Speaker 1: This is Bloomberg Crypto Daily, Bloomberg I heart podcast, and
Speaker 1: I'm Stacy Marie Ishmael, Managing Editor of Crypto for Bloomberg News.
Speaker 1: It's Friday, November eighteen. What a week this has been.
Speaker 1: I could say that pretty much every week, but seriously,
Speaker 1: what a week it has been. Every single day this
Speaker 1: week something has happened in crypto that has led everyone
Speaker 1: from investors to regulators to crypto CEOs to ask themselves
Speaker 1: the question, hang on a minute, what just happened? Things
Speaker 1: are moving fast and things are getting pretty serious. And
Speaker 1: here to help me break down the news is Bloomberg
Speaker 1: Crypto Senior Editor Philip Blogger Cornso based in Switzerland, almost
Speaker 1: half of all crypto trading volumes globally. When to the bynance,
Speaker 1: the runner up is coin based and they're at five percent,
Speaker 1: so that gives you kind of a sense of just
Speaker 1: how big buyinance this. And Bloomberg Crypto Senior Editor Snel
Speaker 1: Jacksoniani based in Sydney, but with me here in Singapore,
Speaker 1: I think it's the kind of thing you can only
Speaker 1: expect to see in crypto. I cannot imagine something like
Speaker 1: that happening anywhere else. Sanil Welcome to the podcast. Thank you,
Speaker 1: Stacy Berry. Tell the folks what you do. We've not
Speaker 1: had you on before. I am the senior crypto editor
Speaker 1: for Asia for Bloombook. I'm normally based in Sydney, but
Speaker 1: today I'm in the tropical island paradise of Singapore. Excellent,
Speaker 1: and Phil, welcome back to the show. You're an all
Speaker 1: handed this by now. Yeah, I guess you can call
Speaker 1: it thank you. I mean that only in the sense
Speaker 1: of experience. So let's flash back in time too, the weekend,
Speaker 1: although I'm not sure that we technically have weekends anymore.
Speaker 1: We just have days that turn into other days. But Neil,
Speaker 1: what was going on for you this weekend? Well, we
Speaker 1: knew that there might be some activity on Saturday, so
Speaker 1: we were logged in and ready and waiting and lo
Speaker 1: and behold, and it took a while for us to
Speaker 1: fully accept this was happening. Lo and behold, we saw
Speaker 1: that there was an enormous hack perpetrated on the recently
Speaker 1: collapsed ft X exchange. And through the course of Saturday,
Speaker 1: we reported out that story, and we saw the size
Speaker 1: of the hack gradually escalate from an initial estimate of
Speaker 1: around two hundred and fifty million to eventually more than
Speaker 1: six and fifty million dollars. So you had the ignominy
Speaker 1: of a hack on f d X happening right as
Speaker 1: the company is falling into bankruptcy. And really, I think
Speaker 1: it's the kind of thing you can only expect to
Speaker 1: see in crypto. I cannot imagine something like that happening
Speaker 1: anywhere else. That that was our Saturday sounds totally chill,
Speaker 1: sounds like a normal Saturday in crypto. And we get
Speaker 1: into Saturday, we get into the weekend, We're still trying
Speaker 1: to figure out who is behind this hack. You know,
Speaker 1: theories and speculations are flying around, and over the course
Speaker 1: of the next couple of days, something interesting happens as
Speaker 1: it relates to how c Z, who is the CEO
Speaker 1: of Finance and Finance itself are sort of positioning their
Speaker 1: rule in this evolving crisis. Phil, what exactly has been
Speaker 1: going on there with SPF Crypto kind of lost. I
Speaker 1: guess what we could call the chief diplomat or the
Speaker 1: person I suppose what he would like to call himself,
Speaker 1: cheap diplomats. I'm not sure we would call him that necessarily. Yeah, No,
Speaker 1: there's a very that's a very good point and and
Speaker 1: all those things that obviously moved now, but there is
Speaker 1: a vacuum that somebody needs to step into, and ces
Speaker 1: is busily casting himself as just a person to step
Speaker 1: into this. So if you've seen even other big executives
Speaker 1: in this industry have been forced on the defensive, cryptot
Speaker 1: Com CEO has been out talking about how your funds
Speaker 1: are safe and you don't need to worry. Um, you
Speaker 1: know we have adequate reserves, etcetera, etcetera. He said, sort
Speaker 1: of went on the offensive instead and started, you know,
Speaker 1: making a lot of tweets, a lot of speeches, a
Speaker 1: lot of comments in the vein of let's all come together,
Speaker 1: let's rebuild. You know, we need more regulation, we need
Speaker 1: better governance. So he started casting himself as as this
Speaker 1: person who is now the prime representative, I guess of
Speaker 1: the crypto industry. And obviously in a way it makes sense, uh.
Speaker 1: I mean, if you look at the data that we
Speaker 1: used in our story from crypto Compare, in the last
Speaker 1: week they handled almost fifty is almost half of all
Speaker 1: crypto trading volumes globally. Went to the Binance. The runner
Speaker 1: up is coin based and they're at five percent so
Speaker 1: that gives you kind of a sense of just how
Speaker 1: big binance this in today's crypto. Now, one of the
Speaker 1: interesting tensions, which we've addressed a few times on this
Speaker 1: podcast and which will will continue to address, is between
Speaker 1: the idea of the crypto industry presenting itself is like
Speaker 1: a bastion of decentralization, right, and that there's no one
Speaker 1: person in charge, there's no cabal of insiders determining the
Speaker 1: financial system to the detriment of the ordinary person. And
Speaker 1: yet what tends to happen in a crisis, particularly a
Speaker 1: financial crisis, is you do see various kinds of coordination
Speaker 1: because people are trying to figure out, okay, what do
Speaker 1: we need to do to stop this from getting worse.
Speaker 1: And that was very much true in the two thousand
Speaker 1: and eight financial crisis, that of course, was the root
Speaker 1: of the creation of bitcoin itself, and it's been true
Speaker 1: with governments around the world trying to deal with rising
Speaker 1: inflation worldwide. And now it's happening in crypto, perhaps unexpectedly,
Speaker 1: where you know, various crypto CEOs are trying to tell
Speaker 1: other crypto CEOs, hey, you should be transparent, because your
Speaker 1: transparency is good for all of US or CZ encouraging
Speaker 1: other folks in the industry to support this fund, which
Speaker 1: is explicitly to backstop, you know, people who might have,
Speaker 1: as the euphemism goes, liquidity challenges in the course of reporting.
Speaker 1: And frankly for us, because we're editors, in the course
Speaker 1: of editing the stories that our reporters are doing, how
Speaker 1: are we finding that people in the industry are trying
Speaker 1: to reconcile this tension? Are they trying to reconcile this tension?
Speaker 1: I think right now the dominant narrative is I mean,
Speaker 1: if you look at the big place, like C said,
Speaker 1: for instance, the dominant narrative is sort of one of
Speaker 1: salvage mode. So it seems to be like kind of
Speaker 1: the principles that the industry built itself upon as decentralization
Speaker 1: seems to be giving way in at least in the
Speaker 1: telling of some of these executives to the fact that
Speaker 1: right now we kind of need to come together. We
Speaker 1: need to re establish trust with everybody, from regulators to
Speaker 1: politicians to obviously our actual customers are If you look
Speaker 1: at this fund that sees it has been tweeting and
Speaker 1: talking about it very much, has the appearance of a
Speaker 1: little bit of an off the cuff invention, a you
Speaker 1: know something that that very much look good in a tweet,
Speaker 1: and it's it's a very nice talking point. The thing is,
Speaker 1: we don't have any details on like how big it's
Speaker 1: going to be and what exactly it's going to be
Speaker 1: doing it's going to back, so we know that sees
Speaker 1: It has said, for instance, okay, well we small. Some
Speaker 1: projects are small, they're very promising, they're not troubled, they
Speaker 1: just need a little bit of money. Well that's one thing. Huh.
Speaker 1: If you want to look into a slightly a smaller
Speaker 1: decentralized product or protocol, that's promising. But the big thing
Speaker 1: here is right now, the big players are the ones
Speaker 1: that are getting attacked. I mean, you're seeing outflows from
Speaker 1: major exchanges and so it's unclear really how how that
Speaker 1: is going to solve that particular problem. So I guess
Speaker 1: it's a little bit of both, but right now I'm
Speaker 1: seeing mostly a sort of centralization narrative almost and sinil.
Speaker 1: One thing when we talk about crises, which we seem
Speaker 1: to do a lot in crypto, but one thing when
Speaker 1: we talk about crisis that we often get into is
Speaker 1: regulators and at the same time that there's this narrative
Speaker 1: among crypto CEOs of like, you know, what are the
Speaker 1: kinds of things that we can do. We disavow bad actors,
Speaker 1: those people don't represent us. There's also an immediate and
Speaker 1: slightly confusing, parallel narrative of this is all the regulators fault.
Speaker 1: You know, this is an industry that spent years saying,
Speaker 1: don't regulate us with your stupid Wall Street rules that
Speaker 1: don't apply to us, then pivoted to if you're going
Speaker 1: to regulate us, here are some rules that we've written.
Speaker 1: Few free to refer to them and adopt them wholesale. Two. Okay, fine,
Speaker 1: if you're going to regulate us, use those rules. But
Speaker 1: we would really prefer to have these particular regulators be
Speaker 1: in charge to now seeming to blaame regulators that they
Speaker 1: had been fobbing off for a very long time for
Speaker 1: missing this latest story. Is it possible to be a
Speaker 1: regulator and win in this kind of environment. I don't
Speaker 1: think it's possible to be a winning regulator in any situation. Really,
Speaker 1: if we're being honest, Regulators take years to frame their policies,
Speaker 1: and crypto evolved at the speed of light, So it's
Speaker 1: no surprise that they've been behind in their effort to
Speaker 1: try and figure out how to regulate and how to
Speaker 1: manage the growth of the industry. I think what you
Speaker 1: will find now is that there's a very clear perception
Speaker 1: and awareness of what comes from concentration risk. So it
Speaker 1: links to what you were discussing just now with Phil
Speaker 1: And while people are hoping that CZ comes out with
Speaker 1: the fund that can help to study the sector, with
Speaker 1: Sam Backman, Freed and the collapse of f t X,
Speaker 1: we've seen what happens if you have too much power
Speaker 1: concentrated in one particular personal enterprise when that enterprise isn't
Speaker 1: appropriately regulated. So I think it's a I would say,
Speaker 1: a delicious tension in the industry right now, and I
Speaker 1: don't think anybody really has an appropriate answer. And that,
Speaker 1: in a nutshell, is the problem of regulating crypto. It's
Speaker 1: been years and nobody has come up with the answer,
Speaker 1: and we get repeated crisis and I would suspect that's
Speaker 1: going to carry on happening for a while longer yet
Speaker 1: and fury, and there's a point in relation to that
Speaker 1: as well. Sorry to break in here, but the regulation
Speaker 1: has been focused. If you look at what the focus
Speaker 1: has been, it's k y C know your customer, I
Speaker 1: don't take sanction money, for instance, and it's a m
Speaker 1: l anti money laundering, an anti terrorist financing. Sure that
Speaker 1: was that was fine up until this year, but then
Speaker 1: the industry itself started breaking down, and the regulation doesn't
Speaker 1: seem to be have been equipped to deal with the
Speaker 1: fact that you now have like major failures across the
Speaker 1: industry among large players, and not only major isolated failures,
Speaker 1: but cascading failures. And it's like a the regulation is
Speaker 1: clearly not in place to deal with that, and be
Speaker 1: it is entirely clear how such regulation might even look.
Speaker 1: We'll be right back with more of the week's top
Speaker 1: crypto stories, featuring Philip Larger Kansa and sa Neil Jagtiani.
Speaker 1: This weekend, Singapore, Bloomberg hosted a major conference for financial
Speaker 1: services professionals and other folks, and I interviewed Anthony Scaramuchi,
Speaker 1: Yes that Anthony Scaramugie of you know multiple Scaramugi's fame,
Speaker 1: and he was very candid in talking about his experience
Speaker 1: with sam bankmun Freed and FTX and noting that earlier
Speaker 1: this year just weeks ago, weeks before that bankruptcy filing,
Speaker 1: he'd sold thirty of his company to SBF and to
Speaker 1: f t X and saying that, you know, he personally
Speaker 1: introduced Sam to folks in the Middle East, and that
Speaker 1: you know, he was sort of using his personal capital
Speaker 1: on his behalf and just feeling like blindsided almost by
Speaker 1: by how this can happen. But he also said something interesting.
Speaker 1: I thought about those personal relationships again and the idea
Speaker 1: of trust, and his allegation was that you know, Sam
Speaker 1: and CZ of Finance have had shall we say, interpersonal
Speaker 1: animus for some time. They didn't necessar sarely get along,
Speaker 1: and that some of what happened in the last couple
Speaker 1: of weeks partly reflected the tension between outsized personalities. And
Speaker 1: that's something that our colleague Mike Reagan has written about.
Speaker 1: You know, we've we've sort of been documenting the egos
Speaker 1: of mostly men in Crypto and Phil because you you know,
Speaker 1: you wrote that story about c Z kind of stepping
Speaker 1: in into this rule and also because you're newer to Crypto,
Speaker 1: have you observed that kind of sharp elbowed behavior, either
Speaker 1: in the folks that you're talking to or just like
Speaker 1: the kinds of stories that you're editing. I mean, before
Speaker 1: coming to Crypto, I've never seen behavior anything remotely like this.
Speaker 1: There's no industry where I've that I've covered over twenty
Speaker 1: three years in journalism where you can have a Twitter
Speaker 1: fight break out between two the titans of the industry
Speaker 1: and that then leading sort of indirectly. I mean, obviously
Speaker 1: we should be careful to state that. You know, sooner
Speaker 1: or later the fter ex Empire would have probably comment
Speaker 1: down anyway given what But I don't about the balance
Speaker 1: sheet and about the way that they were, you know,
Speaker 1: the relationships with Alameda and how they were basically running
Speaker 1: things or I guess you say, not running things, but
Speaker 1: you had a situation here. What we do know is
Speaker 1: that Season made that tweet on a Sunday saying we're
Speaker 1: dumping five thirty million dollars worth of the FTT token
Speaker 1: and panic breaks out. Pandemonium breaks out five billion dollars
Speaker 1: yang from ft X in one day, according to bank
Speaker 1: man Freed. So you know, I've never seen anything like
Speaker 1: this before, and and and frankly, it's hard to see
Speaker 1: in any way, shape or form how this would be
Speaker 1: good for an industry that frankly is limping right now.
Speaker 1: The blow ups this year are too many to even
Speaker 1: recount here. We'll be sitting here for hours. This is
Speaker 1: where Scaramucci's narrative is quite interesting to me, because it's
Speaker 1: so at all with the narrative that season and by
Speaker 1: Is are putting out there, which is basically, and I
Speaker 1: to be honest with you, like, I'm not taking sides
Speaker 1: here at all. What I am noting is that there
Speaker 1: are two very different narratives out there. You have the
Speaker 1: narrative that Scaramucci was was out pointing out to you, Stacy,
Speaker 1: which is basically, okay, this was an act of retaliation probably,
Speaker 1: and then you have the narrative from Finance saying, no, actually,
Speaker 1: we knew that something was wrong because we read the
Speaker 1: coin this article as some everybody else, and we knew
Speaker 1: that we have a very large bag of FTT and
Speaker 1: we have a basically a duty towards our own customers
Speaker 1: and users to to, you know, to deal with this situation.
Speaker 1: And and you know who knows. What we do know
Speaker 1: now is that this went down in an extraordinary messy fashion.
Speaker 1: Sa Neil as somebody who is also a veteran of
Speaker 1: various types of financial markets and has You've had a
Speaker 1: really interesting set of places that you've lived and like
Speaker 1: different types of places that you've covered. If you were
Speaker 1: to analogize at all the behavior that you're seeing in crypto,
Speaker 1: is there anywhere else you've ever seen anything like this
Speaker 1: any other journalistic context. I'm going to say nuclear weapons,
Speaker 1: because from nuclear weapons, we know that people understand the
Speaker 1: doctrine of mutually ustured destruction and we know that, you know,
Speaker 1: nuking each other is a bad idea. But if you
Speaker 1: look at what happened with the cz tweet and the
Speaker 1: chain of events that followed that, you get the sense
Speaker 1: that there's a whiff of encrypto people can do things
Speaker 1: that can take each other down and cause a huge
Speaker 1: crisis that gets people asking about whether the industry has
Speaker 1: any future at all, and that I think is different
Speaker 1: to most other industries, if not all the sectors I've covered.
Speaker 1: It's rare that you find yourself in a situation where
Speaker 1: you're wondering, do these people really understand that they could
Speaker 1: totally destroy the industry that they work in. So that's
Speaker 1: pretty unique, and it goes back to your question about trust.
Speaker 1: You were saying you have this conception of a trust
Speaker 1: list ecosystem, right, But the truth is there are various
Speaker 1: layers of trust all the way down. You trust that
Speaker 1: the underlying blockchain is going to work the way it's
Speaker 1: supposed to work. You trust that the individual whisk Kid
Speaker 1: really has a sound vision and will run his company properly.
Speaker 1: There are various levels of trust, and at a very
Speaker 1: high level, one thing you want to trust in is
Speaker 1: the idea that people in the industry aren't going to
Speaker 1: blow each other up. And it looks like we can't
Speaker 1: have any trust in that either, which I would say
Speaker 1: is not a good thing. On that genuinely apocalyptic notes,
Speaker 1: I think we shall end there. Thank you both, Thank you,
Speaker 1: Thank you. You can find more of Phil and s
Speaker 1: Neil's reporting and editing on the Bloomberg Terminal and on
Speaker 1: Bloomberg dot com, or check us out on the Bloomberg
Speaker 1: Crypto newsletter. And finally, if you have any comments or feedback,
Speaker 1: you can always find us a crypto at Bloomberg dot net.
Speaker 1: This is Bloomberg Crypto, a dearly podcast from Bomberg and
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Speaker 1: suggestions for the show to Crypto at Bloomberg dot net.
Speaker 1: The supervising producer of Bloomberg Crypto is Vicky Verglina. Our
Speaker 1: senior producer is Janet Babin. Our producers are Mohammed Faruk
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 Schmal. We'll be
Speaker 1: back tomorrow