interviews
Water and the American West
by Richard Frank
October 25, 2021
This interview with Richard Frank, professor of environmental practice at the UC Davis School of Law and Director of the California Environmental Law and Policy Center, was conducted and condensed by franknews.
frank | Can you tell me a little bit about the story of water and how it's tied to the West, and to California in particular?
Richard | A friend of mine who's a Court of Appeals Justice here in California wrote an opinion on a water law dispute and started it with the quote, "the history of California is written on its waters." And I think that the point is true of the entire American West.
Water policy and legal issues are inextricably tied to the development of the Western United States; water is the limiting factor in so many ways to settlement, to economic development, to prosperity, and to the environment and environmental preservation.
Can you talk about the difference between groundwater and surface water– and the policies that regulate each?
There are really two types of water when it comes to human consumption. There's surface water: that is the water that is transmitted by lakes, rivers, and streams. Then there is groundwater, and a substantial amount of water that Americans and the American West rely on is groundwater. That is water that is stored in groundwater aquifers, which are naturally occurring groundwater basins. Both groundwater and surface water are critical to the American West and its economy and its culture.
Traditionally a couple of things are important to note, first of all, water is finite. Second, water gets allocated in the Western United States generally at the state level. There's a limited federal role. Primarily, policy decisions about who gets how much water for what purpose are made state by state.
I think allocation is really interesting in that it's more state-level than federal. How was water and the allocation of water in California designed? Is it a public-private combination? What goes on in terms of the infrastructure of water?
Another very good question. The answer is it depends. Most of our water infrastructure is public in nature.
Again, in the American West, the regulation of water rights is generally done at the state level, but the federal government, historically, has a major water footprint in the American West because it has been federal dollars and federal design and management that really controlled much of the major water infrastructure in the American West — you know, Hoover Dam, and the complex system of dams and reservoirs on the Colorado River in California, with the Central Valley Project that was built and managed by the federal government with Shasta Dam on the upper Sacramento River as the centerpiece of that project. But we also have a California State Water Project, the key facility being the Oroville Dam and reservoir on the Southern River that is managed by state water managers. If we were starting over, that kind of parallel system would make no particular engineering or operational sense.
But, we are captive to our history.
And then you have these massive systems of aqueducts and canals that move water from one place to another throughout the American West. They are particularly responsible for moving water from surface water storage facilities to population centers. In the last 50 to 75 years, these population centers have really expanded dramatically, so you need massive infrastructure to deliver water from those storage facilities, the dams, and reservoirs, which generally are located in remote areas to the population centers. So it takes a lot of time and energy to transport the water, from where it is captured and stored to where it is needed for human use.
California has faced continuous drought – what measures is the state taking now to manage water?
Just to frame the issue a little bit — we have, as I mentioned, a growing population in the American Southwest at a time when the amount of available water is shrinking due to drought and due to the impacts of climate change. We have growing human demand for residential and commercial purposes and at the same time, we have a shrinking water supply. That is a huge looming crisis.
And it is beginning to play out in real-time. You see that playing out in real-time. For example, several different states and Mexico rely on Colorado River flows based on an allocation system that was created in the 1920s, which is overly optimistic about the amount of available water. From the 1920s until now, that water supply has decreased, and decreased, and decreased. Now you have interstate agreements, and in the case of Mexico, international agreements that allocate the finite Colorado river water supplies based on faulty, now obsolete, information. It is a real problem.
What measures do you take now, knowing this information?
If you look at the US Drought Monitor, it is obvious the problem is not limited to the Colorado River. We are in a mega-drought, so cutbacks are being imposed by federal and state water agencies to encourage agricultural, urban, and commercial water users to cut their water use and, and stretch finite supplies as much as possible through conservation efforts.
In California, we have the State Water Resources Control Board, the state water regulator in California, and they have issued curtailment orders. Meaning, they have told water rights holders, many of whom have had those water rights for over a hundred years, that, for the first time, the water that they feel they are entitled to, is not available. Local water districts are also issuing water conservation mandates; the San Francisco water department is doing that, in Los Angeles, the metropolitan water district, is urging urban users to curtail their efforts.
And then agriculture. Agricultural users — farmers and ranchers — have had to get water rights in many cases through the federal government, as the federal government is the operator of these water projects. They have contracts with water users, individual farmers, ranchers, or districts, and they are now issuing curtailment orders. They're saying, we know you contracted for X amount of water for this calendar year, but we are telling you because of the drought shortages we don't have that water to supply. Our reservoirs are low at Lake Shasta or at the Oroville Dam.
When you drive from San Francisco to LA on the five, you see a lot of signage from the agricultural farming community about water. There's apparently some frustration about this. What are the other options for them?
About 80% of all human consumed water goes to agriculture. That is by far the biggest component of water use, as opposed to 20% used for urban and commercial, and industrial purposes.
Over the years, ranchers and farmers, and agricultural water districts assumed that the water would always be there — as we all do.
And the farmers and ranchers have, in hindsight, exacerbated the problem by bringing more and more land into production. You see on those drives between San Francisco and Los Angeles, particularly in the San Joaquin Valley, all these orchards are being planted. Orchards are more lucrative crops than row crops — cotton, alfalfa, and rice. But, if you are growing a row crop, you can leave the land fallow in times of drought.
We don't have to plant. If the water stopped there, or if it's too expensive to get, it may make economic sense, but if you have an orchard or a vineyard it's a high value, those are high value crops, you don't have that operational flexibility and they need to be irrigated in wet years and in dry years. Now, you see these orchards, which were only planted a few years ago, are now being uprooted because the farmers realized that they don't have the water necessary to keep those vineyards and orchards alive. For ranchers, the same thing is true with their herds. They don’t have enough water for their livestock.
The water shortage has never been drier than it is right now. Farmers and ranchers are being deprived of water that they traditionally believed was theirs and they're very understandably, very unhappy about it. They see it as a threat to their livelihood and to the livelihood of the folks who work for them. Their anger and frustration are to be expected, but it's nobody's fault.
To say, as some farmers do, that it is mismanagement by state and federal government officials, I think is overly simplistic and misplaced in the face of a mega-drought. Everybody's going to have to sacrifice. Everybody's going to have to be more efficient in how they use water. All sectors are going to need to be more efficient with the water that does exist.
Looking at this percentage breakdown of water use – is it actually important for individual users to change their water habits?
Well, every little bit helps. When you're talking about homeowners, about 70% of urban water use is for outdoor irrigation. So we're talking parks and cemeteries and golf courses and folks' yards. You know, that used to be considered part of that American dream and the California dream — you would have a big lawn in front of your house and behind your house. Truth be told, that has never made much sense in an arid environment. That's where the water savings in urban areas is critical in the way it really involves aesthetics rather than critical human needs, like water for drinking and bathing and sanitation purposes. There is a growing movement away from big lawns, and away from the type of landscaping that you see in the Eastern US — there is no drought in the Eastern United States. As Hurricane Ida and other recent storms have shown, the problem is too much water, or rather than too little in most of the Eastern United States. So it really is a tale of two countries.
We just need to recognize that the American West is an arid region. It has always been an arid region, we can't make the desert bloom with water that doesn't exist. We need to be more efficient in how we allocate those water supplies. And it seems to me in an urban area, the best way to conserve and most effective way is to reduce urban landscaping, which is the major component of urban water use.
You also write about water markets and making them better – for those who don’t know, what is the water market?
Water markets, that is, the voluntary transfer of water between water users, is more robust in some other Western states. Again Arizona and New Mexico come to mind. California somewhat surprisingly is behind the curve. We are in the dark ages compared to other states. Water markets are kind of anecdotal. There is not much of a statewide system. It is done at the local level, through individual transactions without much oversight and without much transparency. And I have concerns about all of those things.
I believe conceptually watermarks are a way to stretch scarce, finite water resources to make water use more efficient. I can, for example, allow farmers or ranchers to sell water to urban uses or commercial usage or factories in times of drought.
Farmers sometimes can make more money by farming water, than they can by farming crops.
There are efficiencies to be gained here.
The problem in my view is really one of transparency. The water markets are not publicly regulated, and some of the people who are engaging in water transactions like it that way, frankly, they want to operate under the radar.
In my opinion, water markets need to be overseen by a public entity rather than private or nonprofit entities. We need oversight and transparency, so that folks like you and myself can follow the markets to see who's selling water to whom, for what purpose, and make sure that those water transfers serve the public interests and not just the private interests.
There have been a number of stories in the New York Times and the Wall Street Journal and the Salt Lake City Tribune about efforts in some parts to privatize water transfer. Hedge fund managers are buying and selling water, as a means of profiting. And it strikes me that when you're talking about an essential public resource — and in California, it is embedded in the law that public water is an inherently public resource, that water is owned by the public and it can be used for private purposes, but it is an inherently public resource — the idea of commoditizing water through the private, opaque markets is very troublesome to me. I think it represents a very dangerous trend and one that needs to be corrected and avoided.
Why is California so behind?
There's no good reason for it. It's largely inexplicable that since the state was created on September 9th, 1860, we've been fighting over water. In the 19th century, it was miners versus farmers ranchers. In the 20th century, with the growth of urban communities, the evolution of California into one of the most populous states with 40 million Californians, it has been a struggle between urban and agricultural uses of water.
In the second half of the 20th century, there was a recognition that some component of water had to be left in streams to protect ecosystems, landscape, and wildlife, including the threatened and endangered wildlife. That suggestion has made agricultural users in California angry. You will see those signs that allude to the idea that food and farming are more important than environmental values. I don't happen to believe that's true. I believe both are critically important to our society. But the advocates for the environment have a proverbial seat at the water table. So that's another demand for water allocation that exists.
Do you maintain optimism?
Yes. I think it's human nature to look on the bright side. I try to do that through research scholarships and teaching. There are models for how we can do this better in the United States. Israel and Saudi Arabia and Singapore are far more efficient with their water policies and efforts. Australia went through a severe megadrought. They came out of it a few years ago, but they used that opportunity to dramatically reform their water allocation systems. That's an additional model. I think most people would agree in hindsight that their previous system was antiquated, and not able to meet the challenges of climate change and the growing water shortage in some parts of the world.
Here in the United States, we can learn from those efforts. There are also some ways to expand the water supply. Desalination for one. Again, Singapore and Saudi Arabia have led the world in terms of removing the salt content from ocean water and increasing water supply that way. In Carlsbad, California, north of San Diego, we have the biggest desalination plant in the United States right now, and that is currently satisfying a significant component of the San Diego metropolitan areas’ water needs. It's more expensive than other water supplies, but the technology is getting more refined, so the cost of desalinated water is coming down at a time when other water supplies, due to shortages and the workings of the free market are going up.
At some point, they're going to meet or get closer. Unlike some of my environmental colleagues, I think desalination is an important part of the equation.
In a proposal that came up in the recall election, one of the candidates was talking about how we just need to build a canal from the Mississippi River to California to take care of all our problems. That ignores political problems associated with that effort, as well as the massive infrastructure costs that would be required to build and maintain a major aqueduct for 2000 miles from the Mississippi to California. That's just not going to happen. Some of those pie in the sky thoughts of how we expand the water supply, I think, are unrealistic.
interviews
Immersed In The Black Hole Of Blockchain
by Joel Telpner
January 31, 2020
Joel Telpner is a highly sought-after legal advisor in the blockchain space, actively working with a large number of clients in structuring token distributions and enterprise blockchain applications. Joel brings more than 30 years of legal experience in a career that includes time as an AmLaw 100 partner, the former U.S. general counsel of a global financial institution and a venture capitalist.
frank | Will you tell me a bit about your background?
Joel: I'm a partner in the global law firm, Sullivan and Worcester. I am the head of the firms FinTech and Blockchain Practice and have been at the firm slightly over three years now.
Okay. How did you –
I'm happy to go into as much background as you'd like without putting you and everybody else to sleep.
You won’t.
I immersed myself fairly deeply into the black hole of Blockchain. It was a lot more fun than anything else I've been doing for a long time. I decided to leave Jones Day and come to my current firm. Jones Day is a very well known firm, it's a huge firm of over 2,500 lawyers. By comparison Sullivan is very small. Big by global standards, they're only 200 lawyers, just not by U.S. standards. But Sullivan being a smaller firm is in a much better position to take on early stage tech clients, which represent a lot of what's going on in the Blockchain space today.
Sullivan started out of Boston, so it's always had somewhat of a tech practice to begin with. And we're one of the few American law firms that also has an office in Tel Aviv. It has a strong presence coming from an Israeli side. So it was a perfect fit for me.
Funny how something that starts off as random can dictate your path in life.
I know, isn't it. The only thing I tell younger people about this is that if you think that you know what your career is going to look like, no you don't.
Yeah, exactly.
It always takes you in crazy directions you can never anticipate.
My first question that has to do with your job is around the idea of regulating currency and looking at regulations without international borders, where money's not tied to the State in the same way. How does that even begin to work?
Well, there are a couple aspects of that. First, I want to make one slight clarification, which is that when we're talking about cryptocurrencies, some may be currency or at least function in a manner that's similar to currency – but cryptocurrencies can also mean other things. Some of them are really securities, or at least regulated as securities. Some of them are commodities. Some cryptocurrencies have multiple features and may fall in more than one regulatory regime, at the end of the day, cryptocurrencies are all based upon software. Since we can design software to do virtually anything we want, we have cryptocurrencies that may not be currency, may not be a security, may not be a commodity – regulators are trying to figure out just what the heck they are in the first place. You have to start with that context because although we throw out the phrase cryptocurrency, it really encompasses all different kinds.
The other aspect of the assessment is that if you look at how we've regulated currency, how we've regulated securities, or how we've regulated commodities historically, we've always had to grapple with the fact that every country imposes their own regulatory scheme. And although there may be similarities to how we regulate currency, certainly on the global basis, at the end of the day, it's still a jurisdiction by jurisdiction approach, and the best we historically have seen are countries trying to harmonize regulation, trying to create the ability to promote global commerce and global capital markets without creating so many barriers that the global markets break down.
To the extent we've always had to deal with how you reconcile regulations and laws from different countries.
Is it any different with respect to cryptocurrency? That's a complicated question, a complicated answer. When the internet was just being developed, a lot of people were arguing that this is all cyber, this is all metaphysical and existing laws and regulations no longer apply and there's no way to regulate quote, "the internet." And that proved not to be true.
Again, it's to a large extent, the same now. Today we're still applying different regulatory regimes for currencies and for securities and for commodities the way we always have.
So is there a difference in this world?
No, the difference is that with Blockchain technology, because it's decentralized and because it's software, people can be anywhere in the world and access different Blockchain applications or build or contribute to Blockchain applications. We have a very distributed universe of participants, of users. That means it’s sometimes hard to figure out where somebody is, what country they're transacting from or doing business in.
So to the extent we're trying to regulate things like a cryptocurrency that nearly anybody, anywhere in the world can access, it does create challenges from a government standpoint. They have to figure out how to regulate within their border, as well as figure out where their borders end and where another border starts. There are definitely challenges, but the challenges aren't so great that it means that regulatory routines, the way countries look at them, fall apart.
Right.
But it certainly brings in all kinds of new challenges.
A lot of cryptocurrencies are country agnostic. I mean, there are certain currencies whose value is tied to the dollar, but where is the policy right now? A big part of the crypto conversation is centered around decentralization and the idea of regulation being absent or different. Depending on who I've spoken to, certainly in the examination of this month, people will say, "Well there are financial regulations on the Blockchain and within cryptocurrencies, just like any other financial institution." But what are they?
That's right. It's not that it's not regulated. Sometimes it's unclear what a cryptocurrency is, but let's say for a minute you have token A, B, and C, and let's say token A is treated as a security in the US – well the US is going to regulate it like any other security. And to the extent other countries also deem that token to be a security, they will regulate it according to their own capital markets, rules and requirements for securities. Where it gets complicated is let's say token A is deemed to be a security in the US by the SEC, but let's say that the EU regulators don't consider it to be a security. Now we've got an instrument that might be regulated security in one country but not be regulated as a security in another country. And there are certainly other precedents for that, but it's fairly unusual.
In other words, it's not typical for a financial instrument to be deemed to be something in one country and something different in another country. So right now, again, because of the complexity of analyzing different types of crypto, you can have a situation where a token can be treated one way in a country based on its characterization of crypto’s attributes. That is one problem that is somewhat unique to the cryptocurrency world.
Now let's take token B and maybe that is intended to be used as some type of a payment mechanism. Well, one country may say that we're going to regulate it as if it's a real currency and apply the same rules and laws that we apply for legal tender. Another country may say it's similar to a currency so we may apply some of the laws that apply to a currency, like maybe money laundering requirements, but otherwise we're not going to regulate the currency. In that case, now you've got an instrument that both countries say is like a currency, but how far down that road they go varies. Those are the types of issues we're dealing with. But I think it's wrong for somebody to say that these are things that are not regulated. It's not true. It's simply a matter of a country applying the existing regulatory regimes based upon how they interpret a particular cryptocurrency to be treated, and what bucket it might fall in within that particular country.
Does it further complicate regulations that Bitcoin for example, is created by an anonymous person or group, and runs on its own? No one’s in charge there. It does feel different than the dollar, which the government controls.
In certain respects it does make it more complicated. In other respects it doesn't. And here's one of the ways to think about it. The SEC has determined that Bitcoin is not a security. One of the reasons the SEC reached that conclusion is because security laws are imposed upon issuers of securities. So in other words, we have a regime in the US that for example, imposes upon issuers and obligations and discloses information to potential investors. In the case of Bitcoin, there is no issuer, there's no company, there's no entity, there's nobody, there's no thing, person, entity behind Bitcoin.
So the fact that there is no entity and Bitcoin simply exists, pragmatically prevented the SEC from deciding to treat it as a security.
Now what can regulators or governments do?
Well, the US government could say, if they wanted, that we don't like Bitcoin and so we're going to say that any transaction in Bitcoin by a US person is unlawful. Congress could pass a law saying anybody transacting in Bitcoin is breaking the law. The question would be would they have the ability to enforce that? Is there a way to track down everybody transacting in Bitcoin, determine if they're a US person and if so, impose some type of penalty on that US person for transacting in Bitcoin? Some people would say that's virtually impossible to do. Others would say no, it would be hard. If the government really wanted to outlaw Bitcoin in the US, they could do it.
Not to ask you to make predictions, but where do you think that this is all going? Cryptocurrencies are gaining popularity. Facebook [Libra] is getting involved.
Right.
It seems like this is a direction we're moving in. Is it likely crypto becomes commonly used as currency in the United States? Maybe not replace the dollar, but exist as an alternate? Or will it remain an investment tool and less of a currency?
Let's list again. Let's break that down into different buckets. By the way, you mentioned Libra, a lot of people believe that whether or not Libra ever goes forward, and I think more and more there are people saying that they don't think it ever will, Libra brought a lot of attention by the mainstream to the crypto world, and some people feel that that actually gave a boost to Bitcoin.
Early on people thought Bitcoin would be a great source of payment, a way to make payments. But Bitcoin has been, for the most part, far too volatile to become a substitute payment form.
Right.
But at the same time, while Bitcoin may have disappointed people as a form of payment, it has proven itself as a potential stored value. In other words, there is some data out there that shows how Bitcoin has been a flight to safety type of investment. In fact, somebody was doing a presentation yesterday I was at that showed that when the United States killed Iranian General Solemani, at the point in time that it was announced, there was a spike in the price of Bitcoin. Some people would say Bitcoin has started to become a flight to safety investment. Just like when people flock to gold whenever they're concerned about something, we're starting to see people do the same thing with Bitcoin, so it may become, on a longer term basis, a very interesting alternative asset class. Even if it never really catches on as a form of payment.
Right.
Now there are other categories of cryptocurrency that people are experimenting with right now that are called stable coins, where each cryptocurrency uses some type of methodology to try to maintain a relatively stable value, so they're backed, for example, by a Fiat currency. You create a stable coin that maybe is backed by dollars or stable coin that's backed by a commodity or, an approach by Libra, which is going to be backed by an asset – the point is, a cryptocurrency that has a value that's relatively stable, not that it will never change, the dollar changes value, but that it's not going to be so volatile that it's going up and down by large parameters. People would say well maybe that could become a substitute form of payment in lieu of Fiat currencies.
To me that depends on a couple of things. A stable coin could replace using credit cards as a source of payment if we get to the point where Blockchain technology allows us to process transactions in a volume at the same rate that MasterCard and Visa can, which are something like 50,000 transactions a second. Right now, Blockchain technology is far too slow to allow any cryptocurrency to become a real form of payment because it is limited to how many transactions can be processed in any given time under existing Blockchain technology. On top of that, the cost of processing those transactions is still too high. So we're in very early stages. But let's say that we could get to the point where as Blockchain technology continues to develop, we can start processing transactions at the same rate as we process credit card transactions.
Let's say the cost of processing the transaction is actually less. Well, if that becomes the case, then there's no reason why Starbucks wouldn't be very happy to take a stable coin as a form of payment. If it's paying somebody less money to process a stable coin transaction than it pays the credit card company, it would be incentivized to do that. If you look five or ten years out, the technology may start to evolve to the point where there are cryptocurrencies that start to become substitute forms of payment because there is an efficient and cheap way for people to make payments to one another. On top of that, you don't necessarily have to have a bank to do that. For people that don't have access to bank accounts, it may become a very viable substitute form of payment. But we're still a ways away from that.
Then there's another factor which is that a number of governments around the world are looking at digitizing their currency. It's not a cryptocurrency, but it would be using Blockchain technology to issue their currency in a digital form, and if countries started doing that, there's an argument as to whether that would compliment cryptocurrencies that are intended to be used as form of payments or whether they would displace those categories or cryptocurrencies. There are all kinds of possibilities and all kinds of unanswered questions.
The same problems with the Blockchain being too slow to handle the amount of transactions that a Visa or MasterCard or whatever handles, is the same for digitized currency right?
Yes. You would still have the same issues because some of the governments that are currently exploring issuing their currency in digital form are looking at using a Blockchain as the means to process those transactions. They would have the same issue for now.
Do you think crypto occupies just a fraction of the space in Blockchain technology?
That's a great question because I think there's not enough discussion as to the distinction between crypto and Blockchain. It's always helpful to remind people that cryptocurrencies are an application of Blockchain technology, but you don't need to have a cryptocurrency to use distributed ledger or Blockchain technologies. There are areas that maybe don't get a lot of attention because they're not as sexy. Right now we're looking at very interesting and valid uses or proofs of concept for Blockchain technology.
Example, supply chain management, where we can use Blockchain technology to make what's a very inefficient process and still a paper process, much more efficient. Walmart is implementing Blockchain for all of its suppliers so that it can improve the vendor process. Those are the types of things that I think over time will prove our Blockchain technology, because you don't need to do 50,000 transactions a second in order to get Blockchain technology to vastly improve supply chain management and you don't need a cryptocurrency to improve supply chain management. Those are some really cool things happening in the Blockchain space.
There's another aspect where it, broadly speaking, falls within the cryptocurrency role and those are what we call tokenized assets or tokenized equity. When equities or other asset classes are issued in digital form using Blockchain, we can fractionalize ownership and create efficiencies of transferring title to securities or to bonds or to a fraction ownership of real estate, or a fraction ownership of art. This creates a type of cryptocurrency or digitized asset or a tokenized asset, depending on what you want to call it, and over time Blockchain technology may become a way to create greater access to different categories of assets much more efficiently than we do today. Eliminating some of the intermediaries which typically suck out costs, but don't necessarily provide a lot of benefits. You may see that part of the crypto world exploding over the next 10 years.
Blockchain is completely fascinating on its own. We've talked to people who deal with the food supply chain. We've spoken to people who focus on transitioning the grid system to Blockchain, which I think would be very interesting. The technology seems limitless.
Oh yeah. Medical records is another area where it's just terribly inefficient, and Blockchain technology could help tremendously. Or State using Blockchain could better manage keeping track of drivers licenses and birth certificates and things like that. There are all kinds of practical and pragmatic uses of the Blockchain that may or may not ever involve any type of cryptocurrency.
Funny – next month’s theme is actually about continuity of care. A huge issue is the sharing or not sharing of patient information between facilities, hospitals, and doctors. HIPAA is part of it but the privatization of information systems hospitals use is another gigantic component.
Oh yeah. Anytime you go to a doctor you have to fill out 40 pages of papers all over again, which is just ridiculous, maybe you can see how giving doctors access to an anonymized database of patient information would make things so much more efficient.
What have you found most interesting in your work recently?
Oh wow. That's such a tough question, but I guess the most interesting project right now that I'm working on involves the Marshall Islands. A tiny, tiny country, but they are successful. Right now they use the US dollars as legal tender. They want to create their own sovereign currency. But instead of issuing it in paper and coin form, they're going to issue it only in digital form on a Blockchain.
Wow.
I'm working on that project and believe me when it comes to saying novel, novel is an understatement.
Wild.
I know it is wild isn't it?
Yes. But it also seems sort of inevitable and obvious. What really is taking so long?
Besides all the regulatory issues, think about it – you have to make sure that every citizen has a way to get their hands on a digital currency, which means integrating that with smartphones or smart cards or something so that instead of having currency in your wallet, you have your phone or your smart card in your pocket instead.
The cash economy has obviously shrunk. There are still people who operate within a cash based system, but less and less so.
Except in the city of New York where we're going backwards by the way.
Why is that?
Oh, city council this past week passed a law, which apparently the mayor is going to sign, that is going to make it illegal for businesses not to accept cash.
What do you think about that?
I think it's moronic because the argument is, well there are poor people that don't have access to credit cards or bank accounts and if you had a sandwich shop or a coffee bar that doesn't accept cash, these people now can't go in and buy a cup of coffee. So the city council's solution is to force all of those businesses to retrofit and go old fashioned and start to put in cash registers and stuff like that.
My view is that we should be trying to help those people that don't have access to bank accounts, get them access to the financial system and make them part of the global financial system and bring them into the modern time and help them that way. Instead of going backwards, we should be going forward. But our so-called progressive New York seems to be going back to the 18th century.
This really leads to another part of the conversation which is that there are a lot of people left out of the current financial system, and many who view crypto as a solution. Do you think that Blockchain and what it can offer as a technology is democratizing?
I think that word's been used a little bit loosely in the Blockchain world, unfortunately. Or maybe aspirationally people would have it that way, so the answer is maybe, I don't think we're there yet. Let's use a real life example. Whether they're here legally or illegally, let's say there's somebody in the United States from Guatemala and they're here working and they're sending money home to their family.
What do they usually do? Because they may not have a bank account, they go into Western Union and they give them dollars and lets Union transfer payments to the family in the local currency back in Guatemala. Those people have access to sources of financial services now. But the real issue is that they pay a lot of money for it. The fees charged by the Western Union's of the world are not cheap.
Those folks are going through alternative channels as opposed to official banks, but paying a lot of money for it. In theory, Blockchain technology and cryptocurrency allow those people that don't have access to virtual bank accounts, potentially the way to move payments from the US to Guatemala to a cryptocurrency at a much lower cost than a Western Union.
But the presumption there is that they have the sophistication and ability to figure out how to create a digital wallet, how to access one of these Blockchain services that does something like that, know how to buy a cryptocurrency, and then transfer that cryptocurrency to somebody in their own country who could then convert it into local currency. There are a lot of ifs and assumptions in that and we're pretty far away from that.
In other words, you have to get to the point where somebody could download an app the way we do from the app store on your iPhone and simply press a button in order to transfer crypto without having to know how to create digital wallet, without having to know what to do with a private key, without having to know how you buy cryptocurrencies.
It has the potential, I think, but I think we're really far away from it until we can make it to the point where you don't have to have an education in order to simply accept Blockchain technology and cryptocurrency.