Sam Lyman on the Digital Payments Race Between the US and China

Sam Lyman is the head of research at the Bitcoin Policy Institute and formerly was a senior advisor and speechwriter for Treasury Secretary Bessent. In Sam’s first appearance on the show, he discusses Secretary Bessent’s secret skill, the competition in the digital payments space between the US and China, why the strategic Bitcoin reserve is important, what the future of Bitcoin holds, where things stand with the CLARITY Act, the Q Day conundrum, whether Satoshi Yakamoto is alive or dead, where Sam thinks the anti-AI sentiment is coming from, and much more.

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This episode was recorded on May 21st, 2026

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected]. 

David Beckworth: Welcome to Macro Musings, where each week we pull back the curtain and take a closer look at the most important macroeconomic issues of the past, present, and future. I am your host, David Beckworth, a senior research fellow with the Mercatus Center at George Mason University, and I’m glad you decided to join us. 

Our guest today is Sam Lyman. Sam is the head of research at the Bitcoin Policy Institute. Formerly, he was a senior adviser and a speechwriter for Treasury Secretary Bessent. He joins us today to give us the lay of the land on the different visions for the digital payment space for the US versus China, as well as some of the issues surrounding it. Sam, welcome to the show.

Sam Lyman: Thanks, David. It’s great to be here.

Beckworth: It’s great to have you on, and I love having someone who paint the broad picture for us, what’s going on from a national security, a state perspective, as well as some of the granular issues we’ll get into as well. Let’s begin, though, with your work at Treasury. Tell us what it was like to work there, and what did you do?

Sam’s Career

Lyman: Working at Treasury was a thrill. There was never a dull day, as you could imagine, between Liberation Day and the One Big Beautiful Bill to the implementation of new trade policies. It was one of the most rewarding professional experiences of my life. Secretary Bessent is an extremely talented operator. He runs the building like a hedge fund, given his career, and so there’s a very high expectation of performance there. What was interesting working with him, just a side note, is that other than being a financial genius, he’s an incredibly good writer. I’ve been a speechwriter—

Beckworth: Oh, really?

Lyman: —at different points throughout my career. What was most interesting about Secretary Bessent, though, is that he’s an incredible writer. He actually wanted to be a journalist early in his career, almost pursued that path until he found banking instead, but that was really rewarding to work with someone who not only had this incredible holistic view of macroeconomics, but also had a very good micro view into what makes for good writing as well. He appreciated the craft of writing, in addition to the business of finance.

Beckworth: Oh, that’s interesting. While you were there, did you write some of his speeches on stablecoins when the GENIUS was being passed through?

Lyman: Yes, I helped him with speeches related to anything digital asset strategy that was taking place within Treasury.

Beckworth: Yes, he had some great statements about stablecoins. There were ones about this was going to extend dollar dominance, the reach of the dollar. I imagine you were there behind the scene helping him write some of that, right?

Lyman: I try to help where I can as a speechwriter.

Beckworth: Let’s move then to where you are now. You’re at the Bitcoin Policy Institute. You’re the head of research there. What are you doing there? What are the objectives of the institution, and what are you doing with research there?

Lyman: The Bitcoin Policy Institute, as the name would entail, of course, is very focused on Bitcoin. What’s interesting about Bitcoin is we see it as somewhat of a Schelling point for the counter elite. I think people who are drawn to Bitcoin oftentimes are those who are very well versed in finance, economics, but also politics and philosophy. They’re drawn to Bitcoin because they see it as an alternative to the existing system. What’s interesting about what we’re building at the Bitcoin Policy Institute is not only is it a think tank focused on Bitcoin policy issues, but it’s a think tank that’s focused on open-source technology across the spectrum.

Bitcoin is a sort of open-source money. Similarly, stablecoins are a permissionless form of money or an open-source form of money, and so is AI. There’s open-source AI out there. Those are three things that we’re principally focused on right now, Bitcoin, stablecoins, and AI, how we can make these technologies as universally available as possible, how we can keep them as tools for freedom and for promoting liberties abroad, and how we can leverage technologies like Bitcoin, stablecoins, and AI to increase global US dominance, how we can use them as tools, essentially, of national security to advance our own strategic interests as a country.

Beckworth: It was interesting for me to see some of the publications come out on stablecoins. You had an op-ed in the Washington Post about stablecoins. Nik Bhatia, we recently recorded a show with him, and he’s talking about how you can use stablecoins to get a better grip on eurodollar markets. It was maybe a little surprising, to be honest, because I’ve been in some Bitcoin communities, and they don’t like stablecoins. They think it’s an impure version. There’s choke points. The real deal is Bitcoin, but you guys are open-minded at BPI since you’re actually looking at stablecoins, not just Bitcoins, as well as AI.

Lyman: Right. Yes, we’re looking at the whole spectrum, really. Why are we focused on stablecoins? Well, stablecoins and Bitcoin are very much interlinked when you look at their history. Stablecoins were actually first created to help onboard people into Bitcoin. It was an easy way of helping transfer dollars into a cryptocurrency asset that would stay stable, that you could then seamlessly go back and forth between dollars and Bitcoin. In a way, we see stablecoins as a gateway drug of sorts to Bitcoin. That’s why, as an organization, we’re not opposed to them, and we definitely see a strategic use case for them on a nation-state level.

As far as AI goes, there’s a real overlap between Bitcoin and AI as well. Previous to Treasury, I worked at a digital asset and AI infrastructure company. Why is that? It’s because Bitcoin requires large amounts of energy, and so does AI. You’re seeing more and more, a lot of Bitcoin miners, they’re, over time, becoming AI and HBC companies as well. They’re working with hyperscalers to help train new models. That’s why we’re focused on those three technologies together, because, in a way, they’re actually all very much interlinked.

Nation-States and Digital Payments

Beckworth: Let’s talk about the nation-state perspective on digital payment space. Also, AI, because you had a recent policy brief on AI. We’ll come back to AI in a minute. Let’s step back and get a broad view of where is the US going with digital payments, broadly speaking, at least with this current administration, versus China, the big competitor. They have a CBDC. They have their own digital currency already. They’re not very internationalized. How do you see the two different trajectories of these countries?

Lyman: I love this question because it’s something I think about every day. You don’t think often about a nation-state digital asset strategy. I think when President Trump was campaigning for office, he vowed to make the United States the crypto capital of the planet and a Bitcoin superpower. I think, honestly, a lot of people rolled their eyes at that. They thought he was just doing a political favor to the crypto industry. In reality, however, he’s very serious about establishing the United States as a crypto superpower because he recognizes that any country that adopts technology first has a first-mover advantage, and that expands opportunities for growth in the future.

He himself is implementing, in real-time, a digital asset strategy. We know there’s the Strategic Bitcoin Reserve, which he’s getting set up. He’s also embraced stablecoins wholeheartedly. He has created this digital asset strategy for the United States right now, which is focused on expanding our own economic strength, both through the Strategic Bitcoin Reserve and his bullish stance on tokenization, tokenization of stocks, and tokenization of the dollar as well through stablecoins. He’s very much focused on promoting stablecoins abroad. He sees stablecoins, clearly from his public statements, as an opportunity to dollarize parts of the world that haven’t been dollarized yet.

I think one of the best analogies I’ve heard for stablecoins up to date is that stablecoins are Starlink for the US dollar system. That’s an incredible asset when you recognize what stablecoins really are. All you need to access US dollars in today’s day and age is an internet connection. That’s it. It used to be much more difficult to do that prior to the internet and prior to cryptocurrency especially. That’s a tremendous tool.

As we are seeing some countries try to move away from the dollar, principally Russia and China, we’re simultaneously seeing people organically across the world adopting stablecoins by the millions because, in their own countries, be it Zimbabwe, Venezuela, Argentina, or any country that’s experienced severe inflation in the past, they now have this exit option to move some of their native currency into the global reserve currency.

No matter how one might feel about inflation and how it affects the US dollar, it pales in comparison to how inflation affects native currencies in other countries. People still see the dollar as this incredibly stable asset that they can keep their savings in. It’s a lifeboat. It’s a refuge for them from the inflation that is really hitting their countries hard.

Beckworth: With China, you don’t worry about China’s digital footprint or what it’s doing?

Lyman: I do worry about China’s digital footprint all the time. What’s interesting is China’s paying very close attention to what we’re doing here in the United States with both Bitcoin and stablecoins. Let’s hit on the stablecoin aspect at first. China took President Trump at his word when he vowed to make the United States a crypto superpower. They’ve been especially concerned about stablecoins because, by their own notes and party meetings, we’ve seen that they recognize stablecoins are a great tool for the dollar. It’s a great way for people to access the dollar in a way they wouldn’t have been able to before.

We see that they’re taking action even now to compete with stablecoins, or at least shore up resistance to stablecoins within their own country. Something happened that was very consequential. That was also very overlooked back in January of this year. China launched a couple of years ago their own central bank digital currency, the digital yuan. However, it didn’t have much pickup in its early years. In January, however, they made an extreme makeover currency addition of the digital yuan. They actually made it an interest-bearing form of money. Just by virtue of holding digital yuan in your digital wallet, you’re actually accruing yield as each month goes by.

That was very clearly done to compete with US dollar stablecoins. Currently, people don’t earn yield for just holding their stablecoins, even though stablecoin providers and some exchanges want to allow that to happen. China, as an added incentive for their own people and some regional trade partners to hold digital yuan, have now made it an interest-bearing instrument. That’s hugely consequential. I think it shows their cards and where they want to take the digital yuan in expanding it globally to the extent that they can. It also shows that they’re watching us and our digital asset strategy and responding accordingly.

Beckworth: That’s interesting that they’re watching our discussions, our policy changes. Now, I’m not worried about the dollar losing dominance. I don’t think the Chinese yuan will ever be competing on the same level, given at least the current leadership over there. They’re very much about control, so they don’t want to internationalize their currency too much. They have capital controls.

There’s things they could do, but I don’t think they will do because of their view of the economy and control. It sounds like that’s almost a defensive measure. They want to offer yield on their CBDC so that a dollar stablecoin won’t make any inroads, as opposed to them going on the offense. Is that fair? It’s more of a defensive measure?

Lyman: I think that’s a good interpretation as being more defensive than offensive. One of the reasons they’re concerned about this is because back in 2015 to 2017, when the Chinese economy was really taking several hits, a huge portion of Chinese elite moved their wealth out of the country through what instrument? Bitcoin, actually. A lot of people interpreted the 2021 ban in China on Bitcoin as being a spur-of-the-moment reaction, but in reality, it was years in the making. China is incredibly threatened by any route around to their capital controls.

Bitcoin and stablecoins are the two best ways to route around capital controls within China. Its entire economy is built on having capital controls that keep the money within China. Without those capital controls, their economy would look very different today. That’s why I think they’re paying attention both to stablecoins, and like you said, David, it’s more of a defensive measure. They’re also paying attention to Bitcoin. Where China stands on Bitcoin is hard to interpret.

I would love to provide some additional insight for your listeners. A lot of people think that China has unilaterally banned Bitcoin. It might take the Charlie Munger view that it’s rat poison. In reality, you look at what China is saying and what they’re actually doing, and those are two very different things.

Beckworth: Really?

Lyman: Yes. Let’s look at the 2021 ban on Bitcoin. It’s very explicit that people are not to mine Bitcoin, and they are not allowed to transact in Bitcoin. You look at what China’s done in the last year especially, and it shows that maybe their revealed preference is something else. Let’s look at as recently as the fall of last year. There was a Treasury action against a Chinese national who was running essentially a scam farm in Cambodia. They were able to seize about 127,000 of his Bitcoin, or about $15 billion in Bitcoin from this Chinese national. China disputed that. They said that Bitcoin belonged to their citizen and that it wasn’t right for the United States to take it.

Of course, that man is currently in China right now being prosecuted for crimes in China from China. China wants to essentially prosecute him themselves, but also that gives them an excuse to appropriate his 127,000 Bitcoin. Why is that consequential? Because if China were able to seize that 127,000 Bitcoin for itself, it would then leapfrog the United States in terms of which nation-state has the most Bitcoin.

One more example I’d love to bring up, the International Monetary Institute associated with Renmin University—which is essentially the farm league in China for future central bankers and people who work in monetary policy there—they recently republished a Bitcoin Policy Institute paper, actually, about Bitcoin as a reserve asset. They republished it to their WeChat, they translated it into Chinese, and they said it’s worth watching the rise of Bitcoin as a reserve asset. They encouraged their hundreds of thousands of followers to read that paper.

Again, the revealed preference with Bitcoin in terms of what it says policy-wise and what it’s doing behind the scenes are two very different things. I think there’s significant evidence to believe that China is still paying attention to Bitcoin and even concerned about this potential global nation-state race to accumulate more of it.

Beckworth: That’s really interesting. There is an individual over there, had a lot of Bitcoins, is a criminal, and they want to keep it. They don’t want the US to get a hold of it, which says something. That says a lot, actually. Let’s go back to what you mentioned about this possibility, or maybe it’s more than a possibility, of a Strategic Bitcoin Reserve in the US. You said that’s still in the works?

Strategic Bitcoin Reserve

Lyman: Still in the works.

Beckworth: Something could be rolled out at some point.

Lyman: Definitely.

Beckworth: Let me provide some pushback on that. Why do we need that? Other than maybe this whole China story, but it runs against at least my perceived spirit of Bitcoin. Bitcoin is, we want a stateless money, we want to get away from the state, get your hands off. It’s a public blockchain, totally free. I’ve even met some people who are hardcore Christians who it’s a way to get away from the mark of the beast in Revelation. It’s to get away from any oversight. Then you have the Strategic Bitcoin Reserve, and you have the US government right in the middle of it. How do we reconcile that tension, and what’s the charitable way to think about that?

Lyman: I’ve heard that same tension as well from different members of the Bitcoin community. I completely understand where they’re coming from. At the same time, if the true Bitcoiner believes that Bitcoin is destined to become a global reserve asset, of course, nation-states are going to pay attention to it the same way that they pay attention to gold. Even though there might be some within the Bitcoin community who don’t like the fact that states are getting involved, in reality, it just shows how successful Bitcoin has become that nation-states, not only from the United States to China, but also to Iran now and to other countries, they’re paying attention to this because they recognize its value.

Would it be amazing if Bitcoin could only exist in a libertarian fantasy world where we never have to touch the grimy hands of the state? Sure, that’d be great, but that’s just not the reality that we live in right now. If Bitcoin succeeds, of course, nation-states are going to pay attention. I’m a committed Bitcoiner, but I’m also a pragmatist, which for that reason alone, it makes sense that the United States is paying attention to Bitcoin and interested in accumulating it as a strategic reserve asset.

Beckworth: I guess follow-up question or two on this would be, one, if the US does actually reveal its plans and it’s ambitious, then probably China’s going to do something in kind. They’re going to be like, “Hey, wait a minute, they’re actually serious about this. Maybe we need to start Bitcoin reserves.” That would be interesting to see if China, how they process what we talked about.

Lyman: Exactly. Yes, it’s interesting because the game theory of Bitcoin plays out both on the individual level, to the institutional level, to the nation-state level, where the theory can be boiled down to very simply, you might want to buy some in case it catches on. If you have the United States, the home of global capital, actively accumulating Bitcoin as a matter of policy, then, of course, other countries are going to pay attention, including China. It’s something China’s paying attention to.

As far as the Strategic Bitcoin Reserve goes in the United States, the current state of play is that both Treasury and Commerce are trying to figure out what’s the best way to custody this Bitcoin and what is the best way to “use” budget-neutral pathways to accumulate more Bitcoin. The executive order that President Trump signed, making a matter of policy a Bitcoin reserve, required Bitcoin accumulation, but in budget-neutral ways.

What are ways to accumulate Bitcoin without imposing any additional expense on taxpayers? That’s an active and it’s a live question in both the Treasury Department and at Commerce right now. I think Commerce is working on this a little more actively than Treasury just because their bandwidth is a little larger.

Beckworth: We already have some Bitcoins at the US government, right?

Lyman: Right.

Beckworth: Some seizures? Okay.

Lyman: Yes, about 300,000 total.

Beckworth: The US is already on a path leading to that potential reserve. Let’s step back again. We’ve stepped back from a nation-state perspective. Let’s step back, though, and talk about where do you see Bitcoin going or becoming? You mentioned it’d be a global reserve asset. Do you think it would actually rise to a global reserve currency, or just would it be similar to gold?

Future of Bitcoin

Lyman: There’s two possibilities, and you outlined both of them. Will it be global money or will it be global gold? I think it could be either one. I think there’s a really good chance, though, that it could rise to the level of a global reserve asset like gold. Simple reason, it’s described as digital gold. Just like gold, it’s an incredibly scarce asset. Unlike gold, it’s so much easier to move Bitcoin. If I were to move, let’s say, $1 million in gold to a friend in France, then it would take me days to ship it. It would cost potentially hundreds of thousands of dollars to process that transaction, just given the security costs involved of moving that physical gold.

Whereas, with Bitcoin, I can make that same transaction—I wish I had $1 million in Bitcoin, but I don’t. If I wanted to, I could move $1 million in Bitcoin to that friend in France for cents, and I could do it in a matter of a few seconds to a few minutes. It’s incredibly portable, and that’s an advantage it has over gold. You look at any new technology that digitizes its analog counterpart, and they always seem to win out in the future.

I think one of my favorite examples is Blockbuster and Netflix. Netflix is essentially a digital Blockbuster, and I think Blockbuster thought for a long time that they were perfectly safe because they were the incumbent. What we saw very clearly with the move from Blockbuster to Netflix, or you can use any other analogy, the CD to MP3 streaming, inevitably, the digital version wins out because it’s so much more frictionless than the analog counterpart. Will Bitcoin become a global reserve asset? I personally am bullish on that because it has all the properties of gold and then some. I see it very possibly achieving parity with gold sometime in the next 10 to 20 years.

Beckworth: I’m sympathetic to that view, that it will be a global reserve asset, but I’m very skeptical that it will become a global reserve currency for several reasons, probably two big ones. One is just its volatile value. Now, maybe I’ve heard this argument in response to that point, as it becomes a more mature asset, the volatility will die down, or you’ll have intermediaries built on top of Bitcoin which handle this demand shock so that the actual end use is relatively stable. Maybe markets will innovate, and we’ll get around the volatile price. That’s the first thing. People want money with a stable nominal value. That would be a big strike against Bitcoin as a global reserve currency versus asset.

The other thing is it’s competing against the dollar. The dollar is so entrenched. Stablecoins are going to probably enhance it on the margin. Even China. People talk about China’s holdings of Treasuries and dollars going down. It’s a reporting trick. I follow Brad Setser pretty closely. He’s a big China person online and used to work in Treasury. He notes the state banks are actually acquiring more dollar assets. As long as they run these big trade surpluses, they have to acquire dollar assets. They’re buying up dollar assets. If anything, the dollar continues to grow around the world. I just don’t see how Bitcoin can displace the dollar. Is that fair? 

Lyman: Yes. No, I think that’s a very fair point of view. To an extent, I agree with you. It could be that throughout our lifetimes, the dollar is always the dominant currency. However, we look at the history of money itself, pretty much every native fiat currency has failed at one time or another. A lot of times when people express this exact concern, I don’t think that Bitcoin can take over the dollar. What they’re showing is a term used in the industry that we call dollar privilege. Definitely, as users of the dollar, we recognize how useful it is to us.

However, outside the United States, in countries like Iran, for example, where the rial has plummeted in comparison to the dollar, interestingly, a lot of their citizens have started to use Bitcoin. About one in five Iranians, for example, uses Bitcoin actively on a day-to-day basis. Now, of course, they’re using that Bitcoin because they can’t very easily use dollars, even though they can now through stablecoins. You look at the history of finance, and the history of money in particular, and those are two things that I would point out.

First, the frequent failures of fiat currencies. The dollar is king today, and I’m very confident it will continue to be the king throughout my lifetime. I’m probably in the minority within the Bitcoin community for that belief. However, we also know that there is the potential that the dollar itself is in no way immune to hyperinflation, for example. We see how much our national debt is growing every year, how much it costs to finance our debt every year to the tune of trillions of dollars. I don’t think the US dollar is immune to what’s happened to other fiat currencies in the past. Now, if that’s the case, it’s nice to have an insurance option.

A lot of people look more and more to Bitcoin as that insurance option. It’s sort of a call option on the dollar failing in the future. Not likely scenario, but it is a more than 0% possibility that that could happen, which is why I think you’re seeing a lot of accumulation of Bitcoin as people become more aware of how inflation affects the dollar. I’m with you, David. I think that it’s very likely throughout our lifetimes the dollar remains king. However, I also believe that Bitcoin has the potential in the event of hyperinflation, for example, to surpass the dollar as potentially the global reserve currency. It’s just something where I think we’re going to have to wait and see.

Beckworth: Yes. Well, Sam, you’re sounding like a TradFi guy wearing a DeFi hat. You’ve got both on, and you’re doing a nice little balancing act between the two. 

Bitcoin vs. Dollar-Based Stablecoins

Okay, so let’s talk a little bit more about digital payments, and let’s compare Bitcoin to dollar-based stablecoins. Again, but on this point about what will be the future. Let’s put aside the US dollar. Let’s say what will be the dominant crypto asset in the future. Right now, clearly, Bitcoin’s miles and miles ahead. What is it? Over $1.5 trillion?

Lyman: $1.5, about that.

Beckworth: $1.5 trillion, and dollar-based stablecoins, a little over $300 billion. I wonder, though, let’s go 20 years from now. Will that be reversed, or will it be similar? Because a stablecoin is a useful transaction asset. Again, it has the stable nominal value. Will that grow more rapidly because of its use as a medium of exchange versus Bitcoin as this put option on the dollar going bust? You can tell a story where maybe stablecoin has a more robust future. Bitcoin will always be there, but what do you think? I know the trajectories of up to $4 trillion in a decade, some forecast for stablecoins. Where do you see this settling out, let’s say, one, two decades out?

Lyman: Yes, let’s take the most bullish possibility that Bitcoin stays ahead of stablecoins in terms of market cap. That would be in keeping with the way Bitcoiners use stablecoins. Within the community, Bitcoiners actually use stablecoins very frequently, not only to go back and forth between Bitcoin and fiat, but they use Bitcoin as a savings instrument. Bitcoin essentially is their savings account, and stablecoins are what they use for everyday payments. That’s an acknowledgment by Bitcoiners that the dollar is a good form of currency. It’s a good medium of exchange precisely for those reasons that you were talking about earlier. It’s not nearly as volatile at all compared to Bitcoin.

I do see a scenario where Bitcoin stays ahead of stablecoins. I think that depends on how wholeheartedly we embrace stablecoins here in the United States, though. There’s a lot of resistance amongst the banking lobby, for example, to stablecoins. I think if the banks were to have their way, you would see the stablecoin total market cap always be well below the Bitcoin total market cap because they would push resistance to adoption of stablecoins. However, let’s suppose a scenario where the United States embraces stablecoins wholeheartedly.

Let’s even suppose that the United States in the near future allows stablecoin providers and stablecoin custodians to issue yield to users. At that point, you’re hyper-dollarizing the world. In that scenario, I could see a potential where maybe stablecoins do achieve parity with Bitcoin’s market cap or just below it. Maybe they even surpass it. It really depends at this point on how bullish the state is in embracing stablecoins. My personal opinion, though, having been in the industry for several years, is that Bitcoin will stay ahead of stablecoins in terms of total market cap just because, as good as the dollar is as a payment instrument, it’s the inflation that always gets to people.

I mentioned stablecoins earlier as a gateway drug to Bitcoin. That’s because they recognize, when they use stablecoins, the ease of transactions where when you pay someone in stablecoins, you don’t have to go through a middleman. It’s that frictionlessness that they really like. Over time, they also recognize how tenuous the dollar is in terms of its long-term value. After recognizing how much inflation affects their own savings, they’re much more inclined to start saving in Bitcoin.

Now, that’s taken place on the individual level for millions of people in the United States and across the world as they’ve started to use stablecoins and Bitcoin together. Could that take place globally with hundreds of millions of people? I think so. If that takes place, then no matter how large stablecoins grow, I think you’re going to see Bitcoin stay just a little bit ahead of them.

Beckworth: Going back to China briefly, you mentioned how China is defensively responding to developments over here with the GENIUS Act, with President Trump’s interest in Bitcoin. They’re hedging themselves. They’re protecting themselves. I also find it interesting that if you go to Europe, the eurozone, another big potential competitor, if you listen to ECB officials, they’re outright terrified about dollar-based stablecoins, which for the life of me, I can’t understand. I’ve actually asked several senior people who’ve worked in positions in international institutions and central banks, why are the Europeans freaking out about dollar-based stablecoins?

They make it sound like the dollar-based stablecoin could replace, to some extent, euros as a retail transaction asset. I’m blown away. Great for the dollar, but is that actually possible? Many people I talk to think that probably won’t happen, but yet the Europeans seem worried about it. Now, part of the challenge is they’ve put themselves in a bind. On one hand, they’ve made these MiCA regulations which make it really hard to issue private euro-based stablecoins, so there’s no real great profit motive to do it. On the other hand, they’re issuing a CBDC, but the CBDC itself is limited in Europe because they don’t want it to be too good to displace the banks. Really, it’s the banking industry that’s dominant.

To be fair to Europe, their financial system is more bank-dominant. They’re preserving their system, but what they’ve done is they’ve created this vacuum, and nature hates a vacuum, so most likely the fear is dollar-based stablecoins will fill that void. Would they actually displace retail spending? Would people start using dollar-based stablecoins in Europe over euros? I find that hard to believe, but maybe I’m missing something. Have you heard these concerns from Europeans, and what is your sense of why they are worked up so much?

Lyman: Yes, I haven’t heard this concern from Europeans specifically, but I’ve heard these concerns voiced at the IMF. My personal point of view is that they’re probably paying attention to what’s taking place in South America, for example. A few people know that in South America, stablecoins are wildly popular. Here’s a crazy statistic. One in three South Americans has actually used stablecoins, and they’re used frequently for payments in places like Venezuela and Argentina, for example. They like to use Tether.

That’s interesting because the inflation taking place in South America is obviously far worse than any inflation taking place in Europe. However, it shows that there is an appetite amongst people to move toward the hardest form of money. Even though people would say that the dollar is not a hard form of money compared to Bitcoin, it’s still a harder form of money compared to euros or pesos or any other fiat currency out there.

I understand their concerns just because they’re probably watching widespread Bitcoin adoption in other countries. I believe it was Nigeria, actually. Obviously, far more inflation taking place in Nigeria than in Europe. The country at one time actually banned stablecoins because so many of their citizens were using them because it was a far superior form of currency than the fiat currency within Nigeria. I understand where they’re coming from because they’re probably just watching the trends taking place globally, and they are concerned that that could happen in Europe, even though I do think it’s far less likely to take place.

Beckworth: It’s interesting you bring up Argentina. I heard a story from one gentleman who told me that he had some relatives down there, and they bought a house with dollars, several hundred thousand dollars, and they literally had to deliver to the seller physical dollars. They had to hire a security team to get the dollars from their bank and then transport them to the seller’s bank. He goes, “Man, if they could just use a stablecoin, that would make life a whole lot easier. It’d be safer, it’d be easier, it’d be quicker.” I could see why the appetite would be growing rapidly in a place like Argentina or Venezuela. If you’ve got a state government that’s really oppressive.

Then I think back to 2008 in Zimbabwe when they had their hyperinflation, people were attempting to use dollars and South African rand because the currency was worthless. I don’t know if you’ve seen the actual notes from that period. Actually, I bought some of them. There’s $100 trillion bill, which was the largest. They actually were dollars because they spoke English and they had dollars. It’s actually worth something now as a collector’s item. Back then it was worthless. They were trying to use dollars and South African rands, but the state put people in jail if they found that you were using dollars.

Eventually, I think it was November 2008, they gave up, like, “Okay, you can use whatever you want to use.” Magically, dollars appeared everywhere and South African rand. Now, back then they couldn’t because it was before its time, but imagine if they’d had dollar-based stablecoins in 2008. It would have been much harder for the state to find out that you were using them. You can see someone physically holding or carrying dollars. You can’t easily tell if they’re doing stablecoins. It would have been a much easier, maybe sooner transition if they had the stablecoins in Zimbabwe in 2008.

Lyman: That’s interesting. I think you’re exactly right. It would have been much easier because stablecoins take any friction away from using US dollars that we would have seen in 2008. Just one more anecdote. I had a friend who traveled to Argentina recently. This was just about a month ago. He said that as he went to multiple retailers and multiple restaurants, they advertised openly that they accept stablecoins, specifically, Tether stablecoins, which is really interesting because it shows how organically it’s taking place.

Beckworth: Retail use, yes.

Lyman: Yes, retail use.

Beckworth: That would be a case where we don’t have to worry about on-ramp, off-ramp either. If the vendor, the seller, the retailer is taking your stablecoins, they’ll deal with it. Maybe they can use it, too. Maybe they don’t have to convert it into actual dollars.

Lyman: Right, exactly. That’s how most people use them, just as if they were physical cash but in the digital sphere.

Beckworth: Wow, that is really something. Yes, so bright new world for some of these places. It was interesting to watch during this so-called crypto winter. As you know, when did that begin? October? 

Lyman: People would say October.

Beckworth: October, end of last year. Then I think we’re out of the winter now. During that time, the market cap on stablecoins flatlined. It was this rapid growth since early 2020, reached $300-plus billion, and then it flatlined. Bitcoin lost value. At least it’s stable. It maintained, but it was a sign that there was some decline in interest. What was interesting to me, if you actually went and looked at each stablecoin, Circle actually went down, and Tether actually continued to grow a little bit.

I think my interpretation of that, and maybe you can correct me if I’m wrong, is Circle is still largely being used as a transaction asset with the crypto community. Tether is being used overseas as an actual transaction asset. People continue to want to use Tether to buy groceries or to do transactions. It’ll be interesting to see the two trajectories for dollar-based stablecoins, the Tether, which is outside of GENIUS, and Circle, which is inside. Now, do you see any problems with that? Tether is not being ringed into the US regulatory framework?

Lyman: Yes, there are potential challenges with that, for sure. This is my speculation, pure speculation. I don’t have any inside information or anything. I think that the United States government sees Tether as a potential asset because you mentioned earlier that it might be a little harder to see people transacting in stablecoins in 2008, for example, than it would dollars. I would push back just a little bit. With stablecoins, like Tether or Circle, you actually have open access to be able to see exactly what wallets are sending stablecoins to what other wallets.

I’ve talked to people in the intelligence community and the FBI, who have said openly that they actually prefer when criminals use stablecoins because it’s easier to track their transactions than other forms of money, which is interesting. Now, you have this scenario, though. Iran’s a great example of this. Tether is very popular in Iran, and we know that the Iranian regime has been using Tether to circumvent US sanctions. What was interesting, though, was we saw a massive seizure of US dollar Tether just about a month ago. I think it was about $600 million worth, or at least hundreds of millions.

What took place there was—I don’t know what happened behind the scenes again—but clearly the US government in some way reached out to Tether to direct them to freeze hundreds of millions of dollars in Tether dollar stablecoins. Potentially, the United States sees what Tether is doing as being somewhat outside of their control, but when the US government knocks on the door, it seems like Tether has been willing to comply up to this point.

Beckworth: That is so interesting.

Lyman: It’ll be interesting to see how that unfolds, definitely.

Beckworth: Don’t tell any of the conspiracy theorists out there that Tether is really an op run by the US government to have more control. That’s fascinating. Because Tether is off the grid, at least off the GENIUS grid, and it’s doing its thing, and it’s growing rapidly, it’s popular, that’s the thing. If the rest of the world starts picking up dollar use through Tether, and the US government can knock on Tether’s door and say, “Hey, we need this, and this to be shut down,” it actually becomes an asset, as you said. That is wild. Maybe one day you’re walking down the halls of the US Treasury, there’ll be the Office of Tether, where someone works closely with Tether to deal with asset seizures and stuff.

All right. Let’s step back from all this great discussion. Let’s come closer to home. We are recording this May 21. This will come out a bit later. We are still in the throes of the CLARITY Act not being resolved, not being delivered. Can you give us an update on that? Where does it stand? What’s the holdup? What is your outlook? Will it actually see the light of day, and when will it?

Update on the CLARITY Act

Lyman: I personally am bullish on the CLARITY Act passing for a few reasons. Number one, it passed with a vote of 15 to 9 out of the Senate Banking Committee, which included two Democratic votes. There was some bipartisan buy-in with moving the bill out of committee, which was a really good sign. Now, will Democrats ultimately vote for the final version of the bill on the Senate floor? I’m more skeptical of that, however, I think we’ll have enough votes to invoke cloture. We’ll need 60 votes to overcome the filibuster. I think what some Democrats will do is, in a way of having their cake and eating it too, they’ll vote to invoke cloture and then afterwards, they won’t vote for the final passage of the bill on the Senate floor.

There’ll be enough votes, at least, to move past the filibuster. I think a lot of Democrats are trying to straddle the line to keep the crypto constituency happy while also keeping more of their party officials happy. I do think that we’ll get it passed and across the finish line. Who knows? Maybe this podcast will come out at a time that it’s already been killed. I’m actually personally very optimistic about it just because I know it’s a huge priority for the White House. President Trump has set a deadline of July 4th to get this bill passed in time for the 250th anniversary.

He set that same timeline with the One Big Beautiful Bill last year. It felt like a very aggressive timeline last year, but in fact, Congress was able to meet it in the nick of time. I think he signed the One Big Beautiful Bill on July 4th. I think we could see that same scenario right now with the CLARITY Act. There’s some things getting hashed out right now from an ethics perspective and also in terms of Bitcoin developer protections, but I think that we’ll be able to get those things worked out in the next couple weeks here.

Beckworth: You’re bullish that by the end of July, we will have the CLARITY Act?

Lyman: I am. I would put the probability at around 60% to 65%.

Beckworth: Tell the listeners why it matters. If you get the CLARITY Act passed, what does that change and in what way?

Lyman: I’ll share just from my perspective as a Bitcoiner. For the past 17 years, every major government and every significant financial institution in the world was trying to ban or destroy Bitcoin in one way or another. However, with the CLARITY Act, that represents a sea change because it represents the United States government itself openly accepting and, even to a certain extent, endorsing Bitcoin as a form of savings, as a form of money even.

Look at how well Bitcoin has done and how much it’s been globally adopted in the last 17 years while everyone was trying to fight it. Now, imagine how much it could grow in the future given that the home of global capital is openly accepting it and giving it its stamp of approval. I think the potential for Bitcoin and the broader digital asset ecosystem to grow even more is far greater after CLARITY than it is pre-CLARITY because finally, you have sensible regulation here in the United States. What do other countries do? They frequently copy-paste the United States in terms of regulation in their own countries.

Not only will you have regulatory clarity here in the United States, I think it will be the spark that ignites more regulatory clarity in countries across the world. That is hugely bullish for Bitcoin and other digital assets because it’s its coming-of-age moment. It’s acceptance not only here in the United States, but abroad. I think you’ll see more and more institutional adoption as a result.

Because we didn’t have clear regulations for so many years, so many developers fled the United States because they didn’t want to operate in that legal gray area. An interesting statistic is that during Trump 1, about 40% of Bitcoin developers were here in the United States, but during the Biden years, when the entire industry was under siege, only about 26% of developers were located in the United States.

That just shows how persecuted the community has been by the regulations being imposed during the Biden years. However, once Trump came in and made true on that promise to make the United States a crypto superpower, people have been coming to the United States in greater numbers to develop their crypto companies here. I think there’s a lot of capital waiting on the sidelines to come in once there’s that regulatory clarity in place. I think it’s hugely bullish for the industry if we can get it passed.

Beckworth: That’s interesting. What you’re saying is that the CLARITY Act will do a whole lot more for Bitcoin as a reserve asset globally than the Strategic Reserve Fund would do itself. This is, what the GENIUS Act is doing for stablecoins, the CLARITY Act will do for Bitcoin.

Lyman: Possibly. I see the Strategic Bitcoin Reserve as actually being a little bit more bullish because I think it’s unambiguously a stamp of approval by the United States government on Bitcoin. CLARITY is still immensely bullish because it provides very clear protections for Americans who want to hold in-custody Bitcoin. It makes very clear that they’re allowed to do so, and they’re allowed to do so using their own self-hosted wallets, which is really important.

Before Trump, you saw in other countries like Canada, for example, this increasing trend of de-banking where individuals who were involved in the trucking protest, for example, their funds were frozen. You also saw a lot of de-banking take place during the Trump years, actually, with crypto companies. About 30-plus crypto companies were actively de-banked throughout the Biden years during the time when Elizabeth Warren mounted the anti-crypto army.

What is consequential about CLARITY is that it makes very clear that people are allowed to hold their own Bitcoin by law, that’s legally recognized now, which makes it much less possible that they can be de-banked in the future because when you hold Bitcoin, you are effectively your own bank. There’s no middleman with the way you use your money. You can hold it yourself. You can transfer it to another person and back and forth without any middleman involved whatsoever. I think that, in and of itself, is a really positive sign.

Quantum Computing

Beckworth: We’ve been painting this big picture of the future for Bitcoin, and two pivotal developments would be the passage of the CLARITY Act as well as the establishment of a strategic Bitcoin reserve. Those would really up the game for Bitcoin, although you could argue it’s already a global reserve asset. It’s already at the place where you could say the horse is out of the barn because, look, there’s ETFs. Is it Larry Fink who completely changed his tune now like, “Everyone’s got to have it in their portfolio”? In some sense, the legislation is catching up to the reality. Your argument you’ve just made is it would super-boost it, it’d be on steroids.

That’s great. That’s wonderful. We have stablecoins. I’m more bullish on stablecoins. I think that’s the important part, but all of them face this issue of quantum computing. You’ve written on this. You’ve thought about this, obviously, a lot. The past month or so, we’ve learned about Claude Mythos. Help us make sense of this. What should we be worried about? Is the Bitcoin community embracing this? Are they really worried about it?

I’ve heard some in the community say, “We don’t touch the architecture of Bitcoin. It’s one and done, because if you do, you’re tinkering. What’s next? You adjust these protocols, then you adjust some other protocols, and then before you know it, we were up in the supply of Bitcoin.” Walk us through all those issues. I’ve thrown a lot at you there, but walk us through them.

Lyman: Let’s start with quantum, just some table-setting to provide maybe a little more context there. Back in March, there was a paper published by Google that showed that the number of qubits it would take to break Bitcoin’s cryptography was much less than previously thought, as shown in their paper. Previously, we thought it would take about 10 million qubits to break Bitcoin’s cryptography. This paper showed that it could potentially take as few as 500,000. 

David, I’m no quantum expert, but I did stay at a Holiday Inn once. I know that 10 million qubits is far more than 500,000 qubits. Because of that, there is potentially a new timeline when it comes to when quantum will achieve the levels that it would need to in order to break Bitcoin’s cryptography. That being said, this is something that could very likely happen in the future, but I think the timeline is still a ways out.

My judgment on that is based off of the assessments of two organizations that I trust with some things. Let’s start with Google and the US government. Google’s own quantum deadline for their technology to become quantum-resistant is 2029. It’s about three years in the future. The US government wants all of its agencies to be quantum-resistant by the year 2035. It’s the US government’s own assessment that this technology, no matter the advancements that have been made in the last couple years, is still a ways out.

As far as what Bitcoin can do in the meantime, I think Bitcoin, in the meantime, should prepare for the potential of a Q-Day. There’s no harm in preparing whatsoever. Rushing a fix, though, is where we can run into some real troubles as a community because there isn’t a real need to rush because the timeline seems to be far off in the future.

I’ve talked to Bitcoin developers with a strong technical background and even a quantum background in one case, and they’ve told me that they are not concerned by the outline as laid out by that Google paper, for example, which it’s worth noting, the paper written by Google and published by Google, one of their co-authors was an Ethereum developer. There’s some rivalry going on there. Of course, there always is.

Quantum is something that could happen in the near future, and it’s something that the Bitcoin community is preparing for now. It’s something that we have everything we need to in order to prepare for quantum. We’ve had major updates to the Bitcoin protocol both in 2017 and in 2021. Of course, there’s a lot of infighting within the community when those protocol updates take place, but we’ve shown time and time again that we’re capable of making those updates, but better to prepare now than to rush something in the future.

Beckworth: Just to be clear, the Bitcoin community has agreed enough to update some protocols in the past, so it’s not inconceivable that it wouldn’t happen in the future despite there being—this is what I was alluding to earlier—some who don’t want to change things. It’s their culture.

Lyman: Right. Exactly. We saw this exact same level of disagreement back in 2017 and also in 2021 again when the Bitcoin community was making some pretty significant updates to the protocol. Given our past successes in making those updates, I’m very confident that we’ll be able to make any necessary updates in the future as well.

Satoshi Yakamoto

Beckworth: All right. One more Bitcoin question. Is Satoshi Nakamoto alive or dead?

Lyman: My guess is most likely dead. We’ll know if his coins move anytime in the near future, but my assumption is that he’s passed away. I know that New York Times just ran a report recently that it’s Adam Back.

Beckworth: They found him.

Lyman: They found him. I think Adam Back is an incredibly talented person in this space, but I don’t think he’s Satoshi. At the end of the day, it doesn’t even matter who Satoshi is, though, because the whole vision of Bitcoin is that it doesn’t belong to any single person. It’s a decentralized form of money that regardless of your color, class, or creed, you should be able to access Bitcoin and use it.

Beckworth: I mentioned this in a previous podcast when that story came out. Nic Carter, who’s a big commentator on Bitcoin, he’s also passionate about quantum computing and getting a fix for it put in place. He made the claim that Satoshi is dead, too, for the following reason—and he also pushed back against that New York Time article—because those coins have not been moved. In fact, how many coins does Satoshi have?

Lyman: I think it’s over a million.

Beckworth: It’s billions and billions of dollars, over $100 billion, I think.

Lyman: Yes, something like that.

Beckworth: There’s a lot of value just sitting there. Nic’s point was this: If Satoshi were alive, and we know that he cares about the future of Bitcoin, he’d be doing something with those Bitcoins because, my understanding is, they’re not in a very secure setting right now. Someone could hack in, could get all of them, and then sell them in, which we would cause a massive price disruption, lower the price temporarily, more volatility. If you really cared about the Bitcoin project, you would try to minimize that. If Satoshi were alive, he would have done something with his Bitcoins already, and therefore, Satoshi must be dead. Does that make sense?

Lyman: Yes. That’s interesting. I think what Nic was probably referring to there, in the event of Q-Day, where we achieve some level of quantum computing that allows users to break Bitcoin’s cryptography, like you said, Satoshi’s coins would be vulnerable. Unless they’re moved before Q-Day, they’re open to be hacked. I agree with his overall assessment, though.

Satoshi cared deeply about the Bitcoin protocol as a Bitcoiner. I do myself. There’s no harm whatsoever in preparing Bitcoin to become quantum-resistant in the near future. It’s just important that we don’t rush that process, that we do it right, and that we do it prudently in order to make sure that we bring in the consensus of the entire community, and not just the corporations that are very invested in Bitcoin, but the individual users in the United States, or even countries that struggle in the third world, making sure that their voices are heard as well.

Foreign Campaign Against AI

Beckworth: Sam, this has been a great conversation. You mentioned at the top of the show that BPI is also concerned about AI. You just had a hot-off-the-press policy brief titled “Foreign Influence in the Campaign Against American AI.” Tell us about that piece.

Lyman: It was a fascinating piece. Just the investigative journalism aspect of writing this report was one of the most fulfilling moments of my career because I realized just how deep the rabbit hole goes when it comes to foreign money in domestic politics. In this paper, I essentially service three vectors of foreign influence. The first vector is China state media.

We know that for years, China state media has been actively pushing anti-data center and anti-export control messaging here in the United States. They use their English-speaking propaganda arms to do this. What was fascinating was that Bernie Sanders, you may have heard, he hosted two Chinese nationals for an event at the US Capitol just a few weeks ago where he asked them to speak about the importance of AI safety. The irony was that these two Chinese nationals were PRC mouthpieces for these China state media arms. These were men, including one of them, who published several op-eds about AI safety for English-speaking audiences in the United States to consume and be concerned about.

The clear signal from what China state media has been doing for the past several years is they want the United States to slow down their AI development. They want the American public to be against data centers. They want them to be concerned about the potential impacts on electricity prices and water of data center buildout. That’s not to say that those concerns aren’t real and valid because they very much are, but we also need to keep in mind that data centers heretofore have shown that they can be of huge economic benefit to United States citizens. That’s vector number one, China state media.

Vector number two is the Singham Network. There’s a man named Neville Roy Singham who is a self-identified socialist who has an entire network of US-based nonprofits in the United States who have been actively pushing out anti-AI and anti-data center messaging and have been openly collaborating with that China state media in order to push out anti-American propaganda, which to me, is really disappointing.

I remember I watched Star Wars the other day and Obi-Wan Kenobi says, “You’ll never find a more wicked hive of scum and villainy than in the Mos Eisley Cantina.” That’s how I feel about the Singham Network. It’s this conglomerate of nonprofits here in the United States who are pushing socialist ideas and socialist values and they’re completely tax exempt. That’s vector number two.

Beckworth: Real quick on the second one, why are they concerned about AI? Why would the socialists be opposed to AI? Is it too capitalist for them or what?

Lyman: I don’t know if it’s they’re opposed to AI as much as they’re opposed to American AI. What’s interesting about Neville Roy Singham is that he’s based in Shanghai. He’s a former Huawei consultant. He is someone who, by his public pronouncements and his behavior, has shown very clearly that he likes China, that he’s partial to China. He probably wants China to win in the AI race.

Beckworth: It’s not just a progressive politic chain of nonprofits. It’s a Chinese national behind it. Okay.

Lyman: I think that’s more likely the motivation for him.

Beckworth: Your third one now.

Lyman: The third one, vector number three of foreign influence is foreign billionaires. There’s two in particular. Alan Parker, whose son is Kristian Parker. The Parker family founded the Oak Foundation, which has worked with the CCP on the Belt and Road Initiative. They have been part of the greenwashing process of the Belt and Road Initiative sponsoring grants to China in order to build out the Belt and Road. They have also been actively pushing money into United States domestic politics through dark money groups and by donating directly to nonprofits in the United States that signed the coalition letter that eventually precipitated Bernie Sanders’ national data center moratorium.

Then one more billionaire that’s worth paying attention to on that front, his name is Hansjörg Wyss. He’s a Swiss citizen who has said that his mission is to “reinterpret the United States Constitution in terms of progressive policies.” That just shows where his allegiance lies and that he’s trying to push a lot of anti-data center and environmental movements here in the United States. They’ve both funded a lot of nonprofits here in the US who have been actively pushing forward that anti-data center messaging.

Those three vectors together have converged on a single policy, which is banning data centers here in the United States. I think it will become more and more likely in the next couple of years that this will be a hot button issue in US politics. It could even become a plank of the Democratic Party platform if the misinformation surrounding data centers isn’t corrected.

Beckworth: Our time is up. This has been a great conversation. We’ve learned a lot about the broader visions of digital payment space, to the US, to China, what the future may be for stablecoins and bitcoins. Tell the listeners, where can they find you online?

Lyman: You can follow me on X, formerly known as Twitter. That’s @SamLyman33. You can also follow the Bitcoin Policy Institute. That’s @bitcoinpolicy. I would encourage listeners to go to the Bitcoin Policy Institute website. That’s where all the papers we’ve talked about today are archived.

Beckworth: Thank you, Sam, for coming on the program.

Lyman: Thank you.

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. Dive deeper into our research at mercatus.org/monetarypolicy. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other thoughtful people like you find the show. Find me on Twitter @DavidBeckworth, and follow the show @Macro_Musings.