Crypto Still A Bit of 'Wild West': MIT's Narula

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Transcript

00:00You heard what Katie was just talking about there.

00:03Bitcoin and crypto did not prove to be much of a safe haven on Friday and over the weekend.

00:08From where you sit as an academic, how are you thinking about crypto and the idea that

00:12it is an undisputed winner in this trend to de-dollarize, if you believe that that's what's

00:18taking place? Well, I think this weekend we learned a lot. And a lot of what happened this

00:24weekend comes from the fact that this is incredibly experimental. We are still figuring it out as we

00:30go. Crypto is still a little bit of the Wild West. But I think what's actually really impressive is

00:35the way that we saw a distinction between what happened on chain and what happened in centralized

00:40exchanges. And it seemed like what happened on chain, it was definitely very difficult for people.

00:45There was a big crash, but it worked. It continued to work. Nothing really broke. People lost on paper

00:52$19 billion. And we weren't talking about bailing anyone out. We weren't talking about having to

00:57revert things. It's kind of impressive the way that what's happening in crypto right now proceeds

01:03and there's experiments and they happen and we work through them. As an academic, I would love to see

01:08a bit more of a focus on users and a bit more of a focus on value driving use cases rather than

01:14speculation. But I think we are learning a lot as we go. Yeah. The fact that it continued,

01:19there was some pain, but nothing broke is certainly encouraging. When you look at stablecoin

01:24regulation, of course, we had the Genius Act that was passed to regulate stablecoin overall. You

01:29still see a lot of areas that, frankly, we need to still fill in. What is the biggest glaring hole

01:36right now? So I think the biggest glaring hole is probably about how we're going to make sure to

01:43enforce par value exchange with stablecoins. Stablecoins have what we call depegged. So you

01:52expect a stablecoin that represents a dollar to be worth a dollar. But then when you go and look

01:55at crypto exchanges, they're not trading at a dollar. During times of stress, they might start

01:59trading for less than a dollar. And what maybe people don't really realize with stablecoins is

02:03that there's a primary market and a secondary market. And when it comes to actually being able

02:08to go to go to the stablecoin issuer and get a dollar from them for the stablecoin that you're

02:12holding, only a limited number of actors are allowed to do that. The rest of retail needs to

02:17operate on the secondary market. And so I think really bringing these together and understanding

02:22the risks there for retail users who can only redeem stablecoins on exchanges is pretty important.

02:28And what is your confidence that the industry can help lead on that front?

02:31Well, I think part of it is acknowledging these risks. So far, I think industry has the crypto

02:40industry in general has tried to sort of paint a very rosy picture. And I think it's important to

02:44be honest, to be honest about the risks so that we can be honest about how to mitigate the risks.

02:48And that's another place where academia can help.