1 00:00:03,930 --> 00:00:06,270 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. 2 00:00:06,990 --> 00:00:10,049 Sean Aylmer: Bitcoin is booming right now. We've seen record- setting Aussie 3 00:00:10,050 --> 00:00:14,999 Sean Aylmer: dollars trading at around 105,000 Aussie dollars a unit. In 4 00:00:15,000 --> 00:00:18,840 Sean Aylmer: US dollars, it's around that 65, 000 US dollars a unit 5 00:00:18,989 --> 00:00:22,200 Sean Aylmer: level. The reason the token has run so hard is 6 00:00:22,200 --> 00:00:25,950 Sean Aylmer: the huge inflows from investors into exchange traded funds offering 7 00:00:26,160 --> 00:00:29,669 Sean Aylmer: Bitcoin and other digital tokens. Add in a weaker Aussie dollar 8 00:00:29,849 --> 00:00:31,859 Sean Aylmer: and you get a new record. But how long can 9 00:00:31,860 --> 00:00:34,349 Sean Aylmer: it keep going and what's ahead for cryptocurrencies this year 10 00:00:34,350 --> 00:00:37,350 Sean Aylmer: in terms of regulation? That's the big question. Remember, this 11 00:00:37,350 --> 00:00:40,080 Sean Aylmer: is general information only and you should seek professional advice 12 00:00:40,080 --> 00:00:44,220 Sean Aylmer: before making investment decisions. John O'Loghlen is the managing director 13 00:00:44,220 --> 00:00:48,598 Sean Aylmer: APAC at Coinbase, the largest cryptocurrency exchange in the US. John, 14 00:00:48,598 --> 00:00:49,769 Sean Aylmer: welcome back to Fear and Greed. 15 00:00:50,219 --> 00:00:51,900 John O'Loghlen: Hey, thanks, Sean. Great to be back. 16 00:00:52,409 --> 00:00:54,510 Sean Aylmer: When we spoke late last year, we were talking about 17 00:00:54,510 --> 00:00:59,460 Sean Aylmer: the potential for spot Bitcoin ETFs from major funds like BlackRock 18 00:00:59,460 --> 00:01:02,610 Sean Aylmer: to push Bitcoin right up. Well, they came to pass 19 00:01:02,610 --> 00:01:04,740 Sean Aylmer: in early January this year when they were allowed by 20 00:01:04,740 --> 00:01:08,369 Sean Aylmer: the regulators in the US. Are you surprised at how much 21 00:01:08,370 --> 00:01:11,580 Sean Aylmer: of a push Bitcoin has got from these ETFs? 22 00:01:12,300 --> 00:01:15,450 John O'Loghlen: No, don't think we're surprised, probably because we were involved 23 00:01:15,780 --> 00:01:18,240 John O'Loghlen: in the process from its outset, and some of these 24 00:01:18,240 --> 00:01:19,920 John O'Loghlen: have been in the works for the better part of 25 00:01:19,920 --> 00:01:23,489 John O'Loghlen: five years. So, working with the likes of BlackRock and 26 00:01:23,490 --> 00:01:26,518 John O'Loghlen: other names in this industry, we are humbled to be 27 00:01:26,520 --> 00:01:29,759 John O'Loghlen: the custodian to most of these ETFs. And there are 28 00:01:29,760 --> 00:01:33,840 John O'Loghlen: similarly discussions going on in other geographies around custody and ETFs 29 00:01:34,709 --> 00:01:37,440 John O'Loghlen: in a number of regions including the ASX. And so, 30 00:01:37,440 --> 00:01:40,050 John O'Loghlen: when you look at the broader journey of the ETF 31 00:01:40,050 --> 00:01:43,529 John O'Loghlen: phenomena versus other products that are out there, clearly these 32 00:01:43,530 --> 00:01:47,789 John O'Loghlen: have been adopted very positively. And then even looking at 33 00:01:47,820 --> 00:01:52,590 John O'Loghlen: ETF demand versus supply for Bitcoin, I think we're somewhere 34 00:01:52,590 --> 00:01:56,280 John O'Loghlen: around the 5, 000 Bitcoin level in terms of demand 35 00:01:56,280 --> 00:02:02,370 John O'Loghlen: versus the 900 Bitcoin supply on a daily basis. And so, 36 00:02:02,370 --> 00:02:04,590 John O'Loghlen: if you think about what that does with a halving, 37 00:02:04,590 --> 00:02:07,770 John O'Loghlen: then that 900 gets halved to 450 again. So, we 38 00:02:07,770 --> 00:02:10,980 John O'Loghlen: think it's sustainable and it's a great entry point for 39 00:02:10,980 --> 00:02:14,790 John O'Loghlen: so many people who possibly haven't been comfortable being exposed 40 00:02:14,790 --> 00:02:18,719 John O'Loghlen: to the space before. And on top of that, Australians 41 00:02:18,719 --> 00:02:22,500 John O'Loghlen: are also becoming more and more familiar with ETFs as 42 00:02:22,500 --> 00:02:25,709 John O'Loghlen: a product and they're becoming more easy for everyday Australians 43 00:02:25,710 --> 00:02:26,430 John O'Loghlen: to access. 44 00:02:27,240 --> 00:02:31,530 Sean Aylmer: Okay. There's a few things in that. So, these ETFs 45 00:02:31,530 --> 00:02:34,320 Sean Aylmer: are allowed in the US. You said you are involved 46 00:02:34,320 --> 00:02:37,740 Sean Aylmer: in discussions in other jurisdictions. So, is it likely to 47 00:02:37,740 --> 00:02:43,500 Sean Aylmer: pass that ETFs, which include Bitcoin at least, potentially other 48 00:02:43,500 --> 00:02:47,250 Sean Aylmer: cryptos, could end up being listed on the ASX or 49 00:02:47,250 --> 00:02:49,230 Sean Aylmer: the UK, I'm not tying you down to any particular 50 00:02:49,230 --> 00:02:52,170 Sean Aylmer: exchange here, but exchanges outside Wall Street? 51 00:02:52,500 --> 00:02:55,410 John O'Loghlen: No, certainly. I mean, there's lots of regulated bodies who are 52 00:02:55,410 --> 00:02:57,780 John O'Loghlen: already in this space and there have been some previously 53 00:02:57,780 --> 00:03:00,720 John O'Loghlen: in Australia with Betashares and others briefly, they didn't have 54 00:03:00,750 --> 00:03:02,520 John O'Loghlen: a huge amount of liquidity and it was possibly a 55 00:03:02,520 --> 00:03:05,430 John O'Loghlen: little bit early days. But I think what's happening in 56 00:03:05,430 --> 00:03:09,599 John O'Loghlen: the US is clearly driving those activities and other exchanges 57 00:03:09,599 --> 00:03:15,000 John O'Loghlen: in other geographies. So, we are heavily regulated as the 58 00:03:15,000 --> 00:03:18,660 John O'Loghlen: only publicly listed international exchange out there. So, we very 59 00:03:18,660 --> 00:03:21,239 John O'Loghlen: much like to dot our I's and cross our T's 60 00:03:21,750 --> 00:03:25,919 John O'Loghlen: and we'll be looking very closely at what entities or 61 00:03:25,919 --> 00:03:27,719 John O'Loghlen: what bodies are doing this and whether or not they 62 00:03:27,719 --> 00:03:32,070 John O'Loghlen: feel that they are properly regulated by an AFSL or what other 63 00:03:32,549 --> 00:03:37,860 John O'Loghlen: means they feel is appropriate. Clearly, we want more regulation 64 00:03:37,860 --> 00:03:40,620 John O'Loghlen: in this market in Australia, and that will allow for 65 00:03:40,620 --> 00:03:43,530 John O'Loghlen: more certainty in this space, and I think those types of 66 00:03:43,530 --> 00:03:44,071 John O'Loghlen: products to be accelerated. 67 00:03:44,071 --> 00:03:50,309 Sean Aylmer: Okay. We are talking about Bitcoin in terms of the US ETFs, are other 68 00:03:50,309 --> 00:03:54,600 Sean Aylmer: cryptocurrencies part of ETFs? And if not, will they eventually 69 00:03:54,600 --> 00:03:55,980 Sean Aylmer: be part of ETFs, do you think? 70 00:03:56,430 --> 00:04:02,010 John O'Loghlen: Yes. I think ETH or Ethereum is really the next one off the block, 71 00:04:02,010 --> 00:04:05,969 John O'Loghlen: and there've been filings around ETFs as well. And I think 72 00:04:05,969 --> 00:04:09,599 John O'Loghlen: that's also driven some of the popularity or the movement 73 00:04:09,599 --> 00:04:12,510 John O'Loghlen: in terms of the price of ETH. Clearly the second 74 00:04:12,510 --> 00:04:15,900 John O'Loghlen: most held asset, and I think people are seeing a 75 00:04:15,900 --> 00:04:19,710 John O'Loghlen: real utility for Ethereum. It's quite a different token to 76 00:04:19,710 --> 00:04:22,710 John O'Loghlen: Bitcoin, but that's already in play and that's quite a 77 00:04:22,710 --> 00:04:26,610 John O'Loghlen: logical one. And I think for laymen on the street, 78 00:04:26,849 --> 00:04:30,450 John O'Loghlen: they're beginning to understand, okay, what does Ethereum look like 79 00:04:30,870 --> 00:04:32,909 John O'Loghlen: in terms of an ETF? So, I think that's clearly 80 00:04:32,910 --> 00:04:37,980 John O'Loghlen: the next milestone for the industry beyond the technical ramifications 81 00:04:37,980 --> 00:04:39,210 John O'Loghlen: of the halving in a few months. 82 00:04:39,480 --> 00:04:42,178 Sean Aylmer: Okay. So, I mean, the halving will make a big 83 00:04:42,178 --> 00:04:46,919 Sean Aylmer: difference. Just explain what's happening there and then the longer 84 00:04:46,920 --> 00:04:51,750 Sean Aylmer: term outlook for Bitcoin and other cryptos. But Bitcoin is the one 85 00:04:51,750 --> 00:04:54,270 Sean Aylmer: we're interested in here because of the ETF issue just 86 00:04:54,360 --> 00:04:55,169 Sean Aylmer: right now today. 87 00:04:55,830 --> 00:04:59,490 John O'Loghlen: Yeah, certainly. So, I'll talk more to the Bitcoin halving 88 00:04:59,490 --> 00:05:02,670 John O'Loghlen: as opposed to how it affects Bitcoin price, because I 89 00:05:02,670 --> 00:05:04,740 John O'Loghlen: don't think it's probably appropriate for an exchange to be 90 00:05:04,740 --> 00:05:08,400 John O'Loghlen: giving guidance on price. But embedded in the code of 91 00:05:08,610 --> 00:05:12,570 John O'Loghlen: Bitcoin is an allotment for a total maximum supply of 92 00:05:12,779 --> 00:05:17,040 John O'Loghlen: 21 million Bitcoin. And so, you have this fixed supply 93 00:05:17,520 --> 00:05:21,330 John O'Loghlen: together with a decreasing number of block rewards for the 94 00:05:21,330 --> 00:05:24,990 John O'Loghlen: miners. And so, every four years you have this periodic 95 00:05:24,990 --> 00:05:28,890 John O'Loghlen: decrease in this rate of issuance into circulation. And this 96 00:05:28,890 --> 00:05:34,500 John O'Loghlen: is called the halving. In 2012, the reward was 25 97 00:05:34,650 --> 00:05:39,059 John O'Loghlen: Bitcoins per block. In 2016, it decreased to 12 Bitcoins per 98 00:05:39,059 --> 00:05:43,830 John O'Loghlen: block. And at March, 2023, miners are awarded 6. 25 99 00:05:44,550 --> 00:05:49,529 John O'Loghlen: Bitcoins per block mined. So, you have this halving and 100 00:05:49,529 --> 00:05:52,230 John O'Loghlen: it relates to roughly every four years, depending on how 101 00:05:52,230 --> 00:05:56,580 John O'Loghlen: quickly blocks are mined, which averages about 10 minutes currently. 102 00:05:57,299 --> 00:06:00,120 John O'Loghlen: To go much beyond there, you need to really be 103 00:06:00,330 --> 00:06:05,460 John O'Loghlen: getting into application specific integrated circuits and computers designed to 104 00:06:05,460 --> 00:06:08,070 John O'Loghlen: hash computers as quickly as possible. So, a little bit 105 00:06:08,070 --> 00:06:12,118 John O'Loghlen: like Moore's law in that we're trying to keep the 106 00:06:12,120 --> 00:06:18,210 John O'Loghlen: supply limited and that's really the fundamental attraction of Bitcoin. 107 00:06:18,990 --> 00:06:20,760 Sean Aylmer: Stay with me, John, we'll be back in a minute. 108 00:06:26,970 --> 00:06:32,789 Sean Aylmer: I'm speaking to John O'Loghlen, managing director APAC at Coinbase. Okay, 109 00:06:32,790 --> 00:06:35,039 Sean Aylmer: John, so the bottom line there is that there is 110 00:06:35,039 --> 00:06:38,580 Sean Aylmer: a finite amount of Bitcoin in the market and therefore, it has 111 00:06:38,580 --> 00:06:43,950 Sean Aylmer: this scarcity value. What about regulation? You mentioned it before 112 00:06:43,950 --> 00:06:47,219 Sean Aylmer: and you're happy for regulation to be increased. What are you 113 00:06:47,219 --> 00:06:48,390 Sean Aylmer: talking about? What do we need? 114 00:06:49,589 --> 00:06:51,779 John O'Loghlen: Great point. And I think as this listed entity, we are 115 00:06:52,170 --> 00:06:54,479 John O'Loghlen: really keen to engage with Canberra on this. And we've 116 00:06:54,480 --> 00:06:58,380 John O'Loghlen: had a good audience with people like Treasury, the Reserve 117 00:06:58,380 --> 00:07:01,770 John O'Loghlen: Bank, ASIC and others. If you look to somewhere like 118 00:07:02,010 --> 00:07:06,539 John O'Loghlen: the EU, they've managed to land on this crypto assets 119 00:07:06,540 --> 00:07:11,429 John O'Loghlen: regulation regime called MiCA, which represents a very unified approach 120 00:07:11,430 --> 00:07:14,160 John O'Loghlen: to crypto across all the EU markets. So, when you 121 00:07:14,160 --> 00:07:18,300 John O'Loghlen: put this regulatory guardrails in place, all of the separate 122 00:07:18,540 --> 00:07:21,240 John O'Loghlen: EU countries, which we could say, compare to the states 123 00:07:21,240 --> 00:07:24,329 John O'Loghlen: of Australia, can go ahead and start building their own 124 00:07:24,389 --> 00:07:28,230 John O'Loghlen: crypto regulation. And then companies and investors and consumers are 125 00:07:28,230 --> 00:07:31,830 John O'Loghlen: comfortable using it. And so, right now in Europe and 126 00:07:31,830 --> 00:07:35,640 John O'Loghlen: MiCA, we are seeing some reviews of how crypto is 127 00:07:35,640 --> 00:07:38,820 John O'Loghlen: marketed to retail consumers and should there be some cooling 128 00:07:38,820 --> 00:07:41,459 John O'Loghlen: off periods or limitations around that, et cetera? And so, 129 00:07:41,460 --> 00:07:45,659 John O'Loghlen: every exchange is working around those parameters because it's clear 130 00:07:45,660 --> 00:07:47,999 John O'Loghlen: of what's happening. We're in a little bit of an in- 131 00:07:48,000 --> 00:07:51,210 John O'Loghlen: between period in Australia in that there has been a second 132 00:07:51,210 --> 00:07:54,510 John O'Loghlen: round to what we called the token mapping exercise, which 133 00:07:54,510 --> 00:07:58,890 John O'Loghlen: has been led by Treasury. And Australian institutions and the 134 00:07:59,070 --> 00:08:04,049 John O'Loghlen: technocrats really don't want invasive regulation that's going to mean 135 00:08:04,049 --> 00:08:08,310 John O'Loghlen: we have to upend all existing securities law. But clearly, 136 00:08:08,370 --> 00:08:12,210 John O'Loghlen: this is a new asset class that Treasury and the 137 00:08:12,210 --> 00:08:15,929 John O'Loghlen: RBA and ASIC have not necessarily had to deal with 138 00:08:15,929 --> 00:08:18,959 John O'Loghlen: before. So, it's not clear to us that we can 139 00:08:19,259 --> 00:08:24,029 John O'Loghlen: necessarily use the same lexicon that's been provided historically for 140 00:08:24,029 --> 00:08:27,990 John O'Loghlen: securities. So, we would like some clarity on that. And 141 00:08:27,990 --> 00:08:32,460 John O'Loghlen: I think in coming months, the latest round of the 142 00:08:32,460 --> 00:08:35,610 John O'Loghlen: token mapping consultation that we made a couple of months 143 00:08:35,610 --> 00:08:38,639 John O'Loghlen: ago, will get an audience in Canberra. That is due 144 00:08:38,639 --> 00:08:41,699 John O'Loghlen: to be made public or at least our submission is 145 00:08:41,699 --> 00:08:46,410 John O'Loghlen: available if people look into the various filings in Canberra. 146 00:08:46,890 --> 00:08:50,130 John O'Loghlen: And we really want a best- in- class global regime 147 00:08:50,520 --> 00:08:54,088 John O'Loghlen: that lends itself to what decentralized finance is. So, for 148 00:08:54,090 --> 00:08:58,169 John O'Loghlen: example, there have been calls to have local custody in 149 00:08:58,170 --> 00:09:01,980 John O'Loghlen: Australia. We are not supportive of local custody, because we 150 00:09:01,980 --> 00:09:06,840 John O'Loghlen: believe that we have very sound, secure custody globally right 151 00:09:06,840 --> 00:09:10,110 John O'Loghlen: now in the technology that we use, and it's actually a 152 00:09:10,110 --> 00:09:16,080 John O'Loghlen: stronger technological solution to have custody spread globally in a 153 00:09:16,080 --> 00:09:20,100 John O'Loghlen: decentralized fashion. So, all in all, moving to an AFSL 154 00:09:20,100 --> 00:09:24,059 John O'Loghlen: type regime, that should drive some consolidation in the industry 155 00:09:24,059 --> 00:09:28,020 John O'Loghlen: just because maintaining an AFSL and the governance standards that people 156 00:09:28,020 --> 00:09:31,170 John O'Loghlen: will be held to account on by ASIC around that 157 00:09:31,170 --> 00:09:35,129 John O'Loghlen: regime are quite a step up from the current requirements 158 00:09:35,129 --> 00:09:38,910 John O'Loghlen: which are driven by AUSTRAC, which everyone has been registered 159 00:09:38,910 --> 00:09:39,958 John O'Loghlen: with to- date in this space. 160 00:09:40,559 --> 00:09:43,380 Sean Aylmer: Okay. One final question. Financial planners are all important to 161 00:09:43,380 --> 00:09:46,860 Sean Aylmer: many people making investment decisions. Are they on board with Bitcoin 162 00:09:46,860 --> 00:09:51,900 Sean Aylmer: and cryptocurrencies and using exchanges like your own, or is 163 00:09:51,900 --> 00:09:53,970 Sean Aylmer: there still an education piece for them? 164 00:09:54,600 --> 00:09:57,630 John O'Loghlen: Look, I think they're moving pretty rapidly to it. I 165 00:09:57,630 --> 00:10:00,420 John O'Loghlen: think we see a lot of inquiries from self- managed 166 00:10:00,420 --> 00:10:03,270 John O'Loghlen: super funds. If you think about the biggest pool of 167 00:10:03,570 --> 00:10:08,400 John O'Loghlen: financial planner demographic out there. And we hear time and 168 00:10:08,400 --> 00:10:11,879 John O'Loghlen: time again from family offices and self- managed super fund 169 00:10:11,879 --> 00:10:15,630 John O'Loghlen: administrators and self- managed super fund trustees that they want 170 00:10:15,630 --> 00:10:19,050 John O'Loghlen: to follow this, let's say, broad rule of 50 basis 171 00:10:19,050 --> 00:10:22,889 John O'Loghlen: points or 1% of their asset allocation into digital. And 172 00:10:22,889 --> 00:10:25,230 John O'Loghlen: we're seeing that across the market. So, I don't think 173 00:10:25,230 --> 00:10:28,049 John O'Loghlen: it's a matter of if or when. It's actually happening 174 00:10:28,049 --> 00:10:31,559 John O'Loghlen: now. And we have solutions that we're looking at for 175 00:10:31,559 --> 00:10:36,540 John O'Loghlen: that space, and clearly that's a really advanced investor set 176 00:10:36,540 --> 00:10:40,889 John O'Loghlen: in Australia. They're listening to their children, their grandchildren, and 177 00:10:40,889 --> 00:10:44,940 John O'Loghlen: there's clearly a very strong demand for this demographically from 178 00:10:44,940 --> 00:10:48,480 John O'Loghlen: this, interestingly, under 35- year- old group, but also that's 179 00:10:48,480 --> 00:10:50,880 John O'Loghlen: really influencing what I would say would be a plus- 180 00:10:50,880 --> 00:10:53,250 John O'Loghlen: 65 boomer set as well. 181 00:10:53,790 --> 00:10:55,620 Sean Aylmer: John, thank you for talking to Fear and Greed. 182 00:10:55,950 --> 00:10:56,458 John O'Loghlen: Thanks, guys. 183 00:10:57,120 --> 00:11:00,240 Sean Aylmer: That was John O'Loghlen, managing director APAC at Coinbase. This 184 00:11:00,240 --> 00:11:02,549 Sean Aylmer: is the Fear and Greed Business Interview. Remember, this is 185 00:11:02,549 --> 00:11:05,399 Sean Aylmer: general information only and you should always seek professional advice before 186 00:11:05,400 --> 00:11:08,400 Sean Aylmer: making investment decisions. Join us every morning for the full 187 00:11:08,400 --> 00:11:11,429 Sean Aylmer: episode of Fear and Greed, Australia's best business podcast. I'm 188 00:11:11,429 --> 00:11:12,930 Sean Aylmer: Sean Aylmer. Enjoy your day.