Speaker: You’re listening to a new episode of The Brave Technologist, and we’re back this week with another episode we recorded at the AI Summit in New York City. This one features Chastity Murphy, a former senior advisor at the US Treasury Department who helps shape federal policy on central bank digital currency and digital payments.

She was the first congressional staffer to draft stable coin legislation under representative Rashida tb. And Chastity is now a visiting research fellow at the University of Manchester’s Law and Technology Initiative, and one of the leading architects of privacy preserving digital public money.

In this episode, we discussed how early stablecoin legislation shaped our understanding of digital money, privacy, and consumer protection.

The gap between how technologists and poly team makers think about digital money, real world risks of surveillance and data visibility in financial transactions, along with practical approaches for creating offline anonymous and interoperable digital payment systems that don’t sacrifice usability. And now for this week’s episode [00:01:00] of the Brave Technologist.

Luke: Chastity, welcome to the Brave Technologist. How are you?

Chastity: Good, how are you? Thank you for having me. Good. Yeah,

Luke: thanks for, I’ve been looking forward to this one. You know, I know you were working on one of the congressional teams that was first working on was a stable act, I think.

Yes. Um, uh, how did working on legislation help shape your understanding of what digital money should. It Protect and what it should be.

Chastity: So during the time that we worked on Stable Act, we were actually in the middle of COVID. Okay. It was actually the last bill that we introduced and I was working for representative to lead Uhhuh out of Michigan at the time.

And one of the things we noticed is that there was a large transition from. Of like cash to the use of like digital payments. Yeah. And that was concerning for us, mostly because her district was like one of the largest districts. But also because it was just a lot of misinformation out there about whether or not cash can transact COVID Uhhuh.

And as we started to understand and move to [00:02:00] more on the digital front, yeah, it became an issue overall because we realized there were a lot of stable points. Issuers presenting their products as deposits uhhuh. you know, thinking that there’s, some sort of insurance people thinking that they have some protected liabilities.

And what ultimately and eventually happened is we said, we need to get in front of this. We need to try to figure out how to regulate stable coins and do this within the prudential regulatory framework. Okay. Which is something that we didn’t do. We hadn’t done before. We’ve seen with money market mutual funds.

Yeah. We’ve seen with repo there’s always this other tier regulation that’s created and usually when there is a financial crisis those particular products can destabilize. So we wanted to bring this in, Prudential, Prudential, regulatory tier, and think about it in that way. Uhhuh. Well, because it was so ahead of the curve in terms of what people’s focus.

Were at the time people didn’t actually start to really consider stable coin legislation until about a year later, which is when around the time I joined [00:03:00] Treasury and that’s when we had the PWG report. And the PWG report really referenced a lot of what we said in the stable act with some pieces in there like merri banking, Uhhuh.

And that was like a thing that we started to think about more intensely. But it’s really the question that we really had to ask ourselves was. Like, is this a fight about over digital money? Is it over like, who can contribute to the architecture of economic life, And we had to think about that in a way of how do we create some, framework for people to navigate within a regulatory tier.

And how do we book architecture that could potentially allow people to transact if they are cash dependent Uhhuh? And that’s just sort of how the, the thinking went around. Stable coin legislation.

Luke: I can imagine it’s, it’s kind of a challenge. Even, even within the, especially at the time, right?

Cryptocurrencies was kind of like a, a, a new, early thing then, and stable coins were still kind of, I, I can imagine it’s probably tough to navigate. Like what surprised you most about the gap between how policy makers think and, and about digital [00:04:00] money and how technologists think about it?

Chastity: So, I think technologists think about it in terms of capabilities.

Uhhuh, I think policy makers think about it in terms of liabilities,

Luke: right? Right.

Chastity: Technologist is thinking how far can we go? Uhhuh and a policymaker is saying, did we go too far? Okay.

Luke: Okay. Right. Yeah, that’s fair.

Um,

Chastity: And I think the underlying assumptions from both ends is technologists are assuming that policymakers understand the underlying technology.

Luke: Right? Right.

Chastity: And policy makers are assuming that technologists understand the social contract behind money.

Luke: Right.

Chastity: So I think that there’s really a gap in both language and in values. Once I. Just trying to optimize that efficiency. And the other is like trying to protect stability. And the truth of the matter is, the public just got caught in the middle

Luke: right.

Of this. Right? Yeah, because there’s this whole like adoption curve too, right? Right, right. It’s like people, it gets adopted by different, you know, different folks and, and different rates and for different things. Right? And then it’s one thing, it just seems totally foreign one day and then the next [00:05:00] you, you blink and it’s okay, now millions of people are using this stuff, right?

And then it’s like they can get a thing out to market fast enough to where okay, if. PayPal is doing it now, or if another, you know, vendor, like that’s already doing it, then you’ve already got adoption at a certain scale

I think the biggest thing that it’s probably important is to center a lot of this in rights versus risk

uhhuh.

Chastity: And I think when we think of it from, from that standpoint, we can potentially translate and rebuild how the public thinks about the product, but also how people who are in, who are building the architecture can think about it as well.

Luke: Right.

Chastity: And you’re right. I think in the States there’s a lot of gaps in terms of privacy.

Yeah. And data. And that also has to get really fine tuned and, and thought about on the back end For sure. Do you think

Luke: the public actually understands, like how much of their financial life is already visible by third parties?

Chastity: Not at all.

Luke: Yeah, absolutely not.

Chastity: I agree. People can, people know things, right?

They know that, you know, banks can see [00:06:00] certain transactions. but they don’t understand the scale and the. Team of the type of financial, you know, visibility. It’s every swipe, every bill, pay, every transfer that metadata can be analyzed and sold without any explicit consent.

Luke: Yeah.

Chastity: And I think the public thinks surveillance is about big purchases.

Right? Right. They think it’s about you know, fraud and, and suspicious activity, but it’s, it’s the smallest like mundane patterns. It’s you know, where do you buy? Groceries. Right. You know, something as simple as what pharmacy do you use? And then they can take that data and, and sort of determine some underlying characteristics about you as a person.

I think the, the thing that I would also add here is, which I, I think is pretty large, I don’t think people understand how much the public actually interacts. How much, how much treasury or how much fencing, and how much these other actors actually share our data. Financial data. You gotta think, you know.

A lot of banks have to, [00:07:00] they over report.

Luke: Right, right, right, right. To try to stay

Chastity: within compliance. Right.

Luke: Right.

Chastity: And because they’re overreporting, there’s a mass amount of data that’s being shared, and that data is going into a, a aggregating sort of site. I think everyone’s now here heard of them, Palantir.

Right, right, right, right. And so now we see that law enforcement can access Palantir. Right. DHS can access Palantir. What do they do with that data? And so people don’t know that. They’re not necessarily aware that that. Is happening. Right. And that’s the thing I wanna raise aware, there’s one thing to say.

Yes. The private sector has a, a massive amount of access to our data. And because it’s unregulated, it’s where it goes, how it’s treated is one thing. There’s another thing to say that, that where you have to use, where you’re, where you have to use banks and other types of ways to transact in the digital economy or the economy more, more broadly.

It’s also being surveilled by the public. Right. And that’s scary given that we’re in this sort of authoritarian system. I mean,

Luke: no, no, no. Hey, I’m with you. We build privacy products, so I [00:08:00] get the, I mean, this is where I kind of worry about it too, where you have you have what, okay, this is what the governments are, are collecting and sharing and kind of collating, right?

And then also there’s so much like third party data about people out there and how, how people are using it to balance out credit score ratings and things like that too. Yes. Things that people aren’t even considering. It’s just yeah, it, it’s really interesting. But, but I think your point about how your money, you’re using your money is a really valid one too.

I don’t think people are really aware of, like Right. The degree to which that information’s out there. You know, what is a cryptographic like capability you’re most excited about right now? That could meaningfully shift how people experience financial privacy and, in activity.

Chastity: I think I’m, probably most excited about selective disclosure. Okay. I would also say zero knowledge proofs. Working together in practical, lightweight waves, uhhuh you know, imagining, proving I’m over 18 without revealing, your identity. Right, right, right. Or if you are approving, I’m not on the sanctions list.

I think one of the things we worked on, on the last things I worked on at Treasury, one of reports is a lot of people [00:09:00] are subject to multiple identifiers, especially people who exist in the Muslim community, Uhhuh, and they could be. Locked out of a bank account.

Luke: Right.

Chastity: Because they are associated with potentially a, a, you know, maybe a terrorist or someone on the sanctions list, and so their account is frozen.

Luke: Yeah.

Chastity: So I think, you know, making sure that we don’t expose someone’s financial history and using those attributes are helpful. And those aren’t just like technological tricks. They open the door for a world where compliance and privacy isn’t, aren’t in competi on competition with each other.

And, the first time, we can design a system where people can give just enough information to meet the rule, but not so much that they are losing some sort of civil liberty or Right, right. Or, or lose their agency more broadly. Yeah. Yeah. Yeah.

Luke: No, I think that’s a great point too. Especially with the potential for like false positives and, and all sorts of things.

Yeah. You know, with cultures and everything. You know, if we fail to kind of build a, a rice preserving digital, digital money, what does the world look like in [00:10:00] 10 years?

Chastity: It looks like frictionless authoritarianism. Wow.

Luke: Alright.

Chastity: and not dramatic, not dystopian. Just quiet. Yeah. Seamless, you know, control a world where every transaction is traceable. Every purchase is behavioral data. I would say every, you know, financial decisions comes from a risk. Score. And you know, I, I talked a little bit about it before, but let me try to center it in, in real life.

Yeah, yeah, yeah. right now, like at this present moment, if I were living in Texas, I just, moved back to DC from Texas. Right. Okay. And if I decided I would like to get access to reproductive health, medicine or, or services. I can’t necessarily do that. If I wanna use.

Use my card or debit card or something. Right. So like, they can use that data to prosecute us.

Luke: Right, right, right.

Chastity: And then I gave an example to a friend the other day who’s, who’s on Xons team, transitional team. And this question of what does this mean for, for immigrants?

Luke: Yeah.

Chastity: And who, want to [00:11:00] just transact and cannot.

Luke: Right.

Chastity: So there are real life implications because ICE can get in. And get that information. we’ve seen examples of that. Oh yeah. Where Western Union sold some data to DHS and it caused a whole a case. So we don’t want a system where everything is surveilled.

We do not wanna live in the world where everything is surveilled. We need to create a cache like digital system that, that doesn’t necessarily need to exist on software, but hardware,

Luke: people won’t notice the shift all at once. They’ll just wake up one day and realize that they stopped taking certain actions.

Yeah. Well, I mean, and and there’s a lot of truth to that. Yeah. Because we sawwhen Supreme Court kind of, overturned the, the Roe v Wade stuff like a whole new wave of privacy interest’cause you had people that were using like third parties to basically like track like people going around to Planned Parenthood and things like that.

Yeah. and, and it’s one of those things where if it’s not. In front of your face or like impacting you, you’re not necessarily thinking about it. Right. Right.

I feel like I could go talk to a, a real you know, hardcore libertarian person, or I could talk to somebody on left and there’s actually a lot more alignment around that [00:12:00] fundamental want of not having a surveillance date where I feel like, that gets a lost a lot.

You know, like in the political process where like people are so like. Of you know, epi cupping over whatever, and tribally kind of like Right. My party versus your, and realistically everybody’s like kind of a human wants to have like kind these basic Yeah.

Chastity: I saw it within the administration, right?

Right. You know, that we were in constant people who were really trying to bring to the forefront conversations from ACL U, other privacy and data academics we saw at the for forefront as saying, Hey, privacy and anonymity has to matter. Right. It’s the second largest reasons why people are on bank. More importantly, everyone doesn’t want to be surveilled.

Right. That’s why we have cash. Right?

Luke: Exactly. Exactly.

Chastity: But, but at the same time, we’re running up against the same people who are in the treasury building, which is Benson, who wants mass surveillance. they refuse for us to use the word anonymity. Right.

They say privacy. I said, no anonymity. Wow. And we lost that debate. because the Democrats decided to, to sort of pass a. Over that conversation around privacy and the, and the need for [00:13:00] privacy and anonymity. Yeah. Guess what took over? The Republicans did? Yeah. And they, they now use it as a, as a tool to say, you don’t want CDBC, you don’t want, public infrastructure and you don’t want the government surveilling your, your transactions.

And that’s what they’re doing. And meanwhile, we see in this administration, Musk has access to, you know, Musk did have, doge, had access to treasury payments.

Luke: Yeah, yeah, yeah, yeah. What,

Chastity: where did that data go? Being treated. So that’s the, real loss with the party. Yeah. Is that we did not take the opportunity to capture and really say Anonymity is important. And when you think about it, like when I go to other countries, even when I’m, you know, working at Manchester, they’re very anti surveillance. So I’m, I’m actually try to understand why we’re so behind the pendulum. People wanna opt into being Ella, people wanna opt into certain things.

You shouldn’t have to like, choose between your. Privacy and anonymity and using something that’s more efficient. Right,

Luke: right, right. No, exactly. There shouldn’t be a trade off that requires that. And, and I think it’s really interesting to hear you talk about it this way.

‘cause I, I like, from the outside, I mean especially ‘cause we were [00:14:00] in the sector, right? So it, it was very much like things just got cold in DC But like hearing that there was this like opposition and like, how did it make you feel about this next wave of a politician.

On the Democrat, do you think that the, the Democrats are gonna get more on page with that? Or do you think that they’re seeing the lesson that you’re talking about here where if we don’t do this, the other side’s gonna use it?

Chastity: I don’t think they’re actually understanding and heeding into the lesson that was there, to be completely honest. Yeah. But I do think that because there was A wave of concern about Doge accessing treasuries information. I think now people are thinking what guard rails do we need to put in place?

Right. But that takes a lot of narrative changing. Oh yeah. And I think that takes a lot of municipal, local government effort Yeah. To sort of show that this is an important thing to our, municipality and allow that to soft launch or pilot the government thinking about it on a more federal and national scale.

So I think that’s. Important. My biggest fear with the Democratic Party is that we are going to go back to the status quo [00:15:00] Uhhuh, that we are not gonna learn our lesson uhhuh. That we are still going to try to be in the you know, center, right? Like level of politics. Yeah. And actually not necessarily think about true social contracts and social contracts that impact people.

We always wanna play in the middle and we really need to be trying to capture a lot of the left, a lot of the generation who care a lot about this issue. And we keep missing the pendulum there. Yeah, that’s interesting. That’s super

Luke: interesting. your research is exploring some of the anonymous like public interest payments.

what’s a use case that makes you realize this is really what, just some of that what we were talking about? Yeah, yeah, yeah.

Chastity: So yeah, we’re working on a public interest payment system, Uhhuh, that’s offline anonymous interoperable enclos loop. Okay. And. Right now, Manchester is focused on it, I would say mostly in terms of the uk, but because right now in the United States, we can’t necessarily focus on it from the federal government standpoint.

We have to focus on it on a municipal level and use that as narrative changing if we are a, if we get out the authoritarian [00:16:00] system. And so, the use cases that we’ve been thinking of, and I brought it up before, is how can someone get access to reproductive health medication? If you know, they.

Live in a hostile state like Texas, but wanna get access to maybe a clinic that is in California or in DC Right. And so how do we completely think through all the threat vectors? Yeah. How do we make it completely offline? And then one of the things we realized is a lot of people who wanna get access to these types of like medications, they’re in low income class.

So how do we do this with a credit card? And so anonymize it. And so we’ve thought through prepaid contactless payment cards maybe based that of Planned Parenthood where they can get access to these particular cards. You can make it even more interoperable. In Texas, there’s a grocery store called HEB.

Okay. Everyone, it’s, it’s in every local neighborhood. I, I call it a cult, but anyways,

They, it’s interesting ‘cause they have these cards right now and it’s prepaid and they’re, they use it for reloading, for toll. Oh yeah. Accessing toll or paying it that way. I think if [00:17:00] we could take that card, make it a contactless payment and people are able to use it and other.

Areas. Hong Kong has a card like this as well. Yeah. Yeah. They use it in other areas. I think it’s a, a really useful offline anonymous use case that could be potentially helpful. And they can use it for a lot of reasons. there’s a lot of flood activity in Houston and other parts of Texas.

I think that’s an opportunity to get flood mobility funds to communities. And then there’s other use cases, right, where people exist on college campuses. When they get their Pell grants that’s operated by a third party.

Luke: Right. Right. And

Chastity: sometimes that third party takes fees on the back end.

Yeah. And so I think there’s a question of how do we do this where the students can get their money directly? Yeah. And then there’s just like this larger unthink question, right? Yeah. Where we’ve talked about a few times where people just. People, some people just don’t want bank accounts, right? I just did a, a round table and we’re going back and forth like, you need a bank account in order to do this.

I’m like, actually, you don’t. Right. We’ve seen it happen. We’ve seen in Pesa. Yeah. We’ve seen Ali, we’ve seen all these [00:18:00] different ways that people have transacted Avan where they did not have a bank account. Yeah. Yeah. And so, I think this, how do we do this say, Hey, if you want, you want, you don’t have to have a bank account, you don’t need an intermediary.

You can just transact I saw someone at a conference having a fingernail with like payments. They get to, you know, take a payment. So you don’t need a bank account, you don’t need an intermediary. Yeah. You can do this on hardware devices. And that is the main point that we are trying to, to drive.

And then hopefully you can on ramp it into some sort of software device, like Cash app, like Venmo, like some sort of,way to do this without necessarily having to sacrifice your anonymity. Yeah, yeah, yeah. So we’re thinking through those use cases. The biggest one right now for me is like trying to think through like.

Like if we can do it through HEB or if we can do it through a college campus. And another one that I didn’t mention is probably the, the most popular one, which is what Hong Kong is using is transit Uhhuh. Or you go to a transit station, you can reload that hardware, that card, right. At the transit system.

But you can only use it at the transit transit system. What if you just use it everywhere? Yeah, yeah, yeah. And there’s no [00:19:00] ledger, there’s no background. You know, that’s just you put the money on there and then it’s like your prepaid, it’s like a prepaid card. Yeah. Yeah. So that’s, so that’s how we’re thinking about it.

And we think that it can solve a lot of issues. Even down to the digital divide. So we’re excited about

Luke: it. And that just, and that’s just it’s resonates so much with like just the ethos around why a lot of us got into the crypto stuff in the first place is like we don’t need to like, I mean it all kind of emerged out of the financial crisis.

Right, right. 2008 where it was like we watched a whole like generation of retirees lose half their retirement. Yes. People can lose their houses. Yeah. And all out of this crisis that like everybody just using banks because they have to that we can have a better alternative. Right? Yes. I think it’s cool.

I I, I didn’t expect to hear what I’m hearing right now. I think you Awesome. You know, and really I’m glad that you all are working on that. so you, you’re working on this at, at Chester. Is there something, are you prototyping anything now? is there anything like in progress?

Chastity: prototyping anything just yet. Uhhuh I think right now we’re assessing the use cases. We’re thinking about potential threat vectors. We’re seeing if the Bank of England might be considering taking this up and considering our design. And then right [00:20:00] now there is potential for.

Are pilots in some of those jurisdictions that I was talking to you about in the States. Oh, cool. And so we’re just, again, trying to get to a place where we have at least to some level of consensus for some of the different use cases and then trying to launch that. But right now it’s just more in the research, like case, proving these cases phase uhhuh.

But I think a lot of funders would be interested and there has been some that sort of poked at Hey, how can we support this? Yeah. So, yeah, we’re excited. That’s awesome. Yeah, it’s

Luke: super cool. what different choices do you think people would make if they had access to this type of money,

Chastity: offline?

Luke: Yeah,

Chastity: I mean, I think people, you know, there’s like benefits on either side, right? Yeah. The benefits of having a bank account. Yeah. Right. You have deposit insurance. Yeah. Yeah, sure. You know, like something were to happen if you lose your money. Right. You’re, you’re covered. And then there are benefits of cash.

Yeah. Right. Or benefits of cash, like products. Yeah. but there are downsides to both, right. Bank account, this is like

Luke: someone can shred it off. Yeah. Right?

Chastity: And I’m like, you’re getting [00:21:00] surveilled regardless, right? Yeah.

Luke: Yeah.

Chastity: With cash, you’re not getting surveilled. But the downside of it is like you lose, if you lose that card, just like if you lose your cash.

Luke: Yep. Yep. It’s gone. That’s.

Chastity: So I think, I think people would use it, but I think that the, the real case for people using this outside of the fact that they want privacy and anonymity outside of the fact that they want to, to, to transact in this economy, especially in this particular government.

Luke: Yeah. I think

Chastity: the real, real case for this is like, how do we on ramp

Luke: people?

Yeah, yeah, yeah, yeah. And

Chastity: to other types of products. It could be software, it could be a bank account, you know, giving people the option. People shouldn’t have to choose either or.

Luke: Oh, totally. Yeah. You gotta meet people. They are. Right. Exactly. That’s my biggest frustration is like being in this space for 10 years is none of my neighbors know a product that uses the technology that would order like how many, how many Your neighbors know a crypto app?

No one. None of them. No one. Right. No one. Like you gotta meet ’em where they are. Right, exactly. Like and the rails are there. Like you just have to, and I’m pretty confident we can. How do you feel? [00:22:00] Do you feel optimistic about this? Like, where’s it going or where it can go? I mean, do you think it’s doable?

Chastity: I do think it’s doable. I think that it’s how we talk about it though.

Luke: Yeah. Yeah, yeah.

Chastity: Yeah. I don’t, I think. it’s what I talked about with the Democratic, like the, the friction and it just within the party, within the administration. But I think there is a silver lining, right? Uhhuh if Republicans are saying they care about privacy and, anonymity.

Luke: Right.

Chastity: And there are a section of Democrats that also are saying we care about privacy and anonymity. Yeah. I think we need to like hook onto that.

Luke: Yeah. Yeah. I

Chastity: say that because there was a bill that was introduced and I cannot remember the representative’s names to save my life, but he introduced a bill.

He was like, it was an anti CDBC bill. Okay. Yeah. He did, what he excluded was ash,

Luke: uhhuh

Chastity: and hardware. Electronic cash.

Luke: Yeah.

Chastity: And so I think that there is a silver lining where people would be on the same page about the use of this particular product. Yeah. I don’t think it would be too hard, but I, I think we have to get people to understand how it works.

We have to pilot it. Yeah. We have to research, we have to talk about it more. We have to do more of these. Right, right, right. Exactly. Exactly. [00:23:00] Do more podcasts, do more conversations and get people really bought into the idea. And it’s, it’s, a lot of this is about narrative changing. Awesome. Awesome.

Luke: Yeah.

I just have a couple rapid fire questions. Sure. If you don’t mind one book that shaped how you think about technology and power?

Chastity: I would say the Wealth Divide was, was a pretty, really good one. Okay, cool for me.

Luke: Awesome. What’s the best lesson you learned from working inside the government?

Chastity: Best lesson. You have to understand bureaucracy. And red tape in order to push policy forward. But I think the biggest lesson I’ve, I’ve learned is that that can make you jaded, uhhuh and make you think about things in a way where it’s just like you don’t really wanna do it. Yeah. And so you have to really go in when there’s interest that you wanna defend.

There’s people who you want to put at the forefront. You have to really allow yourself to be motivated by that. You have to stay connected to the community. You cannot get into a. Where everybody’s like-minded, thinks like you, it will not help.

Luke: Right. Progress

Chastity: [00:24:00] anything forward.

Luke: Oh, that’s awesome. Then what, what city do you think is quietly becoming like a, a digital money innovation hub?

Chastity: Somewhere between California, like San Francisco maybe. I don’t know if we have a, like a good city for this. Maybe. Maybe New York City with their MTA. Yeah. Yeah. The way that they use their cars on the transit system. Yeah. Yeah.

Luke: thank you so much, Jesse. Thank you. I really appreciate you making the time. Where can people follow your work or anything that you might want our, our followers to know about?

Chastity: University of Manchester’s website is really good.

Awesome. I’m also doing a fellowship at Roosevelt Institute. Okay, cool. About a lot of this work. So we’ll be publishing papers there on the University of Manchester in law. T lab and then I think if they wanna follow me, I mean, I don’t, I, I don’t do much of Instagram, but you know, you can always have me on LinkedIn, chastity Murphy.

Awesome. And I’m doing my best there to try to promote as much information and things that we’re doing at, at both institutes as possible. Yeah. Thank

Luke: you. I really appreciate you making the time. This is great conversation. And yeah, we’ll, we’ll have to check back [00:25:00] in. Sounds good. Thank you so much.