to see how much that's going to compete with, or become intertwined with, some CBDC, but I think there is going to be something like whitelisted, regulated stablecoins, that are going to have to have some -- and that's where the fight is now, right, how much do they have to have a banking charter, and they need all those other rules that they don't make loans per se.

So, that's where the fight's going to be.  I think there's going to be some resolution to that probably though in the near term.  And then, yeah, if you're thinking a few years ahead, you're going to see a proliferation of dollar-based stablecoins around the world, and that's actually going to be good for the US, to the extent that now you have a new demand source for our Treasuries.

If you think about it, actually as Bitcoin monetises, if Bitcoin gets bigger, the demand for dollar-based stablecoins will also get bigger.  People want to trade, just the overall market is going to get larger, which means as Bitcoin gets bigger, there's more demand because of the regulation for US Treasuries.  And so, as a synergy then, you can imagine the engineering through the stablecoin regulation between, "Okay, Bitcoin's allowed to succeed and grow, but we're going to put in these mechanisms that essentially hitch the Treasury market to its growth", to a certain extent.

So, as Bitcoin monetises, the endogenous demand in the system for US Treasuries also rises.  And so there, instead of thinking of Bitcoin as a threat to the dollar, at least if they keep this mechanism engineered correctly, it could be hugely beneficial.

Peter McCormack: So, what was your response to the China threat within your report, because one of the things we were discussing recently, myself and Danny, but I don't know if you've seen Balaji's comments regarding ascending and descending nations, we need to stop thinking of First, Second and Third Worlds; there's ascending and descending nations.  There's certainly an argument that China's an ascending nation and perhaps the US is a descending nation.

One of the reasons that China is perhaps winning at the moment is because it has so much control, because it is so authoritarian.  For the US to be able to compete with that, it's not like the US is going to go down a control route, and are they going to do a better job of control?  So if they aren't, does the pendulum swing the complete other way, and it wins on a freedom? 

Traditional American values of freedom and decentralisation, the Republic is decentralised, America's traditionally considered a free country, free speech, values of freedom; is that how it wins?  Is that the countereffect, almost to not push maximum freedom, but as much freedom as possible, and try and sell that around the world, which comes with a currency that is free, it comes without surveillance linked to it?

Matthew Pines: I also think in timescales, because I think it's important to separate what we can plausibly expect to happen in the next 12, 18, 24 months versus what's going to happen more in the longer term.  And I think that hypothesis is plausible over the longer term.  Just the forces of decentralisation, not just in Bitcoin, but also in technology, just in general social attitude that I think is now irreversible is going to lead to, in America and some other countries, that general political force. 

But I think it's going to take time to get there, and I do worry that in the short term, especially if you have periods of acute crisis, up to and including war, governments don't relax controls in wartime, they tighten controls in wartime; it's just the nature of when you're fighting a strategic competition, or even existential competition, all bets are off and central powers need to consolidate power in order to try to fight that competition. 

So, that's what I worry about in the near term, is you can imagine scenarios where we get into an acute crisis, geopolitical confrontation, not just with Russia, but potentially other states like China; and in those scenarios, the central government of the United States is not going to -- they're going to be acutely aware of anything that could disrupt the order, and that's what I worry about.  And that's part of my objective, to sort of diffuse that latent impulse to cramp down on something, because you're in a crisis environment.  And sort of, "Okay, think about it strategically ahead of time, come up with smart policies before a crisis situation, so you don't make ill-considered, rash moves in a crisis environment".  But again, you never know how that's going to evolve.

But I do think over the longer term, yeah, Balaji's thesis is well-founded, although I've studied China quite a bit, I've been to China a number of times and again, it's hard to -- it's an easy thing to model with some numbers.  If you look at Ray Dalio's numbers, and he's got some great charts in his new book of rising powers and declining powers, and some of those key metrics, how to measure relative power; and I think those are pretty definitive.  And if you look at the chart, you can see American power peaked 20 years ago, and it's been in a pretty rapid descent, and China's power has been in a pretty rapid ascent.  We're not quite crossing, but we're close. 

You can look at all sorts of measures, like global trade, GDP.  Across a number of dimensions, China is rising to become a peer competitor in the US global system, and the global system has not evolved to accommodate that yet.  The question is, what accommodations will be forced; what accommodations will be made?  I think that's what the US is trying to figure out, how do we balance, because we don't want to get into a war, I don't think anyone wants to get into a war.

But history teaches us, when rising powers confront status quo powers, it usually ends badly.  The classic Thucydides Trap.  And so, how do we avoid that, I think is the key strategic geopolitical question.  I also think what this crisis is telling us with Russia is, if you look at the world system, what's very different now, as I mentioned, Russia and China are really rising in tandem over the past 20 years, and forming a Eurasian power block, that now has a no-limits strategic partnership.  You do have real politic.  You can look at the moral judgement aside, just look at hard power.

Russia essentially has control over the marginal cost of a barrel of oil and food essentially; China has marginal control over the cost of goods, production and labour; and the US has control over the marginal production of dollar and credit.  When those three legs of the stool of the global economic system were kind of in frenemy mode, then the system worked.  Global trade, globalisation, dollarisation all kind of worked.

Now, we're seeing those core elements of the power system not just become disaligned, but rupture radically, and that's where events of the past two weeks have a strategic -- we can't go backwards.  This is now a disjunctive rupture in the global system, and we're still trying to figure out what the consequences of those are going to be.  And it's not going to be just an easy resolution to the way things were. 

There's a fundamental shift in how the global system is going to have to reorder itself, and I think it places a renewed urgency for the United States to figure out, well, the power we held in that system, the control over the marginal cost of dollar credit, if you compare it to the other two, was the dominant power.  It allowed us to price those things, it allowed us to control the demand for those things, because you can essentially control the marginal price of those things.

But when one element of that stool says, "No, we're not playing that game anymore", that system isn't going to work anymore.  So, you can imagine scenarios, and some senior well-respected analysts on Wall Street have woken up to this just recently and started to see, "What does this mean for the dollar system?  What does this mean for the fact that China can now essentially gobble up cheap commodities from Russia, at a time when the rest of the world's going to face runaway inflation?"

So, we're going to face $150-barrel oil, or something like that or more, and food riots, because wheat and phosphate and other critical commodity exports are going to be severely constrained.  You're going to see runaway inflation in net-net importers of stuff.  We have to import most of our stuff.  Luckily, energy we're pretty good at, but the rest of the world, not so much.

Whereas China -- we're still very vulnerable to acute inflation of those things, whereas China can just buy up cheap Russian commodities.  This is almost analogous to the subprime crisis, where you thought that you had good mortgages and bad mortgages, and they were basically all rated the same, so you could essentially trade them the same.  That's oversimplifying, but basically you had the market did not discount the value of subprime mortgages appropriately, and then when they all of a sudden had to value them appropriately, a whole bunch of other derivatives blew up.

Now, in the commodities market, Russian oil is subprime oil, it's now bad oil; you can't trade it.  So, there's a lot of potential financial risks that could come from that.  But what it also means is now essentially, China can buy up distressed assets, and in this case they're core commodities: food, oil, other critical inputs.  And, China has a voracious appetite for those things.  And from a strategic perspective, Russia may be really bogging themselves, and Ukraine, hard to say how that's going to play out, but it doesn't seem to be that it's going to result in a net win for the Russian economy, so net-net, they're going to be weaker and more reliant on China.

So now, China gets essentially to tuck Russia under their wing and get access to cheaper commodity imports; while the West faces runaway inflation that's going to really strain our fiscal position, and potentially threaten our core monetary structure.  So, I think that's what I worry about in the near term, is just what happened in the past two weeks took these long-standing trends of a rising China, and kind of this Eurasian alignment of power that eventually was going to challenge the global order, and then brought everything to a head.

When you have a crisis like this, you make strategic decisions on a weekend.  It's just like Lehman Brothers, the crisis happens on a Friday, and then bailouts happen on a Sunday.  You had the invasion on a Wednesday or a Thursday, and you had the Central Bank of Russia being sanctioned on a Sunday.  That was an unprecedented strategic decision that they made very quickly, which I'm sure you could argue in the history books about the merits of that, but that's a strategic decision that you made very quickly, and that you probably could not have conceived of the second- and third-order consequences.  And that's what we're now going to be seeing in the next few weeks and months, is what are the second- and third-order consequences to the global system, the global order, as these cascading effects unfold.

Peter McCormack: What is the role in Bitcoin against Russia on that long-term scale?  What is it you think the role is?

Matthew Pines: So, for me, on a long term, I hesitate to make long-term predictions, because I think, especially in the situation we're in right now, there are so many scenarios.  The aperture of possibility has opened up much wider than I thought three months ago.  And so, the range of scenarios goes from really, really, really bad to decently good!  But I really don't have a hard assessment of where it's going to shake out.

But I do think, if Bitcoin is successful in the near term, and you have to separate out timescales, it just needs to act as an alternative.  Because, I think one of the things the lesson of both Canada as well as the Russian Central Bank move, is that what you thought was a risk-free asset isn't a risk-free asset.  And the world economic system was predicated on there being risk-free assets, namely dollars and the bank and US Treasuries for foreign central banks, that could be your just go-to savings vehicle, whether you're a nation state or an individual. 

What we're finding is that there is a risk to those risk-free assets.  There is a tail risk that maybe isn't so small that now you have to discount, whether you're an individual citizen, or you're a central bank reserve manager.  So, individual citizens, their decisions en masse have a collective impact, but take some time.  Foreign central bank reserve managers, they also have a lag, but those are going to be more strategically important.

So, what for me is going to be fascinating is, obviously gold's probably going to the first thing they go to as a neutral reserve asset, at least in the near term, just because that's the next closest thing.  But I do think you could see on the margin certain countries, like Singapore, you could see other maybe more forward-leading countries in the Middle East, that decide, "Hey, you know what?  Maybe we'll take a 5% allocation in our reserves to Bitcoin".  I think that's what a year ago was completely hypothetical.  I would have been, "Yeah, maybe one day, some central bank that's not just playing around, or some podunk country", but a legitimate central bank with a material amount of capital moving into Bitcoin, it was entirely a theoretical proposition.

I think what's happened in the past two weeks has made that now plausible in I don't know how long, but you could see it in the next year or two.  I think that, to me, is kind of a game-changer.  It's like, that just shows -- and whether Bitcoin can accommodate that, right?  That's a matter of, okay, it's now going to play in a different game.  Now it's going to play at a whole other level, and I just think things happen faster than necessarily even hardcore bitcoiners are psychologically prepared for, and what are those institutional structures' response to that going to be? 

Institution structures don't like change to happen too quickly.  They want it to happen on a predictable course, they want to have strategic plans that have a multiyear set of actions, bureaucrats don't want to have to work on the weekends.  So, they don't want to see this system just break.  So, I think it behoves policymakers, at least right now, because the timescales have certainly been dialled up, that they don't have time to sort of coast, they actually have to get smart on this thing and understand what's happening and come up with a coherent strategy.

Peter McCormack: And is it plausible for the US Government to take a 5% position?

Matthew Pines: Again, lots of things are possible.  I also think it may not even be necessary.  We have plurality of the mining hash here, we probably have a plurality, maybe even a maturity of actual Bitcoin in custody, whether it's in institutional-grade custody, individual holders, in the United States; and as long as we remain committed to the rule of law, we stand to gain from our national balance sheet from Bitcoin's appreciation as a reserve asset.

Peter McCormack: Well also, the innovation and the companies, the majority of the large Bitcoin companies are here.

Matthew Pines: Exactly, right.  And not just the market value, but the intellectual capital, that people are attracted to come to the United States, it's a safe place for Bitcoin, it's a safe place for innovation.  That is a compelling theme that even in the absence of these geopolitical trends, would be really positive, and I think it just places even more wind behind those sails.

So, yeah, to a certain extent, I can imagine the United States having some allocation to Bitcoin in the far future, but I'm not sure that makes a material difference, as long as they -- for me, I want the majority of Bitcoin to be owned by individuals.  So, if the Federal Reserve eventually -- they'd have to change some of their rules, or hold some special purpose investment vehicle to hold an asset like Bitcoin. 

I don't think it's a plausible thing in the near term, especially because I think the way that it's going to evolve is, Bitcoin as a reserve asset in the near term is useful for the United States to buttress trust in the US Government; because the reason you hold a Treasury security in the first place is you have trust in the US Government.  They're going to pay you back, they're going to maintain a relatively stable fiscal and monetary policy, so you have confidence that you put your money in a Treasury, you're going to get your coupon paid out, you're not going to lose in real terms.

Well, we're obviously seeing a structural trend towards financial repression, where bondholders are going to have to get hosed, and we've put in a whole bunch of rules, Basel regulations, other kind of capital requirements, that lock up the big pools of capital and force them to buy Treasuries, which makes Treasuries a less attractive asset to hold.  But if Bitcoin can help, at least on the margin, sustain a bid for Treasuries in this transition period, where people, if there's a lot of Bitcoin that's worth a lot more in the United States, that improves the taxable base for the US Government in the long term, which improves the fiscal health of the country, essentially recapitalising.

To a certain extent, if you think about right now, the two candidate neutral reserve assets that exist are gold and Bitcoin.  We hold a lot more Bitcoin relative to the rest of the world than we hold gold relative to the rest of the world.  So, if you were to monetise gold, and shift to a new gold peg standard, Russia's going to win a lot, India's going to win a lot, China's going to win a lot.  We'll win too, because we have a decent amount of gold, but net-net, our adversaries gain more than us, if gold were to be remonetised.  And a lot of gold bugs like Peter Schiff would win, so we can't let that happen!

Whereas Bitcoin, China's kicked Bitcoin out.  So, if Bitcoin were to monetise marginally more than gold were to be remonetised, the US would gain disproportionately relative to China.  So, if that's the endgame of this monetary phase transition to a new regime, where you have a neutral reserve asset that underpins still fiat currencies and Treasury issuance, then Bitcoin is our ace in the hole.  The game that Russia and China seem to be moving towards is a multicurrency regime, where gold is pegged to essentially the price of commodities.  So, they control hard assets, in their mind.  They control hard assets like gold, they control hard assets like commodities, energy, food, etc.  We control the printing press, and we have been able to keep that system going.

But if the world shifts to a hard-asset-backed regime, they're going to be net winners in that regime.  So, that's why the US is fighting so hard against it, because we would lose if that were to be the new regime, or there'd be a rebalance of power.  I wouldn't say we would lose strategically, but it would be a new balance of power arrangement.

Peter McCormack: But also, large parts of the world would, as you mentioned, prefer to have access to dollars, and we've seen that with Tether.  We've seen that in certain markets whereby there's high inflation.  People have talked about, "Buy Bitcoin", but reality is they want Tether.  You speak to Alex Gladstein, if you're in Palestine, you want Tether, you want stablecoins; if you're in Turkey, you want Tether; if you're in Argentina, you want Tether.  You might have some Bitcoin, but that relationship between Bitcoin for the long term, dollars for the long term, and the fact that most of these exchanges have that natural on/off between dollar and Bitcoin, which doesn't really happen with the digital yuan and Bitcoin, actually strengthens the US on both fronts.

So, there's a logical reason to promote Bitcoin and have the world remonetise on a Bitcoin standard.  Add to that, the US tends to lead the way on policy for the rest of the world.  If the US banned Bitcoin, or overregulated Bitcoin, Europe's going to follow, other parts of the world are going to follow.  But if the US leads the way with that, perhaps you're going to see countries, certainly the UK, because we're kind of lapdogs for the US, sadly, I can almost see our policy shifting to match the US's.  So, there's a massive incentive on the economic side to become pro-Bitcoin, stablecoin, at the same time.

Matthew Pines: Yeah, and there's competing -- there are going to be certain winners and certain losers.  Wall Street have pegged their fortunes to the sort of Treasury machine.  US Treasuries are the foundational collateral asset in a global dollar derivative system, and there's a lot of money to be made by essentially being close to new Treasury issuance, and then being part of that whole chain of repo and reverse repo transactions, that allow you to collect a spread on every transaction made with a Treasury around the world.  And Treasuries, that's the primary use case, is as funding collateral in this massive global dollar system.

Those people that play in that world, they have some of their fortunes pegged to -- Treasuries need to stay valuable.  I think my point is you want to eventually do this transition where you see the new reserve asset at the base of that funding pyramid, but a reserve asset that actually can sustain, that actually has people's faith in it.  And if people lose faith in the viability of the Treasury long term, then the whole global dollar system can collapse.  That's where the Fed has been in stop-gap mode, ever since really, you could peg it to the taper tantrum of 2013. 

But really, it accelerated in March 2020, where everything that they've tried to do is try to patch another leaky whole in the Treasury dollar system, and all this obscure technocratic language they put in, things like the RRP, Reverse Repo Programme; the Standing Repo Facility, SRF; FIMA, the Foreign and International Monetary Authority; central clearing, which is going to be the next thing that they come up with; all these desperate attempts to try to keep a lid, or keep the Treasury market well managed, which tells me that they recognise it's weak.  You wouldn't need to do all of these emergency facilities if you had confidence in the reserve asset.

That was, for me, a longer-term trend.  The things that have happened with Russia and the central bank sanctions, I think, is also going to be a lightbulb going off in a lot of other people's minds, about confidence in that foundational reserve asset.  So, if you have another foundational reserve asset that you can start to monetise, that you control more of, you can keep the system from breaking.  It doesn't have to be a radical collapse rebuild.  That could happen and you want to avoid that, so you want to try to think ahead of time, and think through a strategy, so you can transition to a new system with that with minimal distraction.

The other key point about Bitcoin is, as a reserve asset, individuals in Nigeria can't hold any US Treasury; only their central banks.  So, there's an inherent power imbalance that that system sets up, where the reserve asset of the world can only be held by certain institutions, which means those people have the power.  If Bitcoin, as a neutral reserve asset, is held by the majority of the population as opposed to the central government, that's just the global balance of power, and I don't think we've thought through the second-order effects of that, where not just a money which is useful for medium of exchange, but most people don't spend all their money in a day. 

Most of your wealth is in a reserve asset, is in something that you think is going to hold long-term store of value.  That's where the majority of the economic energy of the world exists.  So, when that exists in a form that's like Bitcoin, I think you have dramatic second-order effects that would be positive for democracy and individual participation in their governments.

Peter McCormack: Are there other parts of the economic side of things that we've not talked about here, economic inclusion?  How much do you consider wealth disparity as a part of national security?

Matthew Pines: Very much so.  I mean, if you look at some of those long-term trends, which I think also come from Ray Dalio's book, of inequality structurally, and how it aligns with periods of social instability, and you can see this on the map, like the 1930s, rising inequality, period of populism, rise of fascism, rise of communism, social order starts to break down, very bad for national security.  And I think it's not too much of a stretch to look at what we've been over the past few decades in the United States and other countries around the world where, as rising inequality has split the partisan divide even more violently, you've seen these pernicious social effects, which start to have impacts on your national security.

If you don't have your house in order, how are you supposed to protect power?  If you can't run an effective election, or there's questions about election, how are you going to spread democracy around the world?  So, I think those do have critical impacts on your ability to maintain effective power on the world.  So, if you don't have stable society, if you don't have a reasonably fair distribution of wealth, you're going to have social instability, and that weakens you as a country.

Peter McCormack: And with Bitcoin, you obviously see an opportunity for changing wealth disparity, or reducing wealth disparity, not guaranteed?

Matthew Pines: It's hard, right.  The topic of wealth inequality and income inequality are different things.  I think net-net, the people that are going to gain from Bitcoin, at least in my hope and I think this is relatively borne out, they were not hedge fund billionaires.  A few of them got into it, but most institutional Wall Street were not the early Bitcoin adopters.  It was cyberpunks, people on the fringes of society.

So, you have a rebalancing of wealth, from legacy elites to maybe a new elite, and I think net-net you see over time, because of Bitcoin's finite issuance if you want to pay with Bitcoin, you have to give it up, which means that there's inherent redistribution of Bitcoin in a Bitcoin economy, from people that have Bitcoin, people that don't have Bitcoin.  You've got to sell a goods or service to get your Bitcoin, but that leads to a distribution of Bitcoin.

Now, overall long term, questions of inequality are not just questions of what the monetary system are.  That's a critical input to it, but it's also, what's the prevailing political jurisdiction; what's that system?  If it's a heavily redistributive system, then you could see less wealth inequality.  If it's not a redistributive system, you could see more wealth inequality.  So I think Bitcoin itself answers the question, or strictly determines, a certain distribution of wealth, it changes the structural pattern of how Bitcoin would get distributed in an economy; but ultimately, wealth inequality comes down to politics, it comes down to whether there's a sufficient legal regime that people buy into, that they participate in, that involves transfer of wealth.

To a certain extent, Bitcoin does enable exit, as we said, more than the existing system does, so you could see some more of a reordering around different political systems where people say, "Hey, yeah, I'm more communally-oriented, so I'm going to participate in this system over here that is going to involve more distribution of wealth, or not, or I'm going to associate with a different system that's more [like I say] libertarian-oriented".  So, I don't think Bitcoin itself will determine which of those succeeds, but I think it opens up the possibility for more of those types of, you could say, social experiments to take place and people to associate with different political orders that they find in align with their values.  

Peter McCormack: Okay.  Let's talk about energy security and the role of Bitcoin within the grid, within stability of the grid.  Talk to me about that part, because it's just a growing area of interest.  Obviously, we've had Troy Cross on the show, we've had him again with Nic Carter, I spoke to Margot Paez, and this is an interesting conversation, because there are people who don't want to buy into this, because they're anti-ESG, they think it's propaganda, whatever; but at the same time, it's a fascinating thesis that Troy and Andrew have come up with that other people are taking a lot of interest in, and obviously it's covered within your document, you mentioned it at the start of the show.

Matthew Pines: Yeah, it's one of those things that was fascinating to me.  I had no idea about this really six or nine months ago, and it really was revelatory to me to think about how Bitcoin could have a transformative effect on the energy system.  And it's the near-term things we can see right now, but then there's also the far future, which I know bitcoiners love to speculate about this hyperbitcoinised world future of human civilisation.  You can have those great bar conversations.

But I think practically speaking, in the near term, there are some really tangible and material things we're going to do see Bitcoin have effects on in the energy grid in the next few years.  You're already seeing some pretty powerful case studies in Texas, in ERCOT, where a number of companies are engaging in very sophisticated ways with the grid and with renewable development.  So you see, I think, a few different patterns of development, and that's how it speaks to the sophistication of the market here, and how the industry has sort of popped, I won't say out of nowhere, but become a real force and a relevant consideration for how energy systems and regional energy systems do some of their planning in their long-term design.

So, things like monetising stranded energy assets, folks have talked at length about flare-gas mining, stranded hydro, stranded wind, where it can't be connected to the grid, so you can monetise the wind generation before you had time to build out connection to the grid.  But then, once you're actually connected to the grid, certain grids, especially in Texas, have become much more sophisticated about offering what are called ancillary services, which grids are dynamic systems, and they try to keep things to a stable frequency, roughly 60Hz.  And when load comes on or load comes off, that frequency control can bounce out of their threshold.  And they have a bunch of demand-response programmes, where they tell some factory or industrial production to turn off or to turn back on, and that tries to keep the grid stabilised.

Bitcoin is a unique form of controllable load, because they can scale up and down their power demand, and that's exceptionally valuable to the grid, because now they can have much more fine-tuned response to keep the grid stable.  And as we bring more electricity generation onto the grid to meet some of our net zero objectives in the future, we need to have much more flexible load; I think Troy Cross's number was like ten times more flexible load on the grid.  And right now, the typical sources of flexible load cannot do that.  They can't just create ten more pulping warehouses.

Bitcoin's the only industry that could plausibly scale 10X and offer that type of flexible load to the grid, so to me it's a strategic sort of manna fell from the sky.  We had this impossible goal, we need to 10X the amount of flexible load on our grid, there's no industry that exists that can do that for us; Bitcoin shows up.  It's like, "Yes, we're literally designed to do that".

Peter McCormack: You've got the grin that most people have, and I think it's because it's kind of ironic, because Bitcoin has historically been attacked because of its energy usage, and now it provides this new solution, something that Satoshi would never have planned.  We originally started with GPU mining.  So, to get to this point where the attack vector has now become the defence is super-interesting, and that's why I always see the grin on people when we discuss this!

Matthew Pines: I think there's going to be a lot of those stories too.  We're still at the first innings of this, and no one could have predicted this a few years ago.  I think about, what else are we not seeing that's going to be coming down the line as Bitcoin scales, and what are those second- or third-order industries and industrial effects that we're just now starting to maybe get an inkling of.

One that I see a little bit further down the line is chip manufacturing; again, also critically connected to strategic national security is chip manufacturing, semi-conductor fabs.  Right now, the world relies pretty much on TSMC in Taiwan, which itself relies on ASML, that's a Dutch company, for some of the most advanced technology on the planet.  The most advanced technology human beings have is semi-conductor manufacturing, pretty much, and the world is reliant on this one factory, which makes something like Taiwan much more strategically important than it otherwise would be. 

If TSMC was in South Korea, or was in the United States, there would still be the need to have the one country/two systems, thing and yeah, we'd be worried eventually about a Taiwan takeover, but it wouldn't have as much of a critical national security impact to our supply chains.  Most of our high-technology gadgets require these semi-conductors.

Peter McCormack: Well, we've seen the issue with logistics around semi-conductors during the pandemic, we've seen the issues in a range of things: cars unable to get their chips ready, because most cars now are essentially computers.  I tried to buy my dad a car and there was a delay.  A lot of this shit's happening.

Matthew Pines: And I think you're seeing a deglobalisation trend under way.  I also worry that it's going to be somewhat disorderly in the next few years, because conflicts force people to a form of autarky that maybe they didn't have time to prepare their domestic economies for.  So, you see a lot of distortions in the markets, where you don't have time to, say, reshore production.  And, semi-conductor manufacturing takes several years, if not many, many years.  We cannot just pick up TSMC and relocate it to Arizona. 

We're trying to create some of those factories that have the fabrication facilities, in Arizona.  They're multiyear projects, and even then they usually rely on critical inputs and skills.  You can put the machinery there, but you need highly-trained engineers.  You need some of the world's most in-demand, PhD scientists, who are going to be bid for by China, and China's been offering TSMC engineers NFL-level salaries.  So, one of the things I'm worried about is, yeah, we can rebuild these chip fabrication facilities here, but those engineers in Taiwan, would they rather work on the mainland; they speak their language, same culture, same food, for a ton of money, or relocate to Arizona?  I don't know, it's going to be a tough sell. 

So, I worry that we don't have, long term, we need to think through more about not just the hard facilities structure, but the stem production, where we need to create engineers, create scientists.  Critically, human civilisation is essentially downstream of technology, which is downstream of physics.  If we're not investing in science research and physicists and scientists, we're going to lose in the long game, no matter how much money you through at building a chip fab.

So, in my mind, this is where you start about thinking about the second- and third-order effects of Bitcoin as, well bitcoiners, just like the defence department, have an extreme incentive of removing that single point of failure, or suppressing costs; so, that means vertically integrating your chip design, your chip production.  So, you can imagine a scenario where Bitcoin is driving, even more powerfully, the incentives in the market to innovate in that sort of environment, but also bring it into a jurisdiction that they think is politically reliable, and maybe Taiwan is not politically reliable in the long term.

That's where you see Bitcoin, as itself, as a market force is supporting national security endeavours, but doing it on their own dime essentially.  So, if you want some support to do that, maybe help Bitcoin succeed, and it will act as a force enabler for those objectives.

Peter McCormack: These changes to industry we're talking about, mining, stabilising the grid, chips, and talking about the fact that there's going to multiple other industries that are going to be supported or stabilised with Bitcoin, I think that's one of the most fascinating things about Bitcoin now, is that it's gone beyond the point of just peer-to-peer money, but actually it's this entire organic beast that is changing so many things we're not prepared for.  And to me, it fascinates me.

Matthew Pines: And I think, the other part is the social effects.

Peter McCormack: Of course.

Matthew Pines: You see, I mean Austin, the city we're in, is the network effect, intangible cultural effect of having a new industry get created.  There's the companies that get created, there's the innovation, there's the capital raises.  All that's great, jobs, money.  But then there's the intangible cultural energy.  And ultimately, societies need that in order to survive long term.  It's not just dollars and cents, you need a sense of cultural objectives, you need to have the flourishing that then comes from having wealth.  Then you can invest in things that are maybe not pure necessities, you can invest in art and music and have other cultural production.

Peter McCormack: Modern art.

Matthew Pines: Yeah, each to their own, right!  I'm not an art critic.

Peter McCormack: I want to buy a Rothko with Bitcoin. 

Matthew Pines: I've got my 5-year-old's paintings on the refrigerator, those are my favourite art.  But yeah, I think it seems like Austin is a really leading-edge example of how you can have Bitcoin manifest a more intangible cultural impact, which cities have an economic incentive to generate.  I think you've seen mayors start to compete for this.  They don't even understand what Bitcoin is, they're confused sometimes, "Crypto, whatever".  But I think you're seeing net-net the general evolution of recognising this as a trend, not just a technology trend, peer-to-peer money trend, not just a neutral reserve asset for the world on this geopolitical level, but just as a cultural phenomenon.  It's a social phenomenon at its heart.  And that's just getting started, I think.

Bitcoiners have been around for a while, bitcoiners talk to other bitcoiners about Bitcoin all the time.  It's hard to imagine how that's going to play out when there's 10 times more bitcoiners, or 100 times more bitcoiners, what that means for the broader cultural production, and that's what I'm also excited about.  That's the impossible to predict part of it.

Peter McCormack: Okay, talk to me about American values.  I know you mentioned it's not the strongest part of it, but it's still relevant.

Matthew Pines: Yeah, well I think again, this is where you can be cynical, you can say, "At the end of the day, it's just hard power, just money, and that's what makes people make decisions", so I don't want to oversell the values piece, because I recognise ultimately, at the end of the day, people respond to incentives.  But I do think part of at least what we hold up as our national ethos, is worth investing in, and worth finding any tools we can actually apply to support it. 

I think folks like Alex Gladstein of the Human Rights Foundation have really articulated this in the sense that Bitcoin is not just a human rights' messaging tool, it's not like you're just doing an initiative to generate awareness and fundraising.  It's a tool, it's a tangible resource and a tool that people can use to better themselves.  And so that, I think, when we say Bitcoin is freedom money, is one layer that's just part of the abstract, "Oh, I can hold it, I can transact with it", it enables that idea of freedom.

But for me, it's tangible freedom, to actually have the tools and technology and wherewithal to have autonomy, to actually live your life the way you want to live your life, and that's practical freedom, and do you have a practical tool that can enable that freedom?  And so that's where, for me, the rubber meets the road, where Bitcoin as a freedom tool is not just a highfalutin statement, but is like Jack Mallers developing a technology that gives a new capability in the hands of individuals around the world that they didn't have before, that enables a certain type of autonomy that didn't exist before.  Freedom is going up in a measurable way, not just in an abstract, conceptual way.

So that's, for me, the more powerful relevance of Bitcoin as an enabler of American values.  It actually allows us to tangibly spread those values, not just as a human rights campaign, we flew in some VIPs, and we had a big dinner and we talked about human rights and we went home; it's like, well no, there's actually a leave-behind, there's a tool that people now have that they didn't have before.  And the US Government has spent a lot of money over the years trying to develop tools like that, and a lot of them have been not very effective, or we've thrown money at the problem and it's not very useful; lots of stories about just wasted aid money.

Well, here's a tool that's being organically adopted.  And when people adopt something, they mean it's valuable to them.  And when they use it in their day-to-day life, it's much more impactful than just being airdropped and forgotten about.  So that's, to me, the more powerful story of Bitcoin alignment with American values, is how we can tell the narrative is in alignment with the core ethos.  But the more powerful aspect of it, is it's actually useful, and that's I think the key takeaway.

Peter McCormack: Well, you're essentially exporting freedom to the world?

Matthew Pines: Yeah.  In a certain sense, you want to give people -- and I think that goes back to the geopolitical conversation also translates to individuals.  The current system around the world is, resources are nationally concentrated and concentratable, and systems of government and systems of power are going to find all the mechanisms they can to try and concentrate those resources.  And when the money system, such as it's been designed, relies on a reserve asset that only a few select institutions can control, and the limits of access are extremely high, and therefore the knock-on effects of the distribution of wealth and power associated with that become concentrated, a Bitcoin adoption acts as a decentralising force, but that empowers individuals around the world.

That will run into frictions.  It's not, I don't think -- I'm also realist enough that I don't think it's literally an omnipotent force.  So, I don't think it's inevitable per se, maybe in a long enough timeframe, but I think it's a powerful force that didn't exist before.  And to the extent that the United States desires the outcome that that force is achieving on its own, should remove the barriers to its success.  So, I think net-net, I don't think the United States needs to do a whole lot proactively to support Bitcoin.  It's almost a do-no-harm approach.  It's already doing the things that you want to achieve, and it's doing it on its own.  And when we say "it", it's really individuals doing it, because they're incentivised and driven by the Bitcoin motivation structure that gets set up.

That to me is like, there's lots of other projects that want the government to carve out a certain special status or protection, or legal designation.  All power to them.  Bitcoin doesn't need that, Bitcoin just needs more hands off.  It would be great if they were smart about it and understood how to leverage it in clever ways; but at the end of the day, it's going to be successful.  So, just make sure you're in alignment with that powerful force.

Peter McCormack: Don't get in the way, yeah.  Me and Danny were talking about the potential downsides, and it was funny; once we started running through them, we were like, "Are these downsides?"  There is a chance with the growth of Bitcoin that it actually starts to devalue the dollar.  More people will hold it, less people want to hold the dollar potentially.  Also, tax and spend, it's a harder asset to tax, unless you have masses of layers of surveillance, which we don't really want, because that is putting a barrier in the way.  It could lead to smaller government maybe, nothing ever usually leads to smaller government.  But then we started to release they are perhaps downsides for the state itself as a growing beast.  Do you consider downsides, and what are the things you consider with this, or risks?

Matthew Pines: Yeah, and I think we need to be intellectually humble.  Trying to predict the future if Bitcoin didn't exist is an exceptionally difficult task.  Hedge funds, presidents, governments around the world, their job is to look to the future, predict, and then take actions to steer towards a favourable outcome, and that's usually not successful.  So I think, when you're trying to predict the future without Bitcoin, it's exceptionally difficult.  Trying to predict the future with Bitcoin adds an additional layer of complexity.

So, I go into that question with just a, "Be humble", because I have no real idea.  So, you're trying to map out, what are the trends, what are the forces that you think would be reinforced with Bitcoin, which ones would be mitigated, and what would be the net changing balance of forces that could lead to a certain state of affairs.  So, I think you're right to point to some of those forces, decentralisation, empowerment of the individual over collective.  Those are all forces that's only pointing to one direction.

The question is, does that reach to a new equilibrium that is purely on one end of the spectrum, or does it just mean that you just shift from maybe more centralised to less centralised?  It's a force that pushes in that direction; the question is, how far does it push you along that spectrum, and what are the material conditions?  Geographies, political cultures, contingencies of where you are and what that system is that are going to affect how far it can move.

So, I agree with you directionally; the question is, on what timescale and how far and in what places?  To answer that question, I think you have to be really specific.  You have to say, "In the United States in ten years, given this assumption about the strength of that force, countervailing forces, potential scenarios that could mitigate it, then this is the likely eventually outcome", and that's how, again, I think in terms of scenarios, I don't think of just this one outcome.  I think of, "This is the trend", and I agree with you, that is the trend.  So, if you're thinking in terms of risk, it's also, "Well, risk from what perspective?"

Peter McCormack: Exactly.

Matthew Pines: Certainly people think a certain outcome very desirable; other people think it's the end of the world.  And so, again, I wrote that from the perspective of the national security apparatus is reading this that thinks any challenge to the existing order is itself a threat.  So, it's about accommodating to that viewpoint of, what's a risk to a certain control that they have now that Bitcoin would present?  Maybe the net outcome is positive for humanity, for Americans in general, but it challenges a certain, say, instrument of national power that they rely on.

To the extent that they think that international power could be modified in some way and still be effective and meet its, say, well-suited ends, preventing criminal action while not harming individual use of a freedom tool, well that would be a desirable outcome.  If you can mitigate bad things while not harming any of the good things, that's better than restricting good in order to prevent possible bad.

I think there's a lot packed into the question of the future of the state, the future of monetary policy, the future of taxation, and I presume no special perch to answer those questions.  I think folks like Balaji have a certain idealised view of how these things will evolve in equilibrium, and I like that approach as an intellectual schemer.  He has the CCP, NYT, BTC axis and he thinks these are going to be the new poles of the global order.  It's great, it's a great tagline.  I think it's more messy than that.  I think it's going to be a much more complex disorder, and Bitcoin is going to be a new force in that disorder, and it's going to allow re-orderings of certain systems. 

But I think disorder itself is a force and the world that we've lived in for the past number of years, the one thing you could say the global dollar system did is it created for the fix in the West a sense of artificial order, whilst exporting the disorder to the rest of the world.  It was, "We're going to live fat and happy with stable incomes, rising wealth, stock prices, over here in the West, and then all the wars and all the famines, all the disasters happen everywhere else".

I think folks in the West need to recognise that was an aberration.  That was a historical oddity that came at a cost; there was no free lunch there.  And so, if we're moving to a new system, there's no guarantee that that well-ordered bubble that most westerners lived in is not going to go through some periods of challenge, or some reversion to the mean.  And I think that's something we need to reckon with.  If you lived a nice comfortable existence in the West, and you're thinking you were going to go through this massive, disruptive monetary transition, where it's fair game to anyone around the world, it's going to get messy. 

So, I think there could be a new re-ordering, a new structure that gets formed; but like any phased transition, it's like physics, you don't just jump from one nicely-ordered state to another nicely-ordered state.  You go through a period of disorder, as things move around and shift into new structures, and then start to form some more stable structures that can creep into a larger structure, but that takes time.  And if you're living through that process, it certainly doesn't feel pleasant!

So, I just think people need to be prepared for that.  Intellectually, I'd like to just jump to this far future, hyperbitcoinisation, utopia, everything's great.  Yes, I want to reason about that too, I think it's valuable to reason about that too, but there's going to be a process, there's going to be a lot of potential paths to get there that are potentially going to be very messy.  And I think it's incumbent on us right now to try to present and try to get existing authorities and power structures to plan for that disruption in a way that minimises the amount of disorder, and then manage through it in a way that makes it not as messy.

The other thing, in the near term, so this is the thing I would come back to, we talked a lot about abstract stuff.  I think this year's going to be a very pivotal year, maybe in global history, and I just think people need to be extra acute to what's going on, and especially as bitcoiners, a lot can happen.  It's like the butterfly effect, or even a little difference can make a large difference if it comes at the right moment in time, and I think we're at that moment in time where, when systems like this go through a shock, again strategic decisions get made over a weekend that can have effects for decades. 

I think we're all in a position, even folks that don't think they are, to become politically active and engage with their local officials and say, "Bitcoin's valuable", and if they collectively can on the margins steer at least for us, at least for where I live in America, a positive direction, as I say, this year is going to be, I think, a critical year for that.  So, I think the time to get engaged and think about what's happening is now, and really understand the state of play and simply be prepared for uncertainty.

Peter McCormack: Well, thank you for coming in, absolute pleasure, really enjoyed listening to this.  Congratulations on the work.  I think you're going to be in high demand over the next weeks and coming months.  A lot of people hopefully will hear this and reach out to you, and keep your DMs open.  If people want to follow you, they want to read this report, where should they go?

Matthew Pines: Yeah, so on Twitter, I'm @matthew_pines, so please, yeah, hit me up, DM, tweet.  But also, at the Bitcoin Policy Institute, so btcpolicy.org, a new thinktank we just got started a few months ago really, and we're starting to put out some more content.  We really want to engage with this Executive Order and start to present some interesting analysis on some of those topics for broad use, and just to shape the public conversation. 

So, yeah, take a look at the website.  We've got some of the factsheets and reports we've put out just in the past few weeks, and you can sign-up for our, I don't know if we have an email yet, but also if you want to engage with it yet, please reach out, it's just an open thing.  We're just starting this, so if you have good ideas, or you think you can contribute, you've got some good ideas, or you have some interesting white papers that maybe you've written, or you've thought about you could write, now's the time.  Now's the time to have that idea that you've been bouncing around back in your head that you haven't decided to put down on paper.  Well, do it, write it down, get it out there.

That's what I did.  It was just, I had no thought that I'd be doing this podcast three months ago, when I decided to write this white paper, and you can now have material impact on the conversation.  And so, that's also the beauty of Bitcoin, anyone can do that.

Peter McCormack: Well, big shoutout to Troy and David Zell, they both said -- was it Zell first who said, "You have to talk to Matthew Pines", prior to your article coming out, he said I've got to take to you.  So, big shoutout to them, and we're always looking for new people to come on the show. 

There's a lot of Bitcoin podcasts now, tend to be recycling the same guests, having the same conversations.  We want to elevate new voices, new ideas, which is why it's great to get Troy on, it was great to get Margot, it's great to get yourself, great to get David on, and hopefully we'll have Andrew Bailey at some point, and yeah, we're going to keep doing this and keep pushing it.

But look, congratulations on what is a comprehensive document.  As I said, my brother thinks it's the best thing since the Bitcoin whitepaper.  So, congratulations, keep crushing it.  If we can ever do anything for you, just reach out to us.  You know the whole team now, and yeah, excellent.

Matthew Pines: Thanks for having me, it was great.