Mark Perelman is a Business Development Intern in Blockchain and Digital Assets at IBM, where he focuses on payments and remittances, IBM Blockchain World Wire, stablecoins, and central banks. Previously, Mr. Perelman worked as Associate Director of Investment and Strategy at the Clinton Foundation for four years, where he was instrumental in growing commercial agribusinesses throughout Sub-Saharan Africa and arranging a successful exit following the Foundation’s change in direction. Mr. Perelman also worked as a competition economist producing expert legal reports on monopolization, collusion and fraud in cases involving Enron, Adelphia and others, and managed over $5 billion in assets at a quantitative hedge fund where he researched and launched ESG as well as targeted thematic equity funds. Mr. Perelman earned his MBA from theYale School of Management. He served as a T.A. for Jim Chanos’ The History of Financial Markets Fraud course.
The Politic: Tell me a bit about your background!
Mark Perelman: While I was a student, I tried to have more cross-school activities related to blockchain and fintech. I think there were a bunch, and I think Yale’s trying to move forward. It’s still an emerging technology, and I think there is value. At the same time, I’m not a believer in cryptocurrencies in general, and I think most of them were fraudulent. There was a bubble, and there was a lot of frivolous activity and scheming. I also think a lot of the people involved in these projects might have some technology background, or some business background, but they usually strike me as being very uninformed about either how the economy works or how technology works.
I think there’s a large effort by global governments to move forward in using this technology. Of course, that requires investment and buy in. That doesn’t mean this technology is the best there ever has been or ever will be: what it means is that it’s what we’ve got right now. And if it’s possible to get some of entrenched players to change their business models, then I think it could be successful for what it is.
As more established players enter the space like Facebook, will you be more bullish on the legitimate usage and adoption of cryptocurrencies?
No, I don’t think Libra has any prospect for getting through regulatory hurdles. I think it could basically become a mutual fund of Libra-like assets, but in my opinion, that’s pretty useless. Why would use that when the US. dollar is perfectly acceptable? They claim it will help third world countries, but third world countries don’t want to move their monetary policy with Facebook of all actors. They would rather go with the U.S. dollar which is a trusted currency, the value of which is backed by proven institutions. That being said, JPMorgan has issued their own coin for wholesale use, and I think that’s going to continue working. I think central banks might issue their own coin, too.
What if Amazon or Facebook tethered their coins to the U.S. dollar instead of a basket of global currencies? Would that solve the trust problem?
Why not just use the U.S. dollar or other stablecoins? Amazon has their own credit card already, and they tried to do their own virtual money. I’m not sure why you need cryptographic money on top of that.
Maybe these large enterprises won’t adopt their own coins in the best interest of consumers or the social good, but might they do so to chase customer acquisition like WeChat?
I think that’s worked in China because of the level of development of their financial system, but we’ve tried to do it in the U.S., where I even think digital adoption is pretty high. A lot of people use Venmo and PayPal. I don’t use cash that often. I use my credit card, which is more convenient, gives me credit, and then I just pay it off each month. It’s essentially like having cash. Other countries like Sweden are much more digital, and they’re researching central bank digital currencies along with other options. China is also issuing its own central bank digital currency.
When you say that Libra won’t fly in developing countries, are you speaking from the perspective of their citizens, or from the perspective of central administrators?
I’m speaking from the perspective of who’s in charge of the government, basically. If you read about Ecuador, they gave up their own currency, and now it’s just dollarized. A better example might be Greece within the Euro. They have no monetary policy, and you can see what the side effects of that are. I think cryptocurrencies could pass regulatory muster in the developed world, in countries like Germany, the U.S., and Japan, but they’re not really needed here.
You mentioned that many people in the space don’t strike you as well-informed on economics. In your mind, what are the major fallacies that they fail to recognize?
Some of them think that central banks don’t know what they’re doing, or that they’re bad for the economy, or that they’re redundant or useless.
What’s the counter-argument?
Central banks got us out of the great financial crisis. They were set up during financial crises. I think they’re very tightly linked to the markets and a country’s ability to grow and function. I think when you lose monetary or fiscal policy, it’s not that far behind in my opinion. You could look at Argentina, where you have a slew of government churning all the time. I think independent, strong monetary policy is a sign of a country’s stability and growth.
What are you working on at IBM?
I’m working on insurance policy for central banks’ digital currencies and their WorldWire project, which uses the Stellar protocol to transmit funds across borders.
Interesting– basically what you think the viable use case is for blockchain?
I think supply chain is viable, and I think anything that has a lot of people keeping their own ledgers, where it would just make more sense for everyone to keep their own ledger and not have all of that extra work and mistakes along the way, is viable.
Anything we haven’t covered?
More about interoperability. That’s the true purpose. Blockchains are just smart contracts, and to the extent that these smart contracts work together in some sort of system, then that could be true efficiency– that you could basically automate a lot of contractual processes. I think that would save a lot of money, create audit trails, and foster efficiency while mitigating corrupt because of its transparency. I think that’s kind of the promise of blockchain.
Any idea of what’s going on in the Yale space? Maybe what different people are working on at SOM and otherwise in terms of research?
I don’t know about the research. Different people have different interests. Some of them are interested in supply chain aspects or trying to solve climate change. Some of them are more interested in the “get rich quick” schemes, starting hedge funds, or other types of investments. Some of them are interested in building their own startups. I do think there’s a range of interests.
What’s the number one thing that being a TA for Jim Chanos has taught you with respect to blockchain/crypto? What’s the takeaway?
I think the takeaway is to not believe everything you hear, to look at the underlying information, to make your own judgements, and when something’s too good to be true, it’s too good to be true.
Cryptocurrencies often waste massive amounts of electricity. Bitcoin trading and mining uses more energy than many countries combined. It’s sad that what it takes to make a profit is to use to use such huge amounts of energy when our climate is being devastated. I hope that we’re able to move to a more efficient, intelligent design.