WEBVTT - Weekend Bonus: Crypto IRL, Episode 2 with Tim and Katie 0:00:03.640 --> 0:00:06.760 This is Bloomberg Crypto, a daily Bloomberg I Heard podcast, 0:00:07.120 --> 0:00:10.119 and I'm Stacy Marie Ishmael, Managing editor of Crypto for 0:00:10.160 --> 0:00:29.040 Bloomberg Mush. Yes, I know it's Saturday, but we're here 0:00:29.040 --> 0:00:32.520 to offer you our listeners a special audio only version 0:00:32.600 --> 0:00:35.640 of a new weekly video series called Crypto I r L. 0:00:36.200 --> 0:00:39.120 That's I r L Like in Real Life, and it's 0:00:39.159 --> 0:00:42.159 hosted by friends of the show, Katie Greifeld and Tim Stenovic. 0:00:42.680 --> 0:00:45.559 This is episode two of the series. If you want 0:00:45.560 --> 0:00:48.560 the full video experience, head over to Bloomberg dot com, 0:00:48.600 --> 0:01:06.560 slash qt or check it out on YouTube. Okay, Tim, 0:01:06.600 --> 0:01:09.000 it's a new week. You have another silly little story. 0:01:09.160 --> 0:01:11.920 I understand, how dare you? But you're right, I do 0:01:12.000 --> 0:01:14.840 have a story. This actually happened. Yeah, like all my 0:01:14.880 --> 0:01:17.280 stories actually happened, right for sure? Okay. So I'm walking 0:01:17.319 --> 0:01:20.720 to work last week. I am about to cross the street. 0:01:20.760 --> 0:01:22.840 I look up from my phone. There's a kid in 0:01:22.880 --> 0:01:25.679 front of me and he's wearing a backpack and on 0:01:25.760 --> 0:01:29.119 the backpack it says block five. Really, And I'm thinking 0:01:29.120 --> 0:01:33.240 to myself, why does this kid have the backpack of 0:01:33.600 --> 0:01:36.600 you know, a once very highly valued that you know 0:01:36.720 --> 0:01:39.800 this sounds fake. I have I have a picture of 0:01:39.840 --> 0:01:41.360 this right here, because I was like this and so 0:01:41.520 --> 0:01:43.880 you said Block five just sounded like a story. That 0:01:44.000 --> 0:01:45.800 is a child wearing a black five back Is that 0:01:45.880 --> 0:01:48.160 your Child's not my kid? His kid is way older. 0:01:48.400 --> 0:01:51.920 I saw something the other day and I thought to myself, 0:01:51.920 --> 0:01:53.600 I have to take a picture. I have to show Stacy. 0:01:54.120 --> 0:01:56.040 I already showed Katie. I just want to know what 0:01:56.080 --> 0:02:00.600 you think when you see this. Oh Mom, it's a 0:02:00.600 --> 0:02:03.360 Block five. It's a backpack that says Block five and 0:02:03.360 --> 0:02:07.920 it's warned by like a thirteen year old kid. Well, 0:02:08.040 --> 0:02:11.880 that person is definitely not a qualified institutional investors. Okay, 0:02:11.919 --> 0:02:13.680 And I'm thinking to myself, why does this guy have 0:02:13.680 --> 0:02:15.960 a Block five backpack? Did his parents work at Block 0:02:16.040 --> 0:02:19.200 five and did they get laid off? Was Block five? 0:02:19.280 --> 0:02:22.760 Just like clearing inventory? Sounds like you really meditated on this. Yeah, 0:02:22.760 --> 0:02:24.000 I mean I kind of felt like I was living 0:02:24.040 --> 0:02:27.079 in some sort of metaphor here, like, you know, all 0:02:27.120 --> 0:02:29.520 that's left of Block five is this backpack. So I 0:02:29.560 --> 0:02:32.000 like that you said metaphor because in a sense, this 0:02:32.080 --> 0:02:34.280 is all just a convoluted device to get into the 0:02:34.320 --> 0:02:36.760 next episode, where we're going to talk about where we're 0:02:36.760 --> 0:02:41.240 actually going from this moment of destruction. Who are going 0:02:41.280 --> 0:02:44.639 to be the screeching phoenix? Is that rise from the fire? 0:02:44.919 --> 0:02:54.920 And you recorded another little video. Okay, Some legendary businesses 0:02:55.040 --> 0:02:57.840 have been built in the wake of massive market downturns. 0:02:58.040 --> 0:03:01.160 Look at Disney. It came of age during the Great Depression, 0:03:01.680 --> 0:03:04.360 and Airbnb was built after the Great Recession and the 0:03:04.360 --> 0:03:08.720 housing crisis. Is the two trillion dollar blow up in crypto? 0:03:08.880 --> 0:03:11.360 Is that going to provide some fertile ground for some 0:03:11.520 --> 0:03:15.840 revolutionary new company to emerge, one that could completely change 0:03:15.840 --> 0:03:18.440 the way that the world thinks about finance. Now that 0:03:18.480 --> 0:03:21.480 we understand how so much crypto wealth just evaporated in 0:03:21.520 --> 0:03:24.600 a few short months, let's try to understand what happens next. 0:03:24.880 --> 0:03:28.239 Who's left standing after this historic collapse? What about the 0:03:28.320 --> 0:03:30.880 lessons that we can learn from the crash? And what 0:03:30.919 --> 0:03:34.280 about the opportunities? Who are the people out there and 0:03:34.320 --> 0:03:36.800 the companies that are honkering down right now and building 0:03:37.840 --> 0:03:39.640 and what are they building? What's going to rise out 0:03:39.640 --> 0:03:43.240 of this? How does the industry earn back the trust 0:03:43.240 --> 0:03:46.000 of people who were scared off in the sell off? 0:03:46.720 --> 0:03:48.920 And how will companies have to work with regulators who 0:03:49.320 --> 0:03:55.760 might not like crypto that much. I'm just saying, if 0:03:55.760 --> 0:03:58.560 I had a Block five backpack, I would absolutely wear 0:03:58.600 --> 0:04:01.640 it to work. Yeah, if you saw me in the 0:04:01.640 --> 0:04:04.720 building with that backpack on, I would love you would laugh. 0:04:04.880 --> 0:04:07.320 And that's all I'm trying to do is make Stacy laugh. 0:04:07.440 --> 0:04:12.320 But we should talk about where we're going, because it's 0:04:12.320 --> 0:04:15.160 a good question. You have the Block fives and some 0:04:15.240 --> 0:04:18.800 of the other big lenders and other big success stories 0:04:19.200 --> 0:04:21.840 really come to their knees this summer, and I want 0:04:21.839 --> 0:04:24.159 to talk about next summer. I want to talk about 0:04:24.160 --> 0:04:27.360 the summer after that, the next few months and years, 0:04:27.720 --> 0:04:31.000 where we're going, whether the big players are still going 0:04:31.040 --> 0:04:33.680 to be the big players, or who is trying to 0:04:33.800 --> 0:04:37.440 rise and rebuild right now or build because it's time 0:04:37.480 --> 0:04:43.960 to build. It is time to build. I've heard that. Yeah. 0:04:41.240 --> 0:04:47.360 I think one of the more interesting things, or one 0:04:47.360 --> 0:04:50.040 of the more interesting questions that is going to absolutely 0:04:50.080 --> 0:04:52.000 drive the direction of that answer is what's going to 0:04:52.080 --> 0:04:56.880 happen with regulation and if the whether it's the SEC 0:04:57.200 --> 0:05:00.320 or the CFTC in the US, or political pressure from 0:05:00.320 --> 0:05:02.919 other places or whatever the EU and the UK decide, 0:05:02.960 --> 0:05:05.800 they want to do. How they approach who gets to 0:05:05.839 --> 0:05:10.839 do what is not just influential but in some cases deterministic. Well, 0:05:10.880 --> 0:05:13.040 that's the thing you just said. A lot of letters 0:05:13.360 --> 0:05:17.359 and there's any question over who actually regulates the industry 0:05:17.400 --> 0:05:20.039 going for and it feels like that is one of 0:05:20.080 --> 0:05:25.720 the big hurdles here. Who actually has any sort of say. 0:05:25.920 --> 0:05:30.560 Our genius colleague mc levine, in one of his recent columns, 0:05:30.600 --> 0:05:34.520 pointed out that the answers to the question of who 0:05:34.560 --> 0:05:37.440 regulates crypto is almost like unknowable, right, because on the 0:05:37.480 --> 0:05:41.080 one hand, you have the SEC being very assertive about 0:05:41.160 --> 0:05:44.400 establishing its jurisdiction in certain areas, but mostly doing that 0:05:44.480 --> 0:05:48.880 through enforcement actions rather than policy. You have a very 0:05:48.920 --> 0:05:52.080 clear and very public um. I wouldn't quite describe it 0:05:52.080 --> 0:05:55.000 as a dispute for it, but at least dissent between 0:05:55.080 --> 0:05:58.360 folks who think the CFTC should have more power in 0:05:58.680 --> 0:06:02.760 the US. And then you go to places like India 0:06:02.800 --> 0:06:04.960 where a lot of that regulation is coming through like 0:06:05.040 --> 0:06:07.920 tax policy rather than anything else. And so even in 0:06:07.960 --> 0:06:10.680 the US, whether you're thinking about you know, state level policy, 0:06:10.760 --> 0:06:13.000 New York, New Jersey have been very aggressive on what 0:06:13.040 --> 0:06:16.120 they're allowing various bills that are trying to work themselves 0:06:16.120 --> 0:06:18.320 through the House. If one of the ones that's under 0:06:18.360 --> 0:06:20.960 consideration passes, you would have to effectively be a bank 0:06:21.000 --> 0:06:23.680 to issue stable coins. That's going to have huge consequences 0:06:23.720 --> 0:06:26.359 for the circles and the tethers and the big stable 0:06:26.400 --> 0:06:28.760 coin issues of the world. So you know, there are 0:06:28.760 --> 0:06:30.400 a lot of lawyers making a lot of money right 0:06:30.400 --> 0:06:33.839 now trying to shape the direction of that regulatory conversation. 0:06:34.000 --> 0:06:36.400 That's like, that's like an evergreen thing, right lawyers. Lawyers 0:06:36.400 --> 0:06:39.719 make money, you have no matter what happens. What about 0:06:39.760 --> 0:06:42.200 like this being some sort of inflection point if we 0:06:42.240 --> 0:06:46.840 think about positively or negative Well, I don't I think 0:06:47.080 --> 0:06:49.880 positively because if you think about what happened up till 0:06:51.640 --> 0:06:53.480 you know, it's kind of the wild wild West, right, 0:06:53.839 --> 0:06:57.600 the idea of a lot of experimentation and really light 0:06:57.640 --> 0:07:01.039 touch regulation. And I'm not saying that by any means 0:07:02.000 --> 0:07:04.520 we've seen any sort of regulation at this point. But 0:07:05.520 --> 0:07:07.839 is this a different industry now than it was at 0:07:07.880 --> 0:07:13.240 the beginning of the year. Well, what, some people file 0:07:13.320 --> 0:07:16.680 for bankruptcy, So there's that. Um, there are various folks 0:07:16.720 --> 0:07:21.320 whose tokens are effectively out of Commission. I mean, I 0:07:21.920 --> 0:07:24.680 think back a year ago there was a squid game 0:07:24.760 --> 0:07:29.160 token that turned out to be a complete scam, you know. 0:07:29.240 --> 0:07:32.200 So I think there have been a lot of ways 0:07:32.280 --> 0:07:36.800 in which perhaps the less capitalized players, or the ones 0:07:36.840 --> 0:07:40.480 who had insufficient risk management or due diligence, have been 0:07:40.560 --> 0:07:43.560 like washed out a little bit. But the biggest players 0:07:43.560 --> 0:07:45.360 are still the biggest players, and in some ways they're 0:07:45.400 --> 0:07:48.320 even bigger than at the beginning of this year. You mean, 0:07:48.360 --> 0:07:53.960 like f t X coming in and essentially industry rescuing everyone. 0:07:54.480 --> 0:07:57.080 That is the narrative. But I don't look at them 0:07:57.120 --> 0:08:00.560 the same way that I look at the players that 0:08:00.600 --> 0:08:05.760 went under. Why. Uh, Well, for one, it's an exchange 0:08:06.440 --> 0:08:09.680 with many other businesses that aren't exchanges which haven't gone under. 0:08:09.720 --> 0:08:11.800 I feel like that's the big It doesn't seem like 0:08:11.840 --> 0:08:16.080 they had the same exposure to counterparty risk that you know, 0:08:16.160 --> 0:08:19.120 the Celsius Voyager Block five has had. All of those 0:08:19.120 --> 0:08:21.640 people that you mentioned were among their various counter parties. 0:08:21.680 --> 0:08:23.720 I think what you're seeing is who are the people 0:08:23.800 --> 0:08:27.440 who either manage that exposure better than others or better 0:08:27.480 --> 0:08:29.880 capitalized in the event that one of those counter parties 0:08:29.880 --> 0:08:32.120 blew up. And so you know, for me, the bigger 0:08:32.200 --> 0:08:36.400 question is like the tier to the sort of infrastructure players, 0:08:36.480 --> 0:08:38.839 people who you know, like maybe a couple of billion 0:08:38.840 --> 0:08:43.200 dollars in transactions at a time, mostly a retail customer base, 0:08:43.400 --> 0:08:46.520 flying slightly under the radar. They're the ones that have 0:08:46.600 --> 0:08:48.960 really been popping up with like, oh, we're seasoning withdraws 0:08:48.960 --> 0:08:50.360 and you're like, wait, I've never heard of you, Like 0:08:50.440 --> 0:08:52.840 what's going on here? Uh? And I think that part 0:08:52.880 --> 0:08:55.600 of the market. While we'll continue to have shakeouts there, 0:08:56.000 --> 0:08:58.880 I don't see the big players changing anything drastically other 0:08:58.920 --> 0:09:02.679 than perhaps more land MS. Okay, So if you're talking 0:09:02.720 --> 0:09:05.280 about these tier one institutions coming in and being the 0:09:05.280 --> 0:09:08.760 white Knight and sort of a process of consolidation, then 0:09:08.800 --> 0:09:12.600 I'm thinking to myself, this is totally the antithesis of 0:09:12.760 --> 0:09:16.839 the promise of crypto decentralization. But what I'm hearing right now, 0:09:16.840 --> 0:09:20.160 and what I'm seeing right now, is that big, well 0:09:20.200 --> 0:09:24.680 capitalized firms are coming in. They're buying up the dregs, 0:09:24.760 --> 0:09:28.240 the shadows of what's left from companies, and in that sense, 0:09:28.400 --> 0:09:30.360 they're getting bigger. So what we see on the other 0:09:30.400 --> 0:09:33.520 side of this is a consolidation that actually makes a 0:09:33.559 --> 0:09:37.160 fewer number of institutions much bigger and much more powerful. 0:09:37.559 --> 0:09:43.320 That is the that runs counter to the promise of crypto. Well, 0:09:43.520 --> 0:09:45.520 if I were a bitcoin maximalist, which to be clear, 0:09:45.559 --> 0:09:48.199 I'm not, But if I'm a bitcoin maximalist, one of 0:09:48.200 --> 0:09:50.760 the things I would point out is none of those 0:09:50.760 --> 0:09:54.080 companies affect what happens to bitcoin, right Like, there are 0:09:54.080 --> 0:09:56.560 going to be people who will say, sure, but at 0:09:56.600 --> 0:09:59.920 the blockchain layer, of the protocol layer, at the level 0:10:00.240 --> 0:10:03.000 of indie developers who are still in Ukraine and trying 0:10:03.000 --> 0:10:05.560 to build interesting things, is like bombs full around them. 0:10:05.600 --> 0:10:07.640 But it is also true that one of the things 0:10:07.640 --> 0:10:09.800 that happens when you have a crisis or a shake 0:10:09.880 --> 0:10:12.760 up or the prospect of looming regulation is you do 0:10:12.840 --> 0:10:15.760 have consolidation and you do have concentration. Is there anyone 0:10:15.840 --> 0:10:19.440 who's building and hasn't yet been acquired? I mean to 0:10:19.480 --> 0:10:21.480 go back to that narrative that we've discussed a few 0:10:21.520 --> 0:10:24.600 times that it's time to build, very popular on Twitter. 0:10:25.240 --> 0:10:27.600 Who is building right now? Are they not in my backyard? 0:10:27.840 --> 0:10:31.720 Do not build in my backyard? All right? Mr nimby Um, 0:10:31.760 --> 0:10:34.400 I think that where folks are really paying attention is 0:10:34.440 --> 0:10:39.320 some of the like say the Defy PROTOCOLI type things 0:10:39.360 --> 0:10:43.720 with names like Una Swamp and Sushi swamp um. I 0:10:43.760 --> 0:10:49.160 think folks are looking at the potential of they are large, 0:10:49.400 --> 0:10:51.400 but they are an interesting part of the ecosystem, like 0:10:51.400 --> 0:10:53.840 the Yuga lapses of the world, which went from hey, 0:10:53.880 --> 0:10:55.520 we have some apes in a collection, to hey, we're 0:10:55.520 --> 0:10:58.520 going to acquire various other n f T type collections 0:10:58.520 --> 0:11:03.319 and companies, to hey, we're signing deals with Hollywood and 0:11:03.480 --> 0:11:06.880 the music industry. And I think when you have that 0:11:07.120 --> 0:11:10.040 sort of we were a pure play crypto, but now 0:11:10.040 --> 0:11:14.400 we're extending into mass media lifestyle entertainment. You give opportunities 0:11:14.400 --> 0:11:16.520 for other folks who are like, oh, here's a new 0:11:16.520 --> 0:11:20.280 place for me to play that didn't necessarily exist before. 0:11:20.440 --> 0:11:23.480 And you know, one of my favorite types of coverage 0:11:23.720 --> 0:11:27.600 is when we find actual individuals or like the small 0:11:27.800 --> 0:11:29.760 midsize of the market who are able to be like, 0:11:30.160 --> 0:11:32.120 I am going to make a different kind of art gallery, 0:11:32.480 --> 0:11:36.480 or you know, I'm somebody working in um fashion who 0:11:36.559 --> 0:11:39.080 is able to do interesting things, or I'm a designer 0:11:39.120 --> 0:11:43.640 making virtual clothes and avatars for the methods of the world. 0:11:43.720 --> 0:11:47.040 I'm like, that's cool. So so do we have any 0:11:47.080 --> 0:11:49.880 sort of vision of the future where we see the 0:11:49.880 --> 0:11:54.240 technology that's being experimented experimented with right now and then 0:11:54.640 --> 0:11:58.439 we start to see that in everyday items in everyday life. 0:11:58.720 --> 0:12:00.840 If you talk to people about crypto long enough, eventually 0:12:00.840 --> 0:12:03.120 you'll hear the phrase, well, the underlying technology. At that 0:12:03.120 --> 0:12:05.199 point just like take a shot. I think she just 0:12:05.240 --> 0:12:07.640 said it's time to build. I literally did not say 0:12:07.640 --> 0:12:15.280 it's time to Fine. Nick, it's awesome to see you, 0:12:15.679 --> 0:12:17.439 it's great to be here. Thank you for including me 0:12:17.480 --> 0:12:20.840 on the new show. Thank you. It does it does 0:12:20.960 --> 0:12:24.680 look good. Your general partner at Castle Island Venturous. You 0:12:24.679 --> 0:12:27.440 guys just raised what two or fifty million for your 0:12:27.480 --> 0:12:29.640 third round earlier this year. Okay, cool, So you're like 0:12:29.679 --> 0:12:31.880 the perfect out to talk to about this stuff. I 0:12:31.920 --> 0:12:34.240 gotta tell you. I feel like at this point we've 0:12:34.240 --> 0:12:38.240 been hearing about the promises of the blockchain. It seems 0:12:38.280 --> 0:12:40.040 like for the better part of a decade. At this 0:12:40.080 --> 0:12:44.760 point a part though and and like and crypto too. 0:12:45.280 --> 0:12:48.760 But to me, apart from making a few people just 0:12:49.000 --> 0:12:53.400 fabulously wealthy, I still haven't seen how this technology has 0:12:53.400 --> 0:12:56.600 actually made our lives better. Yeah. I mean I think 0:12:56.600 --> 0:12:58.640 a lot of the promises were pretty vacuous, to be 0:12:58.679 --> 0:13:02.840 honest with you, So, um yeah, I can't sort of 0:13:02.920 --> 0:13:05.880 endorse things that you know, my predecessors may have said. 0:13:05.960 --> 0:13:09.040 But you know, the core thing, the number one thing 0:13:09.120 --> 0:13:13.080 we were endeavoring to solve as an industry was alternative 0:13:13.120 --> 0:13:18.000 monetary systems. Uh. Those have been built, Those exist. Whether 0:13:18.120 --> 0:13:21.200 or not they're going to achieve the penetration the you know, 0:13:21.240 --> 0:13:24.680 crypto acolytes, I think they might, that's an open question. 0:13:24.720 --> 0:13:27.480 We'll see. I think that depends on what happens in 0:13:27.559 --> 0:13:30.280 sort of the real world with you know, um, you know, 0:13:30.400 --> 0:13:34.240 currency crises and things like that. Um, there is sort 0:13:34.280 --> 0:13:36.160 of the Web three space which I would say we're 0:13:36.160 --> 0:13:41.080 seeing real, actual world, real world use cases which are emerging, 0:13:41.120 --> 0:13:44.719 which are fairly interesting. Um. And then the last thing 0:13:44.760 --> 0:13:48.360 on point out would be stable coins. To me, that 0:13:48.559 --> 0:13:51.960 is something that a lot of early crypto people didn't understand, 0:13:52.000 --> 0:13:54.720 didn't necessarily even want, they didn't seek to build that. 0:13:55.320 --> 0:13:57.880 But those are actually, you know, proved to be the 0:13:57.880 --> 0:14:00.760 first killer app of crypto. Use a lot of my 0:14:00.800 --> 0:14:03.680 favorite words between stable coins and Web three, but I 0:14:03.679 --> 0:14:05.800 want to start with one of the first things you said, 0:14:05.800 --> 0:14:08.120 which is alternative money systems, And this is something that 0:14:08.200 --> 0:14:11.679 we actually talk about a lot, and truly we do, 0:14:12.320 --> 0:14:16.680 so I guess we hear about crypto a lot as 0:14:16.920 --> 0:14:21.720 an investment rather than a utility. And when you say that, 0:14:21.840 --> 0:14:24.560 I mean the problem that has been trying to solve, 0:14:24.640 --> 0:14:27.320 Leaving aside all the bad promises that were made by 0:14:27.320 --> 0:14:30.160 some of your predecessors, the alternative money system. I mean, 0:14:30.160 --> 0:14:33.720 does crypto have to be a utility, doesn't need to 0:14:33.800 --> 0:14:40.280 be used transactionally? Um? I think any monetary good um 0:14:40.480 --> 0:14:44.800 satisfies all the all the qualities of money, so um yeah, 0:14:44.840 --> 0:14:47.640 there should definitely be transactional use. What we're seeing is 0:14:47.640 --> 0:14:52.080 the decoupling between sort of like crypto commodities like bitcoin 0:14:52.120 --> 0:14:56.000 and ether, which are you they have a lower velocity, 0:14:56.280 --> 0:15:00.240 and then versus stables, which are used um as a 0:15:00.280 --> 0:15:04.600 medium of exchange, almost as a collateral type and empirically 0:15:04.640 --> 0:15:08.880 they have higher velocities. So it's almost like that first 0:15:08.920 --> 0:15:12.920 idea that crypto assets like bitcoin would be used transactionally, 0:15:12.960 --> 0:15:15.640 that's not really proven to be the case. Why is 0:15:15.720 --> 0:15:17.440 that though, I mean because if you think back to 0:15:17.480 --> 0:15:22.280 what every few months, there was this new news item, 0:15:22.400 --> 0:15:24.560 right every few days. Actually it was like, oh, so 0:15:24.600 --> 0:15:26.800 and so company start is accepting crypto, and then you'd 0:15:26.800 --> 0:15:28.960 see the price of bitcoin go up. It was actually 0:15:29.000 --> 0:15:31.640 this company is accepting bitcoin. Then the present bitcoin would 0:15:31.680 --> 0:15:33.360 go up, and you know, Tesla was like, Oh, we're 0:15:33.360 --> 0:15:36.760 going to start accepting bitcoin until until they didn't. Why 0:15:36.920 --> 0:15:41.600 didn't that stick? That was kind of you know, I don't. 0:15:41.720 --> 0:15:44.200 I think it just doesn't really actually make that much 0:15:44.200 --> 0:15:49.040 sense to use a volatile crypto asset transactually for the 0:15:49.080 --> 0:15:52.160 reason that the US asserts the primacy of the dollar 0:15:52.920 --> 0:15:56.040 um from a tax perspective. Right, So even relative to 0:15:56.080 --> 0:16:00.440 foreign currencies, right, if you hold a foreign currency material 0:16:00.480 --> 0:16:03.160 amount and appreciates, you are now on the hook for 0:16:03.280 --> 0:16:05.040 you have a tax liability, right, so you have to 0:16:05.240 --> 0:16:08.520 you know, keep track of that. There's the accounting um overhead. 0:16:08.800 --> 0:16:10.560 So it's the same with the crypto asset. You have 0:16:10.680 --> 0:16:13.760 to track your tax basis when you spend it. That 0:16:13.920 --> 0:16:17.240 is a considerable friction. That means that nobody's really willing 0:16:17.600 --> 0:16:23.000 to conduct commerce in crypto terms. They would rather stand dollars. Uh. 0:16:23.080 --> 0:16:25.360 And so that's just a barrier which I don't really 0:16:25.360 --> 0:16:29.560 see being lifted anytime soon. Why would the government give 0:16:29.640 --> 0:16:34.680 up the privileged position that the dollar enjoys. This special 0:16:34.720 --> 0:16:37.160 audio only episode of Crypto I r L will be 0:16:37.280 --> 0:16:39.960 right back with more from Katie Greifeld and Tim Stanovic. 0:16:40.280 --> 0:16:43.040 If you want the full video experience, head to Bloomberg 0:16:43.120 --> 0:17:07.000 dot com slash qt okay, I want to talk about regulators. Um, 0:17:07.040 --> 0:17:11.199 are you scared? No? Is this an industry that can 0:17:11.200 --> 0:17:15.959 be trusted to regulate itself? It has shown no willingness 0:17:15.960 --> 0:17:22.240 to regulate itself historically, none whatsoever. So Um, it's unclear 0:17:22.240 --> 0:17:24.600 to me what self regulation would look like. So then 0:17:24.720 --> 0:17:28.680 how do you as a VC, as an investor sort 0:17:28.720 --> 0:17:32.480 of navigate and build a portfolio with that sort of 0:17:33.040 --> 0:17:36.920 huge question mark overhang, the fact that this industry hasn't 0:17:36.920 --> 0:17:39.920 shown any willingness to regulate itself, and you have regulators 0:17:39.920 --> 0:17:43.639 over here making very worried noises haven't yet really done 0:17:43.800 --> 0:17:47.280 anything but made a lot of noise. From the securities 0:17:47.320 --> 0:17:51.360 regulation standpoint, the SEC has shown no willingness to engage 0:17:51.520 --> 0:17:54.280 productively with the industry, none whatsoever. What would I have 0:17:54.359 --> 0:17:59.880 expected a alternative model for tokens to engage in disc 0:18:00.000 --> 0:18:03.160 closure for material facts the same way we have that 0:18:03.280 --> 0:18:06.960 in the regular you know, public equity land. But we 0:18:07.040 --> 0:18:11.320 have seen no signs whatsoever of you know, legislative moves 0:18:11.320 --> 0:18:13.880 on that front or the SEC being willing to lay 0:18:13.880 --> 0:18:15.800 that out. So what are the repercussions of that? Does 0:18:15.840 --> 0:18:19.679 that mean that we start to see crypto firms increasingly 0:18:19.800 --> 0:18:23.200 leave the United States because there's no clear regulatory framework. 0:18:24.680 --> 0:18:26.800 You know, even though the U S is kind of 0:18:26.880 --> 0:18:29.880 challenged from that perspective, there's not that many other jurisdictions 0:18:29.880 --> 0:18:32.280 that are much better. Frankly, people thought Singapore was a 0:18:32.320 --> 0:18:35.199 safe haven proved not to be them as is just 0:18:35.359 --> 0:18:39.200 as tough as the SEC, if not worse. Um, people 0:18:39.200 --> 0:18:44.760 thought Europe might be. Europe has new super aggressive crypto legislation. Uh. 0:18:44.880 --> 0:18:47.399 The U S still maintains the most vibrant capital markets 0:18:47.440 --> 0:18:51.360 in the world, obviously the most venture capital UH. And 0:18:51.520 --> 0:18:54.080 you know, the bulk of activity is still here. My 0:18:54.160 --> 0:18:59.040 view is stay and engage and fight if necessary, rather 0:18:59.080 --> 0:19:01.840 than fleeing to some other uh you know, tax saven 0:19:01.960 --> 0:19:04.919 or something like that. The UK is actually you know, 0:19:05.000 --> 0:19:08.760 shown willingness to engage with the industry. But you know, 0:19:08.880 --> 0:19:12.159 I think American startups and crypto firms are going to 0:19:12.240 --> 0:19:14.439 have to, you know, do what they can with the 0:19:14.520 --> 0:19:18.040 local regulators. So if you could wave a magic wand 0:19:18.119 --> 0:19:21.040 or or go to Capitol Hill and write this legislation yourself, 0:19:21.359 --> 0:19:23.520 I mean, what are what's a framework that you would 0:19:23.520 --> 0:19:27.040 want to say? I would codify stable coins and give 0:19:27.080 --> 0:19:31.840 them access to the Central Bank directly. That would abate 0:19:31.880 --> 0:19:34.400 a lot of the questions that people have about their 0:19:34.400 --> 0:19:39.159 reliability and their ability to be liquid in times of stress. UM. 0:19:39.200 --> 0:19:44.200 I would give issuers of tokens an ability to acknowledge 0:19:44.320 --> 0:19:47.480 that they actually are serving as a kind of pseudo equity. 0:19:47.520 --> 0:19:50.439 I would give these issuers the ability to make the 0:19:50.560 --> 0:19:55.160 salient disclosures to investors that ought to be made UM 0:19:55.280 --> 0:19:59.200 and you know, craft framework such that they could do that. 0:19:59.680 --> 0:20:02.119 And frankly, I think that the disclosure quality would be 0:20:02.119 --> 0:20:06.560 better than what we have in public markets with quarterly filings. 0:20:06.880 --> 0:20:09.600 Because in crypto, if your business is an on Shaine component, 0:20:10.080 --> 0:20:12.920 you can get real time financials, right, you can pull 0:20:12.960 --> 0:20:15.560 the data literally directly from the block chain, and you 0:20:15.600 --> 0:20:19.080 can get financials on a per block basis. UM things 0:20:19.119 --> 0:20:23.399 are generally more transparent in crypto UM because the cash 0:20:23.400 --> 0:20:26.440 flows are on Chaine UH and you know public block 0:20:26.480 --> 0:20:31.200 chains are inherently transparent. What do you think will actually happen? Um, 0:20:31.240 --> 0:20:33.480 I think it's likely we do get stable coin legislation 0:20:33.520 --> 0:20:36.359 maybe this year. I think the SEC will continue to 0:20:36.400 --> 0:20:39.680 stone wall us. I would like to CEFDC to assert 0:20:39.760 --> 0:20:42.920 its authority maybe over spot markets. That seems right. A 0:20:42.960 --> 0:20:46.320 lot of these things look like commodities, so you know, 0:20:46.320 --> 0:20:48.919 would be nice if they were able to um, you know, 0:20:49.000 --> 0:20:53.560 win some more discretion there. But yeah, I think, uh, 0:20:53.640 --> 0:20:56.879 you know, Canceler is very ambitious, and from his outward 0:20:56.880 --> 0:21:00.320 public statements, he has not so far appeared willing to engage, 0:21:00.480 --> 0:21:02.480 and uh so, I think it's gona a really tough 0:21:02.520 --> 0:21:05.320 time the next few few months and years. Here I 0:21:05.320 --> 0:21:09.040 started off by asking you about the promises of crypto 0:21:09.040 --> 0:21:11.280 and the blockchain not necessarily being delivered at least what 0:21:11.280 --> 0:21:14.000 we were promised over the last decade. Let's look forward 0:21:14.040 --> 0:21:18.560 now and just think about the next decade. Ten years 0:21:18.560 --> 0:21:24.280 from now we're sitting here, what has gotten better in 0:21:24.280 --> 0:21:27.240 our lives as a result of this technology? Where are 0:21:27.280 --> 0:21:30.400 we touching it every day? I would say you are 0:21:30.440 --> 0:21:34.040 looking an explosion of Web three consumer So one I 0:21:34.040 --> 0:21:38.640 would point out would be social media communications networks where 0:21:38.680 --> 0:21:43.280 the topology, the hierarchy is much flatter. So you, as 0:21:43.359 --> 0:21:46.800 the owner of your credentials, can choose to engage with 0:21:47.760 --> 0:21:51.080 you know, particular platform you free entry and free exit. 0:21:51.720 --> 0:21:54.439 So like I take my followers from Twitter to a 0:21:54.520 --> 0:21:58.119 new site because you own your identity right literally, what 0:21:58.200 --> 0:21:59.960 is that identity? What do I own of that identity? 0:22:00.080 --> 0:22:04.280 Every tweet I've ever um said, Um, I would imagine 0:22:04.280 --> 0:22:10.000 a world where basically the specific platforms become much less 0:22:10.040 --> 0:22:14.200 empowered relative to the users. And we're not worried about 0:22:14.520 --> 0:22:20.400 Twitter's governance policies or their censorship policies or facebooks because 0:22:20.840 --> 0:22:23.720 there's so many more competing platforms because the costs of 0:22:23.720 --> 0:22:26.760 eggs at an entry are much lower. Um. And so 0:22:27.080 --> 0:22:29.119 I think that's an overall better situation because now you 0:22:29.160 --> 0:22:32.480 can opt into whatever platform, withever, whatever rules you want. 0:22:33.480 --> 0:22:37.200 Arguably that's a much better situation. And we don't have, 0:22:37.400 --> 0:22:40.200 you know, the situation where governments are trying to use 0:22:40.280 --> 0:22:43.800 these platforms as choke points to gain informational control. They're 0:22:43.800 --> 0:22:46.760 not trying to influence the Mark Zuckerberg's the world. And 0:22:46.840 --> 0:22:49.760 so I want to talk a little bit more about 0:22:50.000 --> 0:22:53.679 web three, though, because I like that you're excited, but 0:22:53.720 --> 0:22:56.359 I want to be cynical, and I mean to your 0:22:56.880 --> 0:22:59.640 point about the Mark Zuckerberg's of the world. A cynical 0:22:59.680 --> 0:23:02.840 person lights say that when you think about Web three, 0:23:03.200 --> 0:23:05.000 it's probably going to be built by the same guys 0:23:05.000 --> 0:23:08.600 who built Web two. That I know. It's a The 0:23:08.720 --> 0:23:10.840 ideal is that it's going to take power away from 0:23:10.880 --> 0:23:16.760 these huge social media companies, But realistically it wouldn't it 0:23:16.800 --> 0:23:21.200 be built by sort of existing companies that are already 0:23:21.240 --> 0:23:23.560 out there, sort of those big players who already exist, 0:23:23.720 --> 0:23:26.159 Or do you do you who do you see building it? 0:23:26.280 --> 0:23:29.920 That was a very ineloquently phrased question. Web three will 0:23:29.960 --> 0:23:31.879