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I really think you're going to end up being very proud of what you did because you're pioneers. You're here very early. It's very early, it's a very young industry and you've done very well. And I just want to thank you. I want to congratulate you and I want to let you know that I'm with you all the way. Thank you very much.

When President Donald Trump invited hundreds of crypto investors to his golf club outside Washington D.C. For a fancy dinner last week, Democrats and even some Republicans called it a scam and a grift. These were investors who had contributed millions in Trump's own personal meme coin. But since the guest list wasn't published, it wasn't exactly clear who had the president's and what they were trying to get out of it. The White House insisted this was all above board and that Trump was not trying to profit off the presidency and that he was attending in a personal capacity only, but many critics saw it as corruption, plain and simple. And since crypto is largely anonymous by design, there are law enforcement concerns that criminals can move money with impunity. Well, regardless of how you feel about that whole thing, it's clear that cryptocurrency is here to stay. There's a major Bitcoin conference in Las Vegas this week. Vice President JD Vance and two of Trump's sons are set to speak, as are multiple members of Congress. And just last week, the U.S. Senate advanced a major piece of cryptocurrency legislation.

Mr. President, I rise today to talk about the Genius Act.

Democrats were initially united in opposition, but then a draft amendment peeled off enough dams to move it forward. However, Senator Elizabeth Warren said there's still plenty to be worried about.

While a strong stablecoin bill is the best possible outcome, this weak bill is worse than no bill at all.

My guest today is Hillary Allen. She's a law professor at American University who's been studying this legislation. We're gonna talk about why it's worth paying attention to, whether you care about crypto or not. From CNN, this is One Thing. I'm David Ryan. So, Hilary, before we even get to what's going on in Congress, the thing that I always come back to with cryptocurrency is, like, why should I care? I don't mess with it. I know some people do. Some people say it's the way the future and made a ton of money. Others have gotten in big trouble with it, I'm looking at you, Sam Bankman Fried, but it still feels very niche to me. Is that the reality, though?

It is still really niche and I very much respect your view that you don't want to have anything to do with it. I think that's a very solid life choice. But the reason why you should care is we're getting to the point where crypto could impact people who have never invested in crypto. So that's the reason to care.

Yeah, so let's talk about what's been happening in Congress then, specifically with this type of cryptocurrency called the stable coin. Like I said, I don't really know what that is. So in the simplest, most basic terms possible, can you explain to me what a stable coin is?

'So most crypto assets are made out of thin air and have nothing behind them. They're pretty volatile as a result in addition to being a little Ponzi-like, but if you want any kind of stability in the price of a coin, then that's not gonna work out for you. So they came up with these things called stable coins and they're not as stable as they may claim to be, but they're definitely more stable in price than most unbacked crypto assets. And the way they do that... Is that there is a reserve of relatively safe assets backing the stable coin, and that's supposed to maintain the peg of the value of the stablecoin to usually the US dollar.

So one stable coin would be worth one dollar?

That's the goal, yeah.

Okay. And so how does that relate to this legislation working its way through the Senate right now?

'Right, so there are arguably already legal regimes that apply to a situation when you're creating something that's effectively an equivalent of a deposit or equivalent to a money market mutual fund. So you could say that it should be regulated under the deposit laws, you could say that, it should, be regulated, under the money market, mutual fund laws, but the crypto industry doesn't want to be regulated like that. They want to have a special bespoke regulatory REGIME. For stable coins. So this is something they've been gunning for for years. And it's a piece of legislation that sort of says, yes, stable coins can be stable coins, they're not gonna be regulated like money market mutual funds or bank deposits. We're gonna have a patina of regulation on them, but they're still vulnerable to losing their peg and there is nothing really that the bill has to say about that. And it also opens up doors to things like letting the largest tech platforms, like the Metas and the Xs of the world, issue their own stable coins, so essentially become bank-like. I think the best way of explaining this is to sort of look at what's happened in China. So in China, we're not talking stable coins there, we're talking about just sort of... Wallets, like a PayPal almost, but they have these things AliPay and WeChat Pay that are these wallets that really encourage people to stay within a platform. You can spend money there, the platform gets all the data about what you're buying, they use that to sell you other products, and it becomes this sort of super app.

Facebook's CEO will be in the hot seat today as he defends his company's plans for cryptocurrency.

And Mark Zuckerberg was actually inspired enough by this to try and launch a stablecoin back in 2019 called Libra.

People call this the Libra. It's not the Libre. Nobody, if it finally happens, nobody's gonna call it a Libra, they're gonna call is a Zuckbuck. This is Zuckerberg's.

And the world collectively freaked out, I think rightly so, at the thought of Mark Zuckerberg having your money and knowing how you spend it, et cetera.

And we have a secure tier in our data center focused on payment information, and that has worked well so far. We also, as part of...

You've had no data breaches in that field.

My understanding is we haven't had any issues on that in the payment area.

Somehow everyone in the United States Congress has sort of gotten over that, not everyone, but enough people in the Congress have gotten over that and are willing to bless a regime that would let Marcus Zuckerberg do just that.

Yeah, tell me more about that, because Democrats weren't really on board with this legislation at first, but then recently a bunch of them moved over to the yes column, so what changed?

Well, actually, the Democrats have always been split on this. The unusual moment was when they all united to vote against cloture a couple of weeks ago. So where we are after the vote is where we were a month ago, which is that there are some Dems that wanted to support this legislation and others that didn't.

'But as you know, our excitement about the future of Bitcoin and crypto could not be more difficult from the approach of our opponents. It can't be... Look, our opponents have gone a difficult route. They're going old-fashioned stuff.

The whole goal of the crypto industry with this administration was sort of to legitimize it and what we're seeing is perhaps the reverse of that, that the Trump's embrace of crypto has made people wearier of it in some regards and also has made it more politically salient, particularly for Democrats.

Trump and his family have already pocketed hundreds of millions of dollars from his crypto ventures, and they stand to make hundreds of million more from his stablecoin, USD1, if this bill passes.

Who were coasting by supporting the industry without many people caring, now it's become a lot more politically challenging for Democrats to support the crypto industry.

I guess I'm wondering if crypto advocates are on board with Congress getting involved in this way. Like, is this regulation or not? Like, how do you see it?

Crypto advocates are 100% on board with this piece of legislation. They're the ones that have driven it, right? This is the return on investment for the campaign spending by the crypto industry. So I'm gonna drop a rather shocking statistic on you, which is that 44% of all corporate spending on the 2024 election cycle came from the crypto industry.

Wow, almost half?

Almost half of all corporate spending on the 2024 election cycle came from the crypto industry. And they wanted this law, and there's another law in the works that they wanted as well. These are industry wish lists, essentially.

Say more about that. Why do they want Congress involved in this way?

'Well, there's a couple of things. One is there is the lingering threat always that existing laws would be enforced against them. And that's sort of an existential threat for the industry. Honestly, the industry doesn't have that much to recommend it tech-wise. Blockchain, the underlying tech, is kind of a clunky database. So really, most of their sort of competitive edge has come from avoiding laws that others might have to comply with. So... Having it enshrined that they're allowed to have this special legal treatment is a boon to them. Another thing that's a boone to them is sort of the legitimization of it, right? So, as you said, a lot of us are very wary of crypto and the St. Louis Fed came out with a report a little while ago that said that fewer than 5% of Americans own crypto and amongst them, like half of them own less than $3,000 worth, right. So most Americans aren't. That into this. There's a hope, I think, that this legislation will encourage adoption.

It's like if Congress is, is really setting some rules of the road here that people can look at this and say, Hey, this is real and you can safely get involved in this and start playing around with it.

Right? The Congress says this is safe and I don't need to worry about this. Never mind the fact that they didn't put a single thing in the legislation to deal with the fact, that it might lose its dollar value. And what happens then?

There's one other thing you should know about Professor Allen. She was part of a commission appointed by Congress to investigate the causes of the 2008 financial crisis. Remember, this is when massive losses linked to subprime mortgages caused some of the nation's biggest banks to fail and American taxpayers ended up footing the bill when Congress bailed them out. Well, Allen says she's seeing similar warning signs emanating from this stable coin legislation.

You know, just on the stable coins themselves, they lose their peg all the time. It's plenty of economic research that they don't always stick to that dollar peg. The bill doesn't address that. You know what, I think the latest version said there should be a report done on bankruptcy issues. Like maybe that's something they wanted to figure out before going ahead with this bill. As it stands, if there was a run on a stable coin, then the stable coin would just go into traditional bankruptcy, which means people's assets are tied up for months, if not years. It's uncertain what you get back. So that's not great. And because of that not being great, I think the more realistic outcome, if things really go south on a big stable coin, is that we'll end up seeing bailouts. And to your point about why do you care if you don't have any? Well, you could end up bailing this stuff out.

Because of this legislation, if it's linked in this way and the tech companies are involved, then in that scenario you're describing, taxpayers would be bailing out, not big banks like we saw in 2008 financial crisis, but big tech.

Yeah. And that's really disturbing on so many levels. I don't even know how it really works. So in Europe, there are some countries where their banks were too big to save. They couldn't even afford to bail out their banks. That's what happened in Iceland. Switzerland had a similar issue. With these big tech platforms, do we get to the point where they're too big to save? And even short of that, like... Which parts do we bail out? Do we have to bail out the social media business? You know, meta as well. How do we figure out, do we have bail out the international business or is it just the US? Like, it's really a disturbing thought.

So I've heard a broader concern about digital currency from some people that basically goes like, if the government starts regulating digital currency and it becomes the preferred way, everyone does business linked to the dollar in some way, it could lead to a scenario where the government could start limiting how much people can spend with the currency. You have X dollars to spend at the grocery store and that's it. The kind of stuff you hear about back in the Soviet Union days. Is that? Where all this is headed.

In some ways yes, in some ways no. So what you've just talked about are the concerns about a CBDC or central bank digital currency. So China has one and a lot of central banks have been exploring it. And the idea is if your digital transactions are all sort of facilitated on government rails and government can monitor them, could it use that to censor your transactions? We're not pursuing a CBTC in this country. Very few countries are and the ones that have, it's sort of kind of people haven't been that interested in it. But what's interesting is all the people who are so terrified of these CBDCs and I understand their concerns, seem to have no problem with the largest tech platforms being able to do exactly the same thing with surveillance and censorship and all of that.

Right. So like if you're buying a stable coin from Meta or whatever, they have access to your data, your finances, all that kind of stuff.

'Yeah. So, you know, what if Amazon launched a stable coin and you didn't like how it's working for you, you could complain about that publicly. And then all of a sudden find that you can no longer buy things on Amazon, right? You know, or go back to meta. You could be upset about the service you're receiving and post about it on one of its many social media platforms. Are you blocked from posting now? They could do that. So yeah, I think there are concerns about surveillance and censorship with regards to government-issued digital currencies. The same is also true for these large tech platforms.

And like you said, there's nothing currently in this bill that really addresses all of those possible issues in any real way.

'Yeah, there's sort of a fig leaf in the sense that it says that if you are a publicly traded non-financial company, like Metta, then you need to get approval from a committee of government officials to go ahead. But in the current environment, I don't think that's going to be much of a challenge to get. And also, I would note that Elon Musk wants to do a stablecoin with his ex-platform, and that's not publicly traded. So that's sort of a special. Elon Musk exception right there.

'It sounds like you're saying that this legislation, if it were to go fully forward, it would be kind of like an on-ramp for them to say, hey, we can do this and there's fewer hurdles to making this happen for us.

Yeah, I mean, it's hypothetical in the sense that it hasn't happened yet. It's not hypothetical in the sense that Mark Zuckerberg said he's ready to try again. And Elon Musk has said, I want to do this too.

Really interesting. Well, thanks so much for the perspective. I appreciate it.

You're welcome. Thanks for having me on.

Just a quick note before we go. If you're going to be in the Seattle area this weekend, you can come see us. We're going be doing a live episode of One Thing this Saturday afternoon at the Cascade PBS Ideas Festival. It's a day full of live podcasting. A lot of great shows are going to there. And I'm going to sitting down with former U.S. Ambassador to Turkey and Republican Senator Jeff Flake for a wide ranging conversation. Should be really interesting. So if you're gonna be in Seattle this Saturday, get tickets and I'd love to see you there.

One Thing is a production of CNN Audio. This episode was produced by Paola Ortiz and me, David Rind, our senior producers, are Matt Martinez, Felicia Patinkin, and Faiz Jamil. Matt Dempsey is our production manager. Dan Dzula is our technical director, and Steve Lickteig is the executive producer of CNN Audio. Get support from Haley Thomas, Alex Manasseri, Mark Duffy, Robert Mathers, John Dianora, Leni Steinhardt, Jamus Andrest, Nichole Pesaru, and Lisa Namerow. Special thanks to Alison Morrow and Wendy Brundage. We'll have a new episode for you on Sunday. In the meantime, leave a rating and review, wherever you listen, and I'll talk to you later.