Stellar’s Jed McCaleb: Crypto Doesn’t Need More Regulation, It Needs Clarity

Do you think that a marriage of the traditional sector and the crypto sector is a good thing to grow the space?

It’s a necessary thing. I don’t think there’s another route, really. There’s obviously some people that will just jump straight into holding Bitcoin. But to get mass adoption, you need a way that people can can use the currency that they’re used to using — like dollars or euros or pesos— in this crypto manner.

Has your philosophy on crypto changed at all since the start of the year when the world imploded?

I don’t think it has really changed.

It just kind of highlights one of the reasons why we’re doing this. It makes it more clear for other people. It accelerates the momentum that crypto had already.

Do you think that the pandemic has highlighted some of the benefits of cryptocurrency over fiat currencies over the past few months?

I think so. Obviously, there’s the whole inflation issue, where countries like the U.S. had to print a lot of money just to alleviate some of the pain that’s been caused by the pandemic.

I understand the reasons why they’re doing it. But for the people that are holding dollars, it obviously weakens the dollar. That highlights some of the benefits of any asset that has a fixed supply like Bitcoin or lumens or gold or anything like that. It just makes those things more valuable. There’s that aspect of it. 

And then there’s also the aspect that people have needed to send money around the world, probably more than normal because of this. And any time you’re doing that, there’s a lot of friction when you are sending money across the border, and a lot of projects (particularly Stellar) focus on that.

Since you said that Stellar’s main focus is on helping more people make that bridge from fiat to crypto, do you think XLM’s price itself is important? 

At the end of the day, these networks and protocols need to provide some sort of value to people. They need to be useful to people’s lives. That’s what we spend all our time focusing on, how to make Stellar useful for people. We don’t really focus on the price or anything like that. We just want to be able to affect people’s lives in the real world. That’s what ultimately matters the most. 

Maybe price is a secondary indicator of how useful the underlying protocol is in some way.

But if you do that, then that changes the demand for the underlying network. And the lumens are used in a fundamental way for the network. Maybe that affects the price, maybe price is a secondary indicator of how useful the underlying protocol is in some way. It’s obviously very noisy, because a lot of things aren’t useful that have a high price. But I think that the trend is there: that where price and utility can come into play.

It’s been interesting to watch the rise in the price of YFI, especially since the creator said that the tokens have no value from the very start.

The whole crypto market is pretty wild, inexplicable. I mean, Dogecoin still has value.

Do you think that Dogecoin only has value because Elon Musk keeps tweeting about it?

It’s just one of these things. It’s very hard for these things to die.

Have you ever thought about creating your own currency like that? Not anything to save the world, but a meme-based currency to see what would happen?

(Laughs). No. I’m pretty busy.

For a more serious question, do you have a piece of advice for people that are just entering the crypto space?

Тhere’s a lot of hype and a lot of stuff doesn’t actually make sense when you start scratching under the surface. The consensus mechanism doesn’t hold up, it’s not as actually decentralized as you would want, the fundamental business idea doesn’t make sense. You should do a lot of diligence and try to understand as much as you can, and what will actually work before you jump into something.

Again, I think it’ll be very hard to approach this if you don’t have a strong CS background. Be careful. There’s a lot of nonsense out there.

What do you think then is the best way for non-CS people to get into crypto?

Actually, I don’t know a good route. Ask the people that are most technical that you know, and just be smart about it. 

I think that’s one of the big issues, that there’s a misallocation of resources — both capital and like human capital — because it’s hard to sift through what works and what doesn’t. I’m hoping that eventually some of these things will actually start to gain traction in the real world. And then, it will be more clear to people what things actually have legs and what don’t. This is just the pain of the newness of the space still.

As time goes on, do you believe that the projects that don’t actually have a use case will start to drop out?

That’s what I mean. I would think that that would happen, and ultimately has to happen. Hopefully, once things actually start to be used, it will be clear what makes sense and what doesn’t.

One question I got from Tim Feriss, he asks people what their favorite mistake was. Do you have a favorite mistake?

I’ve made a lot of mistakes, let’s see. I mean, I never should have sold Bitcoin…I don’t know if there’s any one thing. It’s just a sea of things in general. 

Be very mindful of who you end up working with, especially as an entrepreneur or the people that you kind of partner with, since you’re stuck with them for quite a long time. They have a big impact on the trajectory of your venture. 

If you wouldn’t work with someone for your lifetime, don’t work with them for a day.

My biggest mistakes have been not being not doing enough diligence of the people who I actually partner with or work with in that way. The would be the biggest take away for me. 

I think there’s an expression or saying that, if you wouldn’t work with someone for your lifetime, don’t work with them for a day — and taking that to heart is important.

Talking with people in the crypto space, I’ve found that there are varying attitudes towards regulation. I’ve talked to people who think the government is trying to kill them, as well as people like Meltem Demirors who thinks regulation helps minimize pain in the space. Where do you fall?

I would just hope that to the extent that there is regulation, they just keep as light a hand as possible, because that’s really stifled a lot, the a lack of certainty.

What there really needs to be is not so much regulation, but clarity.

I think what Meltem meant is that there needs to be regulation because it takes away the uncertainty, and I agree with that. But they [regulators] can also just say, “Hey, this stuff is regulated or, hey, this stuff is like in this category” and then we’re fine. 

What there really needs to be is not so much regulation, but clarity. That would go a long way to making more legitimate people get involved and just allowing people to do things that they are scared to do or were too unclear before.

Since you’ve joined the crypto community, how have you seen the space mature? Would you say it’s still a very young community?

It’s really changed over time. It still has a bit of a Wild West feel, but not as much as in the early days. 

The quality of people working here has gone way up since I was first involved. There’s much better entrepreneurs, much better people that work in the space than there was originally, and the projects themselves are just higher quality. We are definitely trending in the right direction. 

I do think it still has a ways to go. I think a lot of that has to do with what I said before — there needs to be regulatory clarity, because in the early days when you would talk to banks, they are interested, but they just wouldn’t know if they would get in trouble for working with us. Clearing up that stuff would just go a long way to making it more mature.

I recently spoke to J. Christopher Giancarlo, the former CFTC commissioner also known as “Crypto Dad.” He said that the U.S. is definitely not a leader right now in crypto regulation — do you think that the U.S. has a chance to get ahead?

I don’t follow policy that closely, so it’s hard for me to say. I mean, I would be kind of surprised. The U.S. is naturally more conservative than some other places that have less taboos. The world is big, and so surely somebody is going to be more cutting edge than what the U.S. ends up being. I doubt that we will be the leader here. But maybe.

For our final question: do you have a favorite crypto meme? Most people I ask say HODL, but I would argue it isn’t really a meme.

Yeah, it’s a way of life.

Do you subscribe to the HODL philosophy?

I have been sad every time I’ve sold Bitcoin, for sure.