WEBVTT - The Latest on Bitcoin, FTX and Coinbase

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<v Speaker 1>This is Bloomberg Crypto, a daily Bloomberg IHOD podcast, and

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<v Speaker 1>I'm Philip Blugger Cranzler, senior editor for cryptot Bloomberg News,

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<v Speaker 1>in for Stacy Marie Ishmael. It is Friday, February the

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<v Speaker 1>twenty fourth. Hello, and welcome to another This Week in

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<v Speaker 1>Crypto episode. Coin Base reported earnings again and it wasn't pretty.

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<v Speaker 1>A big loss and training volumes missed estimates, and the

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<v Speaker 1>prospect of more layoffs seems to remain very much alive.

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<v Speaker 1>In Nigeria, the Central Bank is seeking technology partners for

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<v Speaker 1>developing its digital currency called the Nira, and Hong Kong

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<v Speaker 1>is making strides in its effort to embrace crypto and

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<v Speaker 1>may even have the TACIT approval of the central government

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<v Speaker 1>in Beijing. So to help me break down the latest

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<v Speaker 1>developments in the world of digital assets in person, I'm

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<v Speaker 1>joined by Bloomberg editors Best Williams and Anna Irrera. All right,

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<v Speaker 1>we're here in the London studio for the first time,

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<v Speaker 1>I believe all three of us, Beth and Anna, welcome

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<v Speaker 1>gathered here in the London studio. Anna, obviously you are

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<v Speaker 1>a resident of London and you've been here before. Beth,

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<v Speaker 1>is your first time, isn't it? Not to London? No,

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<v Speaker 1>but the first time in a while. I was supposed

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<v Speaker 1>to come right before COVID and then of course that

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<v Speaker 1>changed everything. But most certainly first time in the London studio.

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<v Speaker 1>In the London studio, yes, And I usually dial in

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<v Speaker 1>from Zurich. So it's very nice to sit here with

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<v Speaker 1>you guys, face to face and talk about all things crypto.

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<v Speaker 1>And so let's get into it. Coin Base ported earnings

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<v Speaker 1>fourth quarter earnings this week, and it was not very pretty,

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<v Speaker 1>was it, Beth. Can you give us the sort of

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<v Speaker 1>potted highlights of what they came up with? Yes? Not pretty?

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<v Speaker 1>Is it one way to frame it? There were was

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<v Speaker 1>expectations that it was going to be bad. It was bad. Yeah,

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<v Speaker 1>down in a big way. And while they beat expectations

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<v Speaker 1>for these reduced revenue or less of a loss, their

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<v Speaker 1>revenue was actually down some seventy five percent from a

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<v Speaker 1>year ago, Transaction revenue tumbled, Trading volumes were down actually

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<v Speaker 1>twenty three percent, and they've been losing coin Base is

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<v Speaker 1>affected obviously that they're a crypto exchange, so if trading

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<v Speaker 1>volumes are down, they're going to be hurt. We know

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<v Speaker 1>what happened in the fourth quarter of twenty twenty two.

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<v Speaker 1>FTX imploded, the market went down, and then just finally

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<v Speaker 1>on the stock. The stock fell more than eighty percent

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<v Speaker 1>in twenty twenty two, and it's had quite a rally

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<v Speaker 1>in coming into this year, along with the rest of

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<v Speaker 1>the crypto market in general and other crypto stocks. Whether

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<v Speaker 1>it has further to go is anybody's guests and analysts

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<v Speaker 1>are a little cautious about it. Even the company itself

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<v Speaker 1>is cautious. The CFO on the earnings call said not

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<v Speaker 1>to make a lot out of the January and February

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<v Speaker 1>rebound in crypto necessarily, even though they've seen trading volume increase,

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<v Speaker 1>and they've also said that they are going to keep

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<v Speaker 1>headcount at least where it is, and they may even

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<v Speaker 1>cut more jobs. So there's definitely not a sense that

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<v Speaker 1>they're out of the out of the woods. Yet that

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<v Speaker 1>was interesting to me that they would not basically rule

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<v Speaker 1>out more job cuts. I mean, you've had you saw

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<v Speaker 1>them take out about twenty percent of the workforce earlier,

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<v Speaker 1>and then you've had this massive or you know, fairly

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<v Speaker 1>substantial rally across crypto, and these sort of cautious comments

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<v Speaker 1>that they're making and would you how would you read

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<v Speaker 1>what's your read on that coin? Miss has been through

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<v Speaker 1>the winters before, right, they're one of the oldest sort

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<v Speaker 1>of og crypto exchanges. They've been at it before, so

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<v Speaker 1>you know, you could be a little bit confident that

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<v Speaker 1>they at least know how to shrink and expand very quickly.

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<v Speaker 1>The difference here now is that they're public, right, they

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<v Speaker 1>were in public before, so everybody can take a close

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<v Speaker 1>look at their numbers and can scrutinize, and they have

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<v Speaker 1>investors they have to respond to, and they will have

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<v Speaker 1>like investor relations and speak to people. So I imagine

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<v Speaker 1>they're having to be more cautious because they can't even

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<v Speaker 1>signal to the market that things are picking up. And

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<v Speaker 1>you know it has picked up, but volumes are nowhere

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<v Speaker 1>near what they were last year, and it takes several

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<v Speaker 1>months of rally before your fees go back to what

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<v Speaker 1>they were before. Right, And as much as they have

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<v Speaker 1>been diversifying, I think the biggest era where exchanges make

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<v Speaker 1>money as trading fees. So if volumes don't pick up,

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<v Speaker 1>they don't, so maybe they can start thinking of ways

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<v Speaker 1>to make money on other things that are kind of

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<v Speaker 1>like crypto winterproof. I don't know, I was thinking maybe

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<v Speaker 1>things like analytics, like stuff that's different. I'm thinking, like,

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<v Speaker 1>you know, traditional exchanges had to reduce their reliance on

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<v Speaker 1>rating fees, you know, especially in equities when fees were compressed,

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<v Speaker 1>and so we saw them buying technology companies and becoming

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<v Speaker 1>software providers. So I wonder if they'll start thinking of

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<v Speaker 1>ways to do that. But obviously they have less money now,

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<v Speaker 1>so they can't really go out and buy things. So

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<v Speaker 1>it's just an interesting thing to see if they can

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<v Speaker 1>sort of if they survive this winter, and then if

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<v Speaker 1>they can future proof their exchange for another crypto winter.

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<v Speaker 1>And I'm going to make a pretty big switch now

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<v Speaker 1>and we're going to talk about central bank digital currencies

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<v Speaker 1>CBDCs in Nigeria. So Anna, you were part of this

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<v Speaker 1>story this week about the Nira and some of the

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<v Speaker 1>developments there. Can you talk a little bit about what's

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<v Speaker 1>going on? So? Yeah, So this week we reported that

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<v Speaker 1>the Central Bank of Nigeria is looking for new partners

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<v Speaker 1>for the Nira, which is the central bank digital currency

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<v Speaker 1>that they launch in twenty twenty one, which made them

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<v Speaker 1>the first African nation to launch the central bank digital

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<v Speaker 1>currency on one of the first nations in the world, really,

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<v Speaker 1>because a lot of central banks are talking about it,

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<v Speaker 1>especially the big ones, but very few have launched them.

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<v Speaker 1>They're looking for a new partner, not to replace bit

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<v Speaker 1>which is their current partner straight away, but what they

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<v Speaker 1>want to do, based on what sources have told us,

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<v Speaker 1>is that they want to take more control of the

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<v Speaker 1>system so that they control the ledger and it's their own.

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<v Speaker 1>So the discussions are early days, but it just shows

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<v Speaker 1>how like things are changing and moving, and it raises

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<v Speaker 1>many of the questions that you know, we have when

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<v Speaker 1>we think of, you know, a digital ear or a

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<v Speaker 1>brick cooin, which is like when is it coming? When

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<v Speaker 1>will I be able to pay my coffee with a

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<v Speaker 1>digital year. I don't know if you guys think about

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<v Speaker 1>it when you wake up, I don't put some people

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<v Speaker 1>might right, right, but but you know, one of the

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<v Speaker 1>things is like you're you're planning now for a token

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<v Speaker 1>that a product will come out in like five years,

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<v Speaker 1>and so you know, if you if you think about it,

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<v Speaker 1>the technology you might be deciding to implement now might

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<v Speaker 1>be really bad in five years. And so this this

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<v Speaker 1>shows how like complex it is, and maybe the you know,

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<v Speaker 1>central banks that rush to put out things before maybe

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<v Speaker 1>find themselves now in a situation like a technological situation.

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<v Speaker 1>Then it's not ideal. And as Beth knows because she

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<v Speaker 1>edited a really great piece earlier this year, the Innira

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<v Speaker 1>has had really not great adoption, as have other CBDCs

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<v Speaker 1>that are out there, because one of the big questions is, yeah, kay,

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<v Speaker 1>you put it out, but like, does anybody want to

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<v Speaker 1>use it? What's the point? Isn't one of the points

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<v Speaker 1>here that you have, As you said, Nira is very

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<v Speaker 1>much in a developing country. Britcoin is very much in

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<v Speaker 1>a developed country with a fairly robust fintic infrastructure already.

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<v Speaker 1>Doesn't Nigeria have a good case here when it comes to,

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<v Speaker 1>you know, wanting to establish a CBDC in a more

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<v Speaker 1>sament developing environment. On the face of it, yes, I

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<v Speaker 1>think that is one of the main pushes behind it

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<v Speaker 1>to get to the quote unbanked population. And they're even

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<v Speaker 1>allowing you to be able to use the use the

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<v Speaker 1>Nira via mobile phone. You don't even have to have

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<v Speaker 1>a digital wallet. They're doing those kinds of technical innovations.

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<v Speaker 1>One of the issues that's come up with. Then Ira

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<v Speaker 1>in terms of adoption is very funny because it kind

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<v Speaker 1>of relates to crypto. Two, as a developing nation and

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<v Speaker 1>one with sort of a struggling economy. They've have rampant inflation,

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<v Speaker 1>they have a devaluing currency. The economy is not doing

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<v Speaker 1>so well, and many Nigerians are fleeing to crypto, as

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<v Speaker 1>in the cryptocurrencies like bitcoin and tokens like that, and

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<v Speaker 1>not the Nira, which they see as a proxy for

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<v Speaker 1>this currency that's devaluing. And so for them, they don't

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<v Speaker 1>see any protection. They don't they see better use in crypto,

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<v Speaker 1>which actually confusingly that you know, the central bank is

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<v Speaker 1>against that kind of crypto, the crypto that we all

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<v Speaker 1>think about, and they're trying to promote this central bank

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<v Speaker 1>digital currency that a lot of people don't want, though

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<v Speaker 1>they do want crypto. And so you've got this weird

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<v Speaker 1>disconnect going on in Nigeria. And that's another issue on

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<v Speaker 1>top of the technical issues that Anna mentions, which which

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<v Speaker 1>it's true, you want to make sure that that one

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<v Speaker 1>should get it up and running, that it's actually gonna

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<v Speaker 1>not get hacked or or you know, break otherwise, and

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<v Speaker 1>we'll be right back after the break with Anna Errera

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<v Speaker 1>and Beth Williams. I do want to move further east

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<v Speaker 1>now and talk a little bit about Hong Kong. We've

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<v Speaker 1>done a smattering of stories about Hong Kong and the

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<v Speaker 1>sort of tentative embrace of crypto and Hong Kong as

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<v Speaker 1>an outlined a plan to let retail investors trade digital

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<v Speaker 1>tokens like bitcoin and ether. That's a major step towards

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<v Speaker 1>the city's goal of becoming a crypto harbor in a

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<v Speaker 1>policy shift for contrast with the crankdown we're now seeing. Beth,

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<v Speaker 1>could you do sort of briefly tell us a little

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<v Speaker 1>bit about what's happening there lately. Hong Kong was a

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<v Speaker 1>financial powerhouse for much of recent decades, and lately, with

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<v Speaker 1>China's increasing control, seeing sort of a fleeing of of

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<v Speaker 1>that financial power and influence. Um, Phil you yourself have

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<v Speaker 1>moved from Hong Kong to Zurich. Sort that's when things

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<v Speaker 1>started going really downhill for the Hong Kong um. But

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<v Speaker 1>starting in the fall, uh, you know, China and has

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<v Speaker 1>been supporting and Hong Kong has been trying to reinvigorate

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<v Speaker 1>its incentives and attractiveness to the financial community, including crypto.

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<v Speaker 1>So they have come out with some recent proposals and

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<v Speaker 1>regulations that are more crypto friendly. You can trade crypto futures,

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<v Speaker 1>and they recently came out with a proposal that's going

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<v Speaker 1>to lead toward retail investors being able to trade the

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<v Speaker 1>spot cryptocurrency. Yeah, they haven't completely specified, but it seems

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<v Speaker 1>like it would definitely be those two and another large one.

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<v Speaker 1>But the interesting aspect of the Hong Kong situation is

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<v Speaker 1>that China, which was a huge incubator of all things crypto,

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<v Speaker 1>crackdown on the industry basically banned it over a year ago.

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<v Speaker 1>Now there's a sense that Hong Kong, with its ties

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<v Speaker 1>to China, has a lot of people saying could this

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<v Speaker 1>possibly be leading to or signaling some kind of pivot

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<v Speaker 1>from China. And we just recently reported Bloomberg reported that

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<v Speaker 1>some Chinese mainland liaison officers have been asking questions and

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<v Speaker 1>seeing how things are going in Hong Kong. So there's

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<v Speaker 1>raising this expectation that perhaps China could change course a little.

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<v Speaker 1>I mean, I think that's that's a big statement, and

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<v Speaker 1>I think that would be a long way off. I mean,

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<v Speaker 1>they were pretty severe in the pullback that they made. Yeah,

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<v Speaker 1>and there's another aspect here in that Singapore which sort

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<v Speaker 1>of stole the crown early on in the race, Hong

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<v Speaker 1>Kong was trying to buy itself out of the COVID depths,

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<v Speaker 1>and Singapore now has kind of gotten a little bit

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<v Speaker 1>of cold feet, you know when it comes to retail

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<v Speaker 1>trading our crypto, and do you see that Hong Kong

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<v Speaker 1>perceived potentially like a little bit of a gap here

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<v Speaker 1>to start stealing a march on. I think it's now

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<v Speaker 1>just funny how you have the SEC, not just the SEC,

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<v Speaker 1>but all yours authorities being so aggressive that even someone

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<v Speaker 1>saying well, let you trade bitcoin and either seems like

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<v Speaker 1>such a giant concession. It's I mean, it's you know,

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<v Speaker 1>we went from trade whatever thing you can find on

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<v Speaker 1>against crypto and find like there's no problem to now

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<v Speaker 1>like we'll let you trade bitcoine either and everybody being excited.

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<v Speaker 1>And I think it just shows how, you know, it's

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<v Speaker 1>it's interesting. Throughout crypto's history, we've had waves where the

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<v Speaker 1>volumes were coming from Asia at the very big like

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<v Speaker 1>not very beginning, but early rally days, a lot of

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<v Speaker 1>the volume was on Chinese exchanges, which led people to think,

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<v Speaker 1>you know, how do we know that it's true? And

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<v Speaker 1>there were instances of wash trading that were like documented

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<v Speaker 1>by figures that are still in crypto these days. And

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<v Speaker 1>so like we've had crackdowns, and then from crackdowns cryptos

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<v Speaker 1>moved to another region and then it's come back, and

0:12:59.400 --> 0:13:02.000
<v Speaker 1>you know, it's just a question of like moving somewhere.

0:13:02.000 --> 0:13:04.800
<v Speaker 1>It's just like very shifty crypto, it moves from place

0:13:04.800 --> 0:13:07.760
<v Speaker 1>to the next. But the wonder is, you know, people

0:13:07.760 --> 0:13:10.880
<v Speaker 1>are very much talking about is the US dad, we

0:13:10.920 --> 0:13:14.040
<v Speaker 1>see them, everybody leave? Is there no interest? But you know,

0:13:14.120 --> 0:13:17.240
<v Speaker 1>it's it's a massive domestic market. That's where the money is,

0:13:17.280 --> 0:13:20.360
<v Speaker 1>That's where finances in the end. And so I wonder

0:13:20.400 --> 0:13:23.720
<v Speaker 1>whether really, you know, maybe trading will move to Hong

0:13:23.800 --> 0:13:26.440
<v Speaker 1>Kong for a few years and then once rules get

0:13:26.440 --> 0:13:29.200
<v Speaker 1>in commonplace in the US, or people find another way

0:13:29.200 --> 0:13:31.720
<v Speaker 1>to like skirt them with like some big giant narrative

0:13:31.760 --> 0:13:34.319
<v Speaker 1>about some other new thing, they go back and then

0:13:34.360 --> 0:13:37.320
<v Speaker 1>they get cracked down again. But I don't I don't

0:13:37.320 --> 0:13:40.480
<v Speaker 1>know if anybody will get like the crown for good,

0:13:40.559 --> 0:13:43.320
<v Speaker 1>like if we measure you know, crypto hubs by the

0:13:43.400 --> 0:13:46.600
<v Speaker 1>size of investments and startups and innovation. And in the end,

0:13:46.640 --> 0:13:49.160
<v Speaker 1>it's really, you know, always the US. But if we

0:13:49.240 --> 0:13:52.959
<v Speaker 1>measure it by trading volumes, and it's a bit different

0:13:53.000 --> 0:13:54.679
<v Speaker 1>because in one case, we don't even know where the

0:13:54.679 --> 0:13:57.000
<v Speaker 1>exchange is based, like Finance is the biggest change. We

0:13:57.000 --> 0:13:58.760
<v Speaker 1>don't know where their headquarters is. So would you say

0:13:58.800 --> 0:14:01.400
<v Speaker 1>their volumes are you? Could you judge it by their users,

0:14:01.440 --> 0:14:03.240
<v Speaker 1>like do we trust that users or where they say

0:14:03.240 --> 0:14:06.280
<v Speaker 1>they are. It's just like a giant, you know, conundrum.

0:14:06.360 --> 0:14:07.960
<v Speaker 1>I guess we'll have to wait a few months and

0:14:08.120 --> 0:14:10.920
<v Speaker 1>see how it goes for Hong Kong in its crypto endeavors.

0:14:10.920 --> 0:14:13.160
<v Speaker 1>Anna and Beth, thank you so much for joining me.

0:14:13.720 --> 0:14:19.160
<v Speaker 1>Thank you. This was Bloomberg editors Anna Errera and Beth Williams.

0:14:19.680 --> 0:14:22.560
<v Speaker 1>You can find more of their work on the Bloomberg Terminal,

0:14:22.640 --> 0:14:26.240
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0:14:26.480 --> 0:14:30.600
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0:14:36.280 --> 0:14:40.240
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0:14:40.960 --> 0:14:45.200
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