Speaker 1: This is Bloomberg Crypto, a daily Bloomberg Ihad podcast, and
Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News.
Speaker 1: It's Friday, February tenth. Hi everyone. You know what we
Speaker 1: say about everything in crypto is always moving really fast.
Speaker 1: Well after we recorded this episode, the U S Securities
Speaker 1: and Exchange Commission announced that it had reached a settlement
Speaker 1: with Kraken, a crypto exchange. As part of that settlement,
Speaker 1: Kraken agreed to do two things. First, pay a thirty
Speaker 1: million dollar settlement to the SEC and to and even
Speaker 1: more importantly, to stop offering their US staking service. That's
Speaker 1: the service that they offered that would allow you to
Speaker 1: stake your coins with Kraken or your tokens and earn
Speaker 1: returns on those coins. According to the SEC, this was
Speaker 1: a direct violation of US securities law. We'll have much
Speaker 1: more on this in the coming episodes. Enjoy. You've heard
Speaker 1: of say it before, and it's worth repeating. Crypto is
Speaker 1: a twenty four seven asset class and it can feel
Speaker 1: really hard to keep up. So we're back with another
Speaker 1: episode that reviews the biggest stories of the week in crypto.
Speaker 1: Here's one which billionaires have stopped fighting, just as a clue.
Speaker 1: On the one side you have famous twins Tyler and
Speaker 1: Cameron Winklevoss and their Gemini exchange and on the other
Speaker 1: Barry Silbert's and Genesis. We're also going to talk about
Speaker 1: luxury handbags and how they relate to n f t
Speaker 1: s or non fungible tokens, what the UK is doing
Speaker 1: as it relates to its plans to launch a digital currency,
Speaker 1: and as a bonus, we have a quick aside about
Speaker 1: the U S Super Bowl and how it will be
Speaker 1: different from last year's at least when it comes to
Speaker 1: crypto ads. Joining me this week in the New York
Speaker 1: studio to break down the latest developments in the world
Speaker 1: of digital assets is Bloomberg Senior editor Anna Arera. I know,
Speaker 1: so great to have you in the studio and instead
Speaker 1: of me being in London and US recording this episode,
Speaker 1: this time you're in New York. Yes, which is a
Speaker 1: big change of scenery. It's a big change of scenery. Um,
Speaker 1: but the scenery might change, but somehow the sec coming
Speaker 1: after crypto companies seems to be the thing that is consistent.
Speaker 1: As we were getting ready to step into the studio
Speaker 1: for this episode. Our colleagues in d C, you know,
Speaker 1: Alison verse Brel, who has been on this show a
Speaker 1: bunch of times, reported that Kraken is being probed by
Speaker 1: you know, the top us financial regulator over whether and
Speaker 1: I quote it broke security rules related to certain offerings
Speaker 1: to American clients, which is another way of saying, once again,
Speaker 1: there are questions over whether exchanges like Kraken and others
Speaker 1: are offering unregistered secure these and if they are, the
Speaker 1: SEC is trying to make it clear that no, you
Speaker 1: don't get to do that. There are rules, there are
Speaker 1: regulations that you need to follow. And from the perspective
Speaker 1: of somebody who covers crypto from like multiple perspectives, multiple countries,
Speaker 1: multiple geographies, do you feel like we're kind of in
Speaker 1: a stage where the long awaited enforcement action is seems
Speaker 1: to finally be happening. I guess so. But also, knowing crypto,
Speaker 1: there will always be someone who says, but this, it
Speaker 1: doesn't show that this they're still not saying that it's
Speaker 1: a security And if you speak to lawyers, even lawyers
Speaker 1: with crypto clients now, and obviously they have a sort
Speaker 1: of like an invested interest in telling you it's a
Speaker 1: security and you're doing something illegal. But they are saying
Speaker 1: the SEC could not be clearer Garrigan's or could not
Speaker 1: be clear. They are saying and they think that everything
Speaker 1: under the sun that you have said as a cryptocurrency
Speaker 1: is actually most likely a security, and it's most likely unregistered,
Speaker 1: which means if you're trading, selling it, doing anything with it,
Speaker 1: that that tool will be illegal unless you have a
Speaker 1: broker deer license, you're registered with the SEC. And to
Speaker 1: quotes our colleague on Bloomberg Opinion, Matt Levine, if you
Speaker 1: are Gary Gainstler talking to the crypto industry, it sounds
Speaker 1: like everything is a security. And it's not just Gary Gainstter,
Speaker 1: but his predecessor as well was saying that everything was
Speaker 1: a security, and they were. There were speeches and there
Speaker 1: was a case brought against Ripple. So, you know, I
Speaker 1: think it's maybe wishful thinking, or I guess they're hoping
Speaker 1: it gets sorted in courts and they're fighting it, and
Speaker 1: they're hoping that they can claim that cryptos not elenregistered
Speaker 1: security so they can keep doing what they're doing. And
Speaker 1: to your point there, there's you know two things about
Speaker 1: this cracking thing that are important. The first is it's
Speaker 1: still just approved. They haven't yet come out and said
Speaker 1: we are going to accuse you of X y Z,
Speaker 1: and we don't know what tokens might be involved here,
Speaker 1: like what are the specific things are that the SEC
Speaker 1: is trying to classify securities? But then I think the
Speaker 1: point that you're making about how so much of this
Speaker 1: is going to be played out in courts is really key, right, Like,
Speaker 1: in the absence of specific defineable this is crypto regulation.
Speaker 1: And here's the book you can read to find out
Speaker 1: everything you can about it. It's been judges and lawyers
Speaker 1: who are ending up shaping this policy. And you know,
Speaker 1: we are going to have one of our other colleagues,
Speaker 1: Steve Church, who covers bankruptcy here at Bloomberg, on on
Speaker 1: a future episode to talk about how that dynamic is
Speaker 1: playing out. But we had yet another example just this
Speaker 1: week because as always a lot of crypto stuff happened
Speaker 1: this week, but this time in the world of luxury handbags.
Speaker 1: Now I'm not necessarily a luxury handbag person. I feel
Speaker 1: like you have better bags than me. But what happened
Speaker 1: with mez in this case crypto saying you have better
Speaker 1: bags than mefferent True, I have zero crypto bags, you
Speaker 1: have zero purpose A bit clear we have we're not
Speaker 1: holder of crypto crypto bags. Um so Yeah, So basically
Speaker 1: there was someone who was minting and fts taking advantage
Speaker 1: of the yes the meta broken, Yes exactly, and the
Speaker 1: judge says, no, no, you can't, you can't do that.
Speaker 1: The luxury French designer is suing the maker of the
Speaker 1: non fungible tokens of a trademark rights this court case,
Speaker 1: it's all to do with the fact that these nonfushiable
Speaker 1: tokens get sold of digital birkens but without is say so,
Speaker 1: and as it relates to irmas, they had a really
Speaker 1: significant victory, and the creators of the n f T
Speaker 1: s were arguing like, no, you know, this is homage.
Speaker 1: This is clearly not the same thing as these others,
Speaker 1: and it's certainly going to have an effect on other
Speaker 1: similar n f T projects that are sort of playing
Speaker 1: with existing very large intellectual property. Yeah, and I guess
Speaker 1: what's interesting here is that a lot of the use
Speaker 1: cases for n f T s have been are like
Speaker 1: potential use cases, pseudo use cases have been in luxury
Speaker 1: so they were like, I guess playing with their own
Speaker 1: crowd because there was the luxury people knew and if
Speaker 1: they've been briefed about n f T s and so
Speaker 1: you can't, like, I think there's a whole point there.
Speaker 1: There there are brands that are trying to connect n
Speaker 1: f T s to your bag, your luxury bag, and
Speaker 1: so in this case, you would have been like getting
Speaker 1: in an f T for a luxury bag that didn't exist.
Speaker 1: And they were clearly banking on on the on the
Speaker 1: Burkin brand. So it seems like a bit of a
Speaker 1: no brainer. There's something in law, or if you've ever
Speaker 1: been in trial or on trial or you know subpoena
Speaker 1: called the discovery process, which is essentially when you are
Speaker 1: compelled to turn over everything everything like all relevant materials,
Speaker 1: and in a digital age, all relevant materials increasingly includes
Speaker 1: text messages. And the discovery in this lawsuit revealed some
Speaker 1: just incredible text messages. I'm going to read it just
Speaker 1: two of them here. Ours attorneys pointed to dozens of
Speaker 1: pages of text messages that they said show the creators
Speaker 1: of the meta Burkins wanting to quote create the same
Speaker 1: exclusivity and demand for the famous handbag. According to the
Speaker 1: text messages. The creator of the Messa Broakens, used the
Speaker 1: words pump and chill and sought financial backers that he
Speaker 1: called whales. Another quote is, we're sitting on a gold mine.
Speaker 1: I don't have a lot of I'm not a lawyer.
Speaker 1: I have a lot of legal advice, but I think
Speaker 1: you know, just don't send text messages people like especially
Speaker 1: if you're gonna get sued by luxury brands that have
Speaker 1: the ability and the resources to hire lawyers. One thing
Speaker 1: we should notice about this is the the settlements in
Speaker 1: the case wasn't a lot of money. It was like
Speaker 1: it was less than two hundred thousand dollars like three
Speaker 1: in her broken back. I don't even know how much.
Speaker 1: Broken back costs a lot of time, but if you know,
Speaker 1: police school for the emails, crypto, Bloomer dot net. But
Speaker 1: you know, it's just the important thing here, as we're
Speaker 1: seeing with other cases, is like the legal precedent. We're
Speaker 1: gonna stay on the topic of money. This case digital money.
Speaker 1: And it's the UK which has, as we've talked about
Speaker 1: a lot on the show, attempted to really position itself
Speaker 1: as a digital innovator and to capitalize on the reputation
Speaker 1: for being a jurisdiction that has attracted that kind of
Speaker 1: entrepreneurial talents, people who are interested in financial technology. They
Speaker 1: seem to be moving forward with getting ready to launch,
Speaker 1: which I know is like regularly to speak for like
Speaker 1: maybe we will, We're thinking about it. Here's some white papers.
Speaker 1: But they seem to at least be coming up with
Speaker 1: a plan for what folks are starting to call get
Speaker 1: this brit coin. Yeah, it sounds like endorsed by the
Speaker 1: Spice Girls, but it is in fact not. Um, we
Speaker 1: don't think so, but they when when you talk about
Speaker 1: central bank digital currency, as you said, it involves a
Speaker 1: lot of white papers and research, and it's hard to
Speaker 1: understand when is it happening. It's very hard to say.
Speaker 1: They have said that if they do do something, it
Speaker 1: will be in the second half of this decade decade,
Speaker 1: So imagine that being the timeframe from like for like
Speaker 1: a consumer brand thing. We're doing this in like this decade.
Speaker 1: So one of the big sticking points with central bank
Speaker 1: digital currencies is will it be like cash, Like would
Speaker 1: it like replace commercial bank money? Will like to be
Speaker 1: cut out, and so there's a lot of lobbying behind
Speaker 1: the scenes to make sure banks don't disappear, and I
Speaker 1: think they've sort of switch concerns and said, you know,
Speaker 1: it'll be beside cash and it won't hurt banks, and
Speaker 1: it will be a great opportunity. One thing with like
Speaker 1: CBDCs is that people they're trying to be a little
Speaker 1: bit of everything so that they don't upset anyone. And
Speaker 1: so the question is will anyone want them? Especially if
Speaker 1: you're like developing now something that we want we're going
Speaker 1: to use like in five or six years maybe, So
Speaker 1: it's quite interesting. So so if it's not going to
Speaker 1: replace cash, then what is it gonna what's it for?
Speaker 1: Can I just not use you know, like whatever we
Speaker 1: have now and in the UK and like sort of
Speaker 1: the US digital payments work really well, they're really fast,
Speaker 1: they're cheap, and you're just like that's in Europe in general, right,
Speaker 1: So like the idea of like why would we need
Speaker 1: a CBDC that's like a consumers like, it's just that's
Speaker 1: something that still needs to be I think answered well.
Speaker 1: I think playing into the confusion is when most folks
Speaker 1: think about digital cash, they think maybe in like the
Speaker 1: US context of zell or Venmo or PayPal or you know, like,
Speaker 1: what are some of the e banks in the UK
Speaker 1: that allow you to do mobile based instantaneous payments, and
Speaker 1: it's like basically all of them, the banks like your
Speaker 1: literal bank, Yeah, exactly, just do it. And whereas here
Speaker 1: in the US, if my landlady is like you need
Speaker 1: to pay your rent by a transfer, I'm like, yeah,
Speaker 1: my landlard here wanted to check when they want. He
Speaker 1: wanted to check three years ago, so not so long.
Speaker 1: So you know, we're a very different stages as development
Speaker 1: as the point that you're making. But those apps are
Speaker 1: not actually digital cash, because what they're doing is they're
Speaker 1: allowing you to move around, you know, bits and bytes
Speaker 1: that represent your claims to the banks that you have
Speaker 1: accounts in. But digital cash, in the form of a
Speaker 1: central bank digital currency would actually be like a claim
Speaker 1: on the central bank. Right, it would be the equivalent
Speaker 1: into holding a dollar note or a pound sterling or
Speaker 1: one Japanese yen, which is a really different paradigm entirely. Yes,
Speaker 1: so it would he actually be a claim you have
Speaker 1: with the central bank. Movie, it would be the equivalent
Speaker 1: of cash. But then the problem is with cash, it's
Speaker 1: like totally like anonymous, right, So do you actually want
Speaker 1: to create a digital form of payment that is totally anonymous? Essentially,
Speaker 1: it's central banks launching a great, big consumer like a
Speaker 1: big fintech consumer product, which is like very interesting intellectually,
Speaker 1: and they're doing it in that horizon that's like very far,
Speaker 1: very far away. And the last big consumer party launch
Speaker 1: was cash, which worked pretty well but hundreds of you.
Speaker 1: But like they haven't done any great product development since,
Speaker 1: Like who's the product manager at the ECB? Hard to
Speaker 1: improve on coins and notes? You know, it's it's it's challenging,
Speaker 1: but I actually think we should find out who the
Speaker 1: product manager is the ECB. We'll follow up on that,
Speaker 1: and if you were the product manager of the ECB
Speaker 1: and you listen to those podcast, we'd love to have
Speaker 1: you on the show Cryptoe. When we've done that, we'll
Speaker 1: be right back with more of the week's top crypto
Speaker 1: stories with Bloomberg Senior editor an a Arera Anna. How
Speaker 1: much do you care about the NFL? Not very much.
Speaker 1: I used to watch the Super Bowl but like the
Speaker 1: ads and then I bade like confused. Okay, So that's
Speaker 1: like you and the vast majority of people, especially people
Speaker 1: who are not in the US. And last year, basically
Speaker 1: for my job, I had to watch the Super Bowl
Speaker 1: for the ads because as we call it, as various
Speaker 1: people called it, it was the super Bowl of Crypto.
Speaker 1: You know, you had pick a celebrity and they were
Speaker 1: telling you how great bitcoin was. And now fast forward
Speaker 1: it's a year later. I don't think there are going
Speaker 1: to be many celebrities at this Super Bowl shilling crypto.
Speaker 1: It's a very different kind of environment. One of the
Speaker 1: things that we've talked about is the fact that crypto
Speaker 1: companies tried to use marketing and advertising to get their
Speaker 1: products in front of, you know, the average consumer. A
Speaker 1: big story this morning, Staples Center getting a name change. Yeah,
Speaker 1: it is soon going to be known as Crypto dot
Speaker 1: Com Arena. Crypto dot Com paying some seven hundred million
Speaker 1: over twenty years for the deal and what is believed
Speaker 1: to be the richest naming rights deal. That's why FTX
Speaker 1: had the naming rights to the Miami Heat Arena. In
Speaker 1: the absence of these big event driven things, is there
Speaker 1: still scope for crypto companies to be trying to do
Speaker 1: this kind of marketing and advertising like with the down market,
Speaker 1: with regulatory scrutiny, like what's the vibe right now? So
Speaker 1: they don't have any money, which doesn't help if you're
Speaker 1: trying to buy a Super Bowl ad. Um. So that
Speaker 1: that's probably like a big issue at the beginning. I'm
Speaker 1: also hearing that some are actually thinking about the potential
Speaker 1: reputational damage now that you might have from having like
Speaker 1: a crypto advertisement. You know, like if you had an
Speaker 1: FTX AD. Now is not looking great for you know,
Speaker 1: what's been known as the mt X arena in downtown
Speaker 1: Miami is no more. A judge just terminated the naming
Speaker 1: rights agreement with Miami. Dad Kelly after the crypto companies. Yeah,
Speaker 1: well he's retired now, he's already easy retiring and he's
Speaker 1: re re re retired and he's going to be some
Speaker 1: kind of sports commentated. Yeah, he's doing fine, I think, right,
Speaker 1: like definitely better than the people that lost their money
Speaker 1: and fd X all of it. Um so. So yeah,
Speaker 1: so they have less money to spend on ads. Um,
Speaker 1: there's more scrutiny. And then also we've had cases in
Speaker 1: which the teams themselves have like upped their due diligence
Speaker 1: because they were left with no money. So if you
Speaker 1: sign a sponsor and you put it on your team's
Speaker 1: shirts jersey and then they disappear. Then that's a big,
Speaker 1: big problem. So it's another interesting thing that we're looking
Speaker 1: at is seeing like how sports sponsorships evolved. Now as
Speaker 1: you correctly identified crypto companies across the board generally have
Speaker 1: less money than this time last year. There's always going
Speaker 1: to be options, but given market conditions, things have been
Speaker 1: pretty tough, and there are you know, a couple of
Speaker 1: well three billionaires actually that we've been covering quite a lot, who,
Speaker 1: to be clear, are still billionaires, so they personally still
Speaker 1: have a lot of money. Two of them are Cameron
Speaker 1: and Tyler Winklevoss, the you know, co founders of the
Speaker 1: Gemini crypto exchange, and they have been involved in a
Speaker 1: relatively long running by crypto standards public dispute with Barry
Speaker 1: Silbert of DCG Digital Currency Group, and Digital Currency Group
Speaker 1: owns an entity called Genesis, and Genesis is one of
Speaker 1: the folks that had to file for bankruptcy in recent weeks,
Speaker 1: so they've been fighting and one of the things that
Speaker 1: happened this week at least if you are a creditor
Speaker 1: to either of these companies is they seem to have
Speaker 1: come to some sort of agreement. Yes, they have come
Speaker 1: to a settlement. The big sticking point was that Gemini
Speaker 1: was getting money from their own clients who deposited money
Speaker 1: with Gemini, and then the money was going to Genesis
Speaker 1: within lend them out to someone else. Genesis lent to
Speaker 1: people it shouldn't have lent to, or like three exactly
Speaker 1: and lost the money. And so if you were a
Speaker 1: user of Gemini, normal people, you will have lost your money.
Speaker 1: And so that was the issue. Gemini wanted the money back.
Speaker 1: So they've now come to an agreement. So like there
Speaker 1: was a lot of squabbling on Twitter, and it seems
Speaker 1: that that has been resolved. Of course, you know, again
Speaker 1: it's yet another instance in which a crypto company has
Speaker 1: has gone bankrupt, and as we know, in bankruptcy, a
Speaker 1: lot of people end up not seeing their money, or
Speaker 1: if they do, they see it many years after and
Speaker 1: they don't see all of it. So at least it's
Speaker 1: been semi resolved and like there's less fighting. So just
Speaker 1: as a closing note, as we look forward into the
Speaker 1: next few weeks and months, I think a buzzy word
Speaker 1: everywhere is artificial intelligence and I'm just going to kind
Speaker 1: of throw out a question, which is channel chat GPT
Speaker 1: like war game outs. What you think a likely headline
Speaker 1: is that we're going to have to talk about on
Speaker 1: the show that has to do with AI and crypto.
Speaker 1: Someone's gonna do like an AI code or is gonna
Speaker 1: throw AI into their exchange and say that the actually
Speaker 1: matching engine is optimized for liquidity by using artificial intelligence,
Speaker 1: So you're like sending an order and it's getting matched
Speaker 1: in the most perfect way or waiting for the order
Speaker 1: to find a match because it's using r I AI.
Speaker 1: And then when we asked, but what liquidity, who's actually
Speaker 1: wanting to buy stuff? We will never get an answer,
Speaker 1: but they will raise a hundred million dollars gazillion? Got it? Perfect? Yeah, Well,
Speaker 1: thank you as always, and have a safe flight back.
Speaker 1: Thank you. That was Bloomberg Senior editor Anna Arera. You
Speaker 1: can find more of Anna's reporting on the Bloomberg Terminal,
Speaker 1: on Bloomberg dot com and in our twice weekly Bloomberg
Speaker 1: Crypto news letter. This is Bloomberg Crypto, a daily podcast
Speaker 1: from Bloomberg and I Heart Radio. For more shows from
Speaker 1: I Heart Radio, visit the i Heart Radio 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 Barriro. Our associate producers are Ty Butler and
Speaker 1: Moses on Them. Desta wonder At is our engineer. Original
Speaker 1: music by Leo Sidrn. I'm Stacy, Marie Ishmael. Have a
Speaker 1: great weekend.