Speaker 1: This is Bloomberg Crypto, a daily Bloomberg IHOD podcast, and
Speaker 1: I'm Philip Blugger Cranzler, senior editor for cryptot Bloomberg News,
Speaker 1: in for Stacy Marie Ishmael. It is Friday, February the
Speaker 1: twenty fourth. Hello, and welcome to another This Week in
Speaker 1: Crypto episode. Coin Base reported earnings again and it wasn't pretty.
Speaker 1: A big loss and training volumes missed estimates, and the
Speaker 1: prospect of more layoffs seems to remain very much alive.
Speaker 1: In Nigeria, the Central Bank is seeking technology partners for
Speaker 1: developing its digital currency called the Nira, and Hong Kong
Speaker 1: is making strides in its effort to embrace crypto and
Speaker 1: may even have the TACIT approval of the central government
Speaker 1: in Beijing. So to help me break down the latest
Speaker 1: developments in the world of digital assets in person, I'm
Speaker 1: joined by Bloomberg editors Best Williams and Anna Irrera. All right,
Speaker 1: we're here in the London studio for the first time,
Speaker 1: I believe all three of us, Beth and Anna, welcome
Speaker 1: gathered here in the London studio. Anna, obviously you are
Speaker 1: a resident of London and you've been here before. Beth,
Speaker 1: is your first time, isn't it? Not to London? No,
Speaker 1: but the first time in a while. I was supposed
Speaker 1: to come right before COVID and then of course that
Speaker 1: changed everything. But most certainly first time in the London studio.
Speaker 1: In the London studio, yes, And I usually dial in
Speaker 1: from Zurich. So it's very nice to sit here with
Speaker 1: you guys, face to face and talk about all things crypto.
Speaker 1: And so let's get into it. Coin Base ported earnings
Speaker 1: fourth quarter earnings this week, and it was not very pretty,
Speaker 1: was it, Beth. Can you give us the sort of
Speaker 1: potted highlights of what they came up with? Yes? Not pretty?
Speaker 1: Is it one way to frame it? There were was
Speaker 1: expectations that it was going to be bad. It was bad. Yeah,
Speaker 1: down in a big way. And while they beat expectations
Speaker 1: for these reduced revenue or less of a loss, their
Speaker 1: revenue was actually down some seventy five percent from a
Speaker 1: year ago, Transaction revenue tumbled, Trading volumes were down actually
Speaker 1: twenty three percent, and they've been losing coin Base is
Speaker 1: affected obviously that they're a crypto exchange, so if trading
Speaker 1: volumes are down, they're going to be hurt. We know
Speaker 1: what happened in the fourth quarter of twenty twenty two.
Speaker 1: FTX imploded, the market went down, and then just finally
Speaker 1: on the stock. The stock fell more than eighty percent
Speaker 1: in twenty twenty two, and it's had quite a rally
Speaker 1: in coming into this year, along with the rest of
Speaker 1: the crypto market in general and other crypto stocks. Whether
Speaker 1: it has further to go is anybody's guests and analysts
Speaker 1: are a little cautious about it. Even the company itself
Speaker 1: is cautious. The CFO on the earnings call said not
Speaker 1: to make a lot out of the January and February
Speaker 1: rebound in crypto necessarily, even though they've seen trading volume increase,
Speaker 1: and they've also said that they are going to keep
Speaker 1: headcount at least where it is, and they may even
Speaker 1: cut more jobs. So there's definitely not a sense that
Speaker 1: they're out of the out of the woods. Yet that
Speaker 1: was interesting to me that they would not basically rule
Speaker 1: out more job cuts. I mean, you've had you saw
Speaker 1: them take out about twenty percent of the workforce earlier,
Speaker 1: and then you've had this massive or you know, fairly
Speaker 1: substantial rally across crypto, and these sort of cautious comments
Speaker 1: that they're making and would you how would you read
Speaker 1: what's your read on that coin? Miss has been through
Speaker 1: the winters before, right, they're one of the oldest sort
Speaker 1: of og crypto exchanges. They've been at it before, so
Speaker 1: you know, you could be a little bit confident that
Speaker 1: they at least know how to shrink and expand very quickly.
Speaker 1: The difference here now is that they're public, right, they
Speaker 1: were in public before, so everybody can take a close
Speaker 1: look at their numbers and can scrutinize, and they have
Speaker 1: investors they have to respond to, and they will have
Speaker 1: like investor relations and speak to people. So I imagine
Speaker 1: they're having to be more cautious because they can't even
Speaker 1: signal to the market that things are picking up. And
Speaker 1: you know it has picked up, but volumes are nowhere
Speaker 1: near what they were last year, and it takes several
Speaker 1: months of rally before your fees go back to what
Speaker 1: they were before. Right, And as much as they have
Speaker 1: been diversifying, I think the biggest era where exchanges make
Speaker 1: money as trading fees. So if volumes don't pick up,
Speaker 1: they don't, so maybe they can start thinking of ways
Speaker 1: to make money on other things that are kind of
Speaker 1: like crypto winterproof. I don't know, I was thinking maybe
Speaker 1: things like analytics, like stuff that's different. I'm thinking, like,
Speaker 1: you know, traditional exchanges had to reduce their reliance on
Speaker 1: rating fees, you know, especially in equities when fees were compressed,
Speaker 1: and so we saw them buying technology companies and becoming
Speaker 1: software providers. So I wonder if they'll start thinking of
Speaker 1: ways to do that. But obviously they have less money now,
Speaker 1: so they can't really go out and buy things. So
Speaker 1: it's just an interesting thing to see if they can
Speaker 1: sort of if they survive this winter, and then if
Speaker 1: they can future proof their exchange for another crypto winter.
Speaker 1: And I'm going to make a pretty big switch now
Speaker 1: and we're going to talk about central bank digital currencies
Speaker 1: CBDCs in Nigeria. So Anna, you were part of this
Speaker 1: story this week about the Nira and some of the
Speaker 1: developments there. Can you talk a little bit about what's
Speaker 1: going on? So? Yeah, So this week we reported that
Speaker 1: the Central Bank of Nigeria is looking for new partners
Speaker 1: for the Nira, which is the central bank digital currency
Speaker 1: that they launch in twenty twenty one, which made them
Speaker 1: the first African nation to launch the central bank digital
Speaker 1: currency on one of the first nations in the world, really,
Speaker 1: because a lot of central banks are talking about it,
Speaker 1: especially the big ones, but very few have launched them.
Speaker 1: They're looking for a new partner, not to replace bit
Speaker 1: which is their current partner straight away, but what they
Speaker 1: want to do, based on what sources have told us,
Speaker 1: is that they want to take more control of the
Speaker 1: system so that they control the ledger and it's their own.
Speaker 1: So the discussions are early days, but it just shows
Speaker 1: how like things are changing and moving, and it raises
Speaker 1: many of the questions that you know, we have when
Speaker 1: we think of, you know, a digital ear or a
Speaker 1: brick cooin, which is like when is it coming? When
Speaker 1: will I be able to pay my coffee with a
Speaker 1: digital year. I don't know if you guys think about
Speaker 1: it when you wake up, I don't put some people
Speaker 1: might right, right, but but you know, one of the
Speaker 1: things is like you're you're planning now for a token
Speaker 1: that a product will come out in like five years,
Speaker 1: and so you know, if you if you think about it,
Speaker 1: the technology you might be deciding to implement now might
Speaker 1: be really bad in five years. And so this this
Speaker 1: shows how like complex it is, and maybe the you know,
Speaker 1: central banks that rush to put out things before maybe
Speaker 1: find themselves now in a situation like a technological situation.
Speaker 1: Then it's not ideal. And as Beth knows because she
Speaker 1: edited a really great piece earlier this year, the Innira
Speaker 1: has had really not great adoption, as have other CBDCs
Speaker 1: that are out there, because one of the big questions is, yeah, kay,
Speaker 1: you put it out, but like, does anybody want to
Speaker 1: use it? What's the point? Isn't one of the points
Speaker 1: here that you have, As you said, Nira is very
Speaker 1: much in a developing country. Britcoin is very much in
Speaker 1: a developed country with a fairly robust fintic infrastructure already.
Speaker 1: Doesn't Nigeria have a good case here when it comes to,
Speaker 1: you know, wanting to establish a CBDC in a more
Speaker 1: sament developing environment. On the face of it, yes, I
Speaker 1: think that is one of the main pushes behind it
Speaker 1: to get to the quote unbanked population. And they're even
Speaker 1: allowing you to be able to use the use the
Speaker 1: Nira via mobile phone. You don't even have to have
Speaker 1: a digital wallet. They're doing those kinds of technical innovations.
Speaker 1: One of the issues that's come up with. Then Ira
Speaker 1: in terms of adoption is very funny because it kind
Speaker 1: of relates to crypto. Two, as a developing nation and
Speaker 1: one with sort of a struggling economy. They've have rampant inflation,
Speaker 1: they have a devaluing currency. The economy is not doing
Speaker 1: so well, and many Nigerians are fleeing to crypto, as
Speaker 1: in the cryptocurrencies like bitcoin and tokens like that, and
Speaker 1: not the Nira, which they see as a proxy for
Speaker 1: this currency that's devaluing. And so for them, they don't
Speaker 1: see any protection. They don't they see better use in crypto,
Speaker 1: which actually confusingly that you know, the central bank is
Speaker 1: against that kind of crypto, the crypto that we all
Speaker 1: think about, and they're trying to promote this central bank
Speaker 1: digital currency that a lot of people don't want, though
Speaker 1: they do want crypto. And so you've got this weird
Speaker 1: disconnect going on in Nigeria. And that's another issue on
Speaker 1: top of the technical issues that Anna mentions, which which
Speaker 1: it's true, you want to make sure that that one
Speaker 1: should get it up and running, that it's actually gonna
Speaker 1: not get hacked or or you know, break otherwise, and
Speaker 1: we'll be right back after the break with Anna Errera
Speaker 1: and Beth Williams. I do want to move further east
Speaker 1: now and talk a little bit about Hong Kong. We've
Speaker 1: done a smattering of stories about Hong Kong and the
Speaker 1: sort of tentative embrace of crypto and Hong Kong as
Speaker 1: an outlined a plan to let retail investors trade digital
Speaker 1: tokens like bitcoin and ether. That's a major step towards
Speaker 1: the city's goal of becoming a crypto harbor in a
Speaker 1: policy shift for contrast with the crankdown we're now seeing. Beth,
Speaker 1: could you do sort of briefly tell us a little
Speaker 1: bit about what's happening there lately. Hong Kong was a
Speaker 1: financial powerhouse for much of recent decades, and lately, with
Speaker 1: China's increasing control, seeing sort of a fleeing of of
Speaker 1: that financial power and influence. Um, Phil you yourself have
Speaker 1: moved from Hong Kong to Zurich. Sort that's when things
Speaker 1: started going really downhill for the Hong Kong um. But
Speaker 1: starting in the fall, uh, you know, China and has
Speaker 1: been supporting and Hong Kong has been trying to reinvigorate
Speaker 1: its incentives and attractiveness to the financial community, including crypto.
Speaker 1: So they have come out with some recent proposals and
Speaker 1: regulations that are more crypto friendly. You can trade crypto futures,
Speaker 1: and they recently came out with a proposal that's going
Speaker 1: to lead toward retail investors being able to trade the
Speaker 1: spot cryptocurrency. Yeah, they haven't completely specified, but it seems
Speaker 1: like it would definitely be those two and another large one.
Speaker 1: But the interesting aspect of the Hong Kong situation is
Speaker 1: that China, which was a huge incubator of all things crypto,
Speaker 1: crackdown on the industry basically banned it over a year ago.
Speaker 1: Now there's a sense that Hong Kong, with its ties
Speaker 1: to China, has a lot of people saying could this
Speaker 1: possibly be leading to or signaling some kind of pivot
Speaker 1: from China. And we just recently reported Bloomberg reported that
Speaker 1: some Chinese mainland liaison officers have been asking questions and
Speaker 1: seeing how things are going in Hong Kong. So there's
Speaker 1: raising this expectation that perhaps China could change course a little.
Speaker 1: I mean, I think that's that's a big statement, and
Speaker 1: I think that would be a long way off. I mean,
Speaker 1: they were pretty severe in the pullback that they made. Yeah,
Speaker 1: and there's another aspect here in that Singapore which sort
Speaker 1: of stole the crown early on in the race, Hong
Speaker 1: Kong was trying to buy itself out of the COVID depths,
Speaker 1: and Singapore now has kind of gotten a little bit
Speaker 1: of cold feet, you know when it comes to retail
Speaker 1: trading our crypto, and do you see that Hong Kong
Speaker 1: perceived potentially like a little bit of a gap here
Speaker 1: to start stealing a march on. I think it's now
Speaker 1: just funny how you have the SEC, not just the SEC,
Speaker 1: but all yours authorities being so aggressive that even someone
Speaker 1: saying well, let you trade bitcoin and either seems like
Speaker 1: such a giant concession. It's I mean, it's you know,
Speaker 1: we went from trade whatever thing you can find on
Speaker 1: against crypto and find like there's no problem to now
Speaker 1: like we'll let you trade bitcoine either and everybody being excited.
Speaker 1: And I think it just shows how, you know, it's
Speaker 1: it's interesting. Throughout crypto's history, we've had waves where the
Speaker 1: volumes were coming from Asia at the very big like
Speaker 1: not very beginning, but early rally days, a lot of
Speaker 1: the volume was on Chinese exchanges, which led people to think,
Speaker 1: you know, how do we know that it's true? And
Speaker 1: there were instances of wash trading that were like documented
Speaker 1: by figures that are still in crypto these days. And
Speaker 1: so like we've had crackdowns, and then from crackdowns cryptos
Speaker 1: moved to another region and then it's come back, and
Speaker 1: you know, it's just a question of like moving somewhere.
Speaker 1: It's just like very shifty crypto, it moves from place
Speaker 1: to the next. But the wonder is, you know, people
Speaker 1: are very much talking about is the US dad, we
Speaker 1: see them, everybody leave? Is there no interest? But you know,
Speaker 1: it's it's a massive domestic market. That's where the money is,
Speaker 1: That's where finances in the end. And so I wonder
Speaker 1: whether really, you know, maybe trading will move to Hong
Speaker 1: Kong for a few years and then once rules get
Speaker 1: in commonplace in the US, or people find another way
Speaker 1: to like skirt them with like some big giant narrative
Speaker 1: about some other new thing, they go back and then
Speaker 1: they get cracked down again. But I don't I don't
Speaker 1: know if anybody will get like the crown for good,
Speaker 1: like if we measure you know, crypto hubs by the
Speaker 1: size of investments and startups and innovation. And in the end,
Speaker 1: it's really, you know, always the US. But if we
Speaker 1: measure it by trading volumes, and it's a bit different
Speaker 1: because in one case, we don't even know where the
Speaker 1: exchange is based, like Finance is the biggest change. We
Speaker 1: don't know where their headquarters is. So would you say
Speaker 1: their volumes are you? Could you judge it by their users,
Speaker 1: like do we trust that users or where they say
Speaker 1: they are. It's just like a giant, you know, conundrum.
Speaker 1: I guess we'll have to wait a few months and
Speaker 1: see how it goes for Hong Kong in its crypto endeavors.
Speaker 1: Anna and Beth, thank you so much for joining me.
Speaker 1: Thank you. This was Bloomberg editors Anna Errera and Beth Williams.
Speaker 1: You can find more of their work on the Bloomberg Terminal,
Speaker 1: on Bloomberg dot com and on Twitter, and for more,
Speaker 1: be sure to check out our twice weekly newsletter, Bloomberg Crypto.
Speaker 1: This is Bloomberg Crypto, a daily podcast from Bloomberg and iHeartRadio.
Speaker 1: For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts,
Speaker 1: or wherever you get your podcasts. Send us your comments, questions,
Speaker 1: or suggestions for the show to Crypto at bloomberg dot net.
Speaker 1: The supervising producer of Bloomberg Crypto is Vicky Vergelina. Our
Speaker 1: senior producer is Janet Babin. Our producers are Mohammed Farouk
Speaker 1: and Sharon Barrero. Our associate producers are Ty Butler and
Speaker 1: Moses on Them. Desta wonder At is our engineer. Original
Speaker 1: music by Leo Sidron. I'm Stacy, Marie Ishmael. Have a
Speaker 1: great weekend.