Speaker 1: This is Bloomberg Crypto, a daily Bloomberg Ihart podcast, and
Speaker 1: I'm Philip Bloggercrunsler, Senior editor for Bloomberg News. In for
Speaker 1: Stacy Marie Ishmael. It is Tuesday, March seventh. Over the
Speaker 1: past few weeks, we have seen US regulators, both in
Speaker 1: federal and state levels, in some cases take aim at
Speaker 1: crypto companies with accusations of fraud and unregistered securities offerings.
Speaker 1: These moves send shockwaves through the digital asset industry, and
Speaker 1: the new regulations have raised concerns about potential overregulation or
Speaker 1: overstepping in the US, with some referring to the actions
Speaker 1: as a regulatory carpet bombing moment. By contrast, on the
Speaker 1: other side of the Atlantic, the UK and EU are
Speaker 1: taking a slightly different approach. The UK Treasury has recently
Speaker 1: proposed new rules for crypto related businesses aimed at stepping
Speaker 1: up transparency and consumer protection. Meanwhile, the planned EU Markets
Speaker 1: in Crypto Assets or MICA regulations seeks to provide a
Speaker 1: clear legal framework for digital assets across all member states.
Speaker 1: Here we meet today to discuss all of this. Is
Speaker 1: Bloomberg Crypto reporter Emily Nicole. Emily I want to start
Speaker 1: out by talking about the US, because there's been quite
Speaker 1: a lot happening there over the last couple of weeks,
Speaker 1: especially on the or uniquely, I guess we could say,
Speaker 1: on the enforcement front. Could you talk us through the
Speaker 1: main things that have hit in the US over the
Speaker 1: last couple of days and weeks. It's really been a
Speaker 1: bit of a departure for the US in terms of
Speaker 1: what the global consensus was for how bodies wanted to
Speaker 1: regulate crypto. So most countries have been working towards a
Speaker 1: general framework that they might be able to put around
Speaker 1: crypto businesses one day, and politicians have been working towards
Speaker 1: passing legislation to that effect. Each country doing their own thing,
Speaker 1: but everybody trying to be a little bit joined up.
Speaker 1: In the US, however, there's been a bit of a
Speaker 1: political stalemate over crypto, and obviously they have their own
Speaker 1: stalemates still with just in politics in general, it's a
Speaker 1: very divided country. But that is meant that not much
Speaker 1: has been moving on the framework or the regulation front,
Speaker 1: except crypto doesn't slow down. Crypto doesn't stop. Companies are
Speaker 1: still going bust for aud is still happening, and so
Speaker 1: the Securities and Exchange Commission has taken it upon itself
Speaker 1: to continue with a spate of enforcements. So that's been
Speaker 1: several settlements that they've signed with crypto exchanges and other
Speaker 1: companies trying to also make a bit of a mark
Speaker 1: in terms of how they think crypto should be categorized.
Speaker 1: And that's created a bit of an unwelcome environment for
Speaker 1: crypto in the US, at least from the company's perspective,
Speaker 1: and also put the US on a bit of a
Speaker 1: different trajectory compared to other nations. So you mentioned this
Speaker 1: like interesting juxtaposition between how quickly crypto moves and how
Speaker 1: slowly legislation moves putting in place frameworks as we know
Speaker 1: with micaphrases. Could you argue that in a way, it's
Speaker 1: logical that we're seeing the SEC and the regulators kind
Speaker 1: of move first, given what happened up to and including
Speaker 1: FTX last year. So the SEC's thinking here is that
Speaker 1: something has to happen around crypto, like it can't be
Speaker 1: allowed to just continue to operate at well. Companies need
Speaker 1: some level of guidance, even if it's just to say
Speaker 1: this is what not to do, and so that's why
Speaker 1: it's been taking action. It's been saying, you know, you
Speaker 1: can't be offering stay services if you're not making your
Speaker 1: terms clear to users. You can't be operating coins that
Speaker 1: we may consider security if you don't have the relevant permissions.
Speaker 1: The only problem is is that the crypto industry doesn't
Speaker 1: quite understand the SEC's thinking on all of these topics,
Speaker 1: because again, without frameworks, is not particularly clear, and they
Speaker 1: often disagree as to whether or not those actions were warranted,
Speaker 1: were sufficiently justified. And that's what's creating the uneven dichotomy
Speaker 1: in the US. Okay, I want to put a bookmark there,
Speaker 1: and I want to move over the Atlantic, move across
Speaker 1: the Atlantic and talk a little bit about what's going
Speaker 1: on the UK side, because the UK government has made
Speaker 1: some moves earlier this year, what has been going on
Speaker 1: there Earlier this year, in the start of February, the
Speaker 1: UK Treasury announced what its plan would be to regulate
Speaker 1: the broader cryptosphere. So last year the UK said going
Speaker 1: to be talking more about stable coins, We're going to
Speaker 1: be talking more about how crypto envelops itself into regular
Speaker 1: payment systems. We've spoken about this on the podcast before.
Speaker 1: It's it's a bit of the crypto industry which looks
Speaker 1: most like traditional finances. So it's the easiest for regulators
Speaker 1: to understand. Now what we're seeing are the rules for
Speaker 1: what could be the rest of crypto. So how crypto
Speaker 1: companies should try and register with proper licensing, you know,
Speaker 1: what they should be doing in terms of market abuse,
Speaker 1: how they should be segregating different activities under different units
Speaker 1: to look a little bit more like what we see
Speaker 1: in traditional finance. And those are the rules that the
Speaker 1: UK came out with in February. There are some more
Speaker 1: considerations to have. These are still just proposals. We've got
Speaker 1: to have you consultation and feedback and then it all
Speaker 1: goes to the regulator and they have to have their
Speaker 1: say and then eventually we get to the point of legislation.
Speaker 1: But this was like the first big step for the
Speaker 1: UK on crypto rules. The UK is an interesting one
Speaker 1: because at around this time last year there was a
Speaker 1: lot of sort of simmering discontent in the crypto industry
Speaker 1: that UK was falling behind and you know, UK needed
Speaker 1: to catch up to places like Paul, including the US,
Speaker 1: and it was in a crypto friendly destination. And then
Speaker 1: you had the Boris Johnson, Rishi Sunak wanting to become
Speaker 1: a you know, market themselves as do orth the UK
Speaker 1: as a crypto friendly hub. And then you had the
Speaker 1: political turmoil of the summer and early fall where Johnson fell.
Speaker 1: Boris Johnson has resigned as British Prime Minister, Liz Trust
Speaker 1: has quit as Prime minister. We are going to have
Speaker 1: Raschi Sunac as our next prime minister. It's a prime
Speaker 1: minister that comes without a democratic elect There was a
Speaker 1: lot of hope, I guess you could say among some
Speaker 1: crypto firms that something was going to shake out here.
Speaker 1: What is your best sense of where we stand now
Speaker 1: from the industry's point of view, Are they still just
Speaker 1: waiting the wings or are they becoming more optimistic? Definitely
Speaker 1: becoming more optimistic, but also still waiting in the wing.
Speaker 1: It's what a perfect journalist danser. So there is definitely
Speaker 1: cause for optimism. The government has given clear indications about
Speaker 1: what it thinks on crypto and even some clear indications
Speaker 1: of what the rules could be. Obviously, you know, consultation
Speaker 1: could still happen, things could feels change, but largely that
Speaker 1: that is the statest quote the crypto companies will now
Speaker 1: be aiming for, and ultimately what you hear from crypto
Speaker 1: companies is that regulatory clarity is the be all and
Speaker 1: end all. They just want to know what's going on,
Speaker 1: even if it's stricter rules, and so the UK is
Speaker 1: looking very appealing from that front. Also because of the
Speaker 1: general sentiment that was expressed by the UK last year
Speaker 1: it wanted to become a global crypto hub, and that
Speaker 1: made companies think more about setting up shop in London,
Speaker 1: investing here as a European base. So far though, that
Speaker 1: hasn't really led to much on the ground. We haven't
Speaker 1: seen a whole lot of expansion in terms of, you know,
Speaker 1: more startup being founded here, more investment happening here. There
Speaker 1: has been a little bit of like staff expansion from
Speaker 1: the existing crypto companies that already had bases here, like
Speaker 1: coin based Gemini Kraken, but for the most part, we're
Speaker 1: still kind of waiting to see what the outcomes will
Speaker 1: be and I think it'll it'll be another year or
Speaker 1: so before any of that even comes to fruition. Yeah,
Speaker 1: and it's worth pointing out that it's been a pretty
Speaker 1: long crypto winter now and everything from funding has been
Speaker 1: restricted I guess it's natural for it to take a
Speaker 1: little bit of time for this to shake out, given
Speaker 1: where the industry has been of the last twelve to
Speaker 1: fifteen months. Yeah, and actually we're already seeing what could
Speaker 1: be the eventual outcome for the UK happening in Europe,
Speaker 1: where let lawmakers have been working on their version of
Speaker 1: crypto legislation for at least two three years at this point.
Speaker 1: As you called it earlier, MICA is the directive and
Speaker 1: that is now close to being signed in the coming year.
Speaker 1: And so we've even been seeing funding in Europe increase
Speaker 1: quite a lot from what it used to be, more
Speaker 1: than doubled in the last year, year on year for
Speaker 1: the quarter that's just gone. So crypto investment is definitely
Speaker 1: happening in Europe where it's declining elsewhere. Coming up more
Speaker 1: with Bloomberg reporter Emily Nicole on the UK and EU
Speaker 1: crypto regulations, we'll be right back. So I want to
Speaker 1: come back to Mike and a little bit, but first
Speaker 1: I just want to do a little stop at something
Speaker 1: that you and I have discussed before, but an area
Speaker 1: where there has been I guess we could call it
Speaker 1: a crypto adjacent area where there's been some action lately,
Speaker 1: and that's digital pound, or Britcoin as it's now being
Speaker 1: called in some circles. Can you just give us the
Speaker 1: potted version of what's going on there? Yeah, so if
Speaker 1: you listen back to the episode that Philan I did
Speaker 1: on this not that long ago, then you'll be fully
Speaker 1: aware of this synopsis. But all central banks around the
Speaker 1: world generally and now considering what they might do in
Speaker 1: the world of digital currency, is a digital version of
Speaker 1: the government sterling. This is a little bit like a
Speaker 1: stable coin, you know. It would be tied to the
Speaker 1: value of the UK's case, the pound. It will be
Speaker 1: worth one to one, but instead of being issued by
Speaker 1: a private company, will be issued by the central bank itself,
Speaker 1: in this case the Bank of England. The hope is
Speaker 1: that retail users will be able to use inital pound
Speaker 1: for everything from you know, getting paid to paying your mortgage,
Speaker 1: and there may also be a wholesale version up to
Speaker 1: be used for between settlements between banks and between big companies.
Speaker 1: But there's still a long way to go. The UK
Speaker 1: has been investigating this for quite a few years now
Speaker 1: and there's obviously a lot more work to be done still.
Speaker 1: On you know who builds technology, who the partners are,
Speaker 1: who issues the wallets that could hold digital pounds. But
Speaker 1: every time we hear from the Bank of England, it's
Speaker 1: more and more likely that this will be a reality
Speaker 1: and you know, within a few years we will have
Speaker 1: a digital pound in our wallets. Okay, So now that
Speaker 1: we're talking about things that are you know, years into
Speaker 1: making and still a ways out, let's discuss MICA a
Speaker 1: little bit because that is a big one. We did
Speaker 1: get an agreement on MICA around media last year and
Speaker 1: where do we stand now. We're still waiting for the
Speaker 1: final version to come out. Yeah. So MICA, the Markets
Speaker 1: and Crypto Acts Directive in the EU is that is
Speaker 1: the block's big crypto proposal. It should be the first
Speaker 1: step towards enabling crypto companies to operate better in the space.
Speaker 1: That includes rules for things like crypto licensing, so that
Speaker 1: companies basically will select a block country in which to
Speaker 1: register their services and then be able to passport those
Speaker 1: permissions across all twenty seven member states that will have
Speaker 1: lots of rules like their existing traditional finance things like
Speaker 1: curbs on being able to use too many stable coins
Speaker 1: in one wallet, or it'll have rules around things like
Speaker 1: being able to use stable coins under a daily limit.
Speaker 1: It will also seek to make sure that Europe has
Speaker 1: its own kind of reach on where customers can access
Speaker 1: services and try and place limits in place so that
Speaker 1: customers aren't accessing things that aren't outside the block without
Speaker 1: their control. But mostly it's still an initial step. Politicians
Speaker 1: have said this is one of many micas to come.
Speaker 1: The current set of text will be voted on in April,
Speaker 1: and it's likely to come into action probably from twenty
Speaker 1: twenty four onwards, although even after that crypto companies will
Speaker 1: have a few years to comply. Yeah, you said many
Speaker 1: micas to come, And I think that's a fairly crucial
Speaker 1: point because while MICA was making its way through the
Speaker 1: political machine, so much happened, and so what can we
Speaker 1: expect in terms of are there areas where critics are
Speaker 1: already saying, listen, we are going to have to add
Speaker 1: to micare or update MICA to deal with this and
Speaker 1: that particular problem or potential problem in the industry. Already
Speaker 1: it's missing quite a few crucial components of what we
Speaker 1: think of as the main things to regulate in crypto
Speaker 1: at present. So while it has lots of rules for
Speaker 1: crypto companies, it doesn't really have rules for crypto assets themselves,
Speaker 1: and to be fair to the EU, that is something
Speaker 1: that no regulator has really been able to get its
Speaker 1: head around yet how you could regulate bitcoin or ethereum.
Speaker 1: But those are things that they are now thinking about.
Speaker 1: There's also no rules for decentralized finance, no rules for staking,
Speaker 1: no rules for lending, no rules for an fts. Largely
Speaker 1: at the minute they're considered to be exempt from all
Speaker 1: of this, and so there are definitely going to at
Speaker 1: least be a MICA two, if not a MICA three
Speaker 1: and four on its way. But given that this has
Speaker 1: taken several years already, who knows what we might get
Speaker 1: those micas. And when it comes to stable coins, which
Speaker 1: is a topic that we've been sort of hitting on
Speaker 1: again and again and again ever since well last year
Speaker 1: Terra USD debacle and even before that, what are the
Speaker 1: issues that are being raised here? So, as I said earlier,
Speaker 1: stable coins are the things that look most like traditional money,
Speaker 1: traditional finances, So regulators have got the most formed rules
Speaker 1: on those today in the UK and Europe in particular,
Speaker 1: and that's good, right It means that there's are these
Speaker 1: parts of crypto that are already kind of getting put
Speaker 1: in check. The only problem is is that no regulator
Speaker 1: has been able to say definitively that any of the
Speaker 1: stable coins that are out there at present, be that
Speaker 1: Tether's USDT or Circle's USDC meets the standards that they
Speaker 1: would require for stable coin issuers. They need to have
Speaker 1: things like proper segregation of funds, be able to show
Speaker 1: transparency transparently, that they meet one to one requirements on
Speaker 1: the clatteral backing those token, that they have sufficient risk
Speaker 1: management in place, that getting full financial audits every year.
Speaker 1: These are all things that are now like pretty standard
Speaker 1: things to expect of companies in finance, particularly if you
Speaker 1: would think of a company that could issue its own currency,
Speaker 1: And those are all things that are currently nobody in
Speaker 1: crypto is able to meet. So while we do have expectations,
Speaker 1: clear expectations in place in the UK and Europe for
Speaker 1: what stable coin issues will be expected to do in future,
Speaker 1: it's still a long route is to whether or not
Speaker 1: any of them will be considered compliant anytime soon. All right,
Speaker 1: So this is all pretty high level stuff, But if
Speaker 1: you're a crypto user, What does this ultimately mean for you?
Speaker 1: If you're someone who's based in the UK and Europe,
Speaker 1: it means that in the next few years you can
Speaker 1: expect to have a proper regime in place. That means
Speaker 1: that there will be crypto companies in those countries that
Speaker 1: are regulated, that are licensed for you to go to
Speaker 1: that you can have a little bit of faith that
Speaker 1: at least someone who's in a form of authority has
Speaker 1: checked that that company is doing what it says it's
Speaker 1: doing and it's acting in the best interests of you
Speaker 1: the user. What it doesn't mean it the minute, though,
Speaker 1: is that there's going to be any sort of protections
Speaker 1: for you. So while that the FCA in the UK
Speaker 1: or some of the regulary bodies and the EU like
Speaker 1: ESTHMA will be making checks to make sure, for example,
Speaker 1: there's no untoward money laundering going on, or that you know,
Speaker 1: everybody's reasonably declaring all the risks that they should, there's
Speaker 1: not going to be things that we used to like
Speaker 1: insurance over your holding, so if a company went bust,
Speaker 1: you definitely get all your money back, or you know,
Speaker 1: if you were a subject to a scan that they'd
Speaker 1: have to pay that back to you. Those aren't things
Speaker 1: that they're even anywhere close to promising for crypto. So
Speaker 1: it's a little bit of a mixed bag, right. You
Speaker 1: get a little bit more of a sense that you're
Speaker 1: that you're dealing with somebody who knows what they're doing,
Speaker 1: but you don't necessarily get the sense that Crypto is
Speaker 1: going to change from being the current message, which is,
Speaker 1: if you invest in crypto, be prepared to lose all
Speaker 1: of your money. Thank you, Emily. That was Bloomberg reporter
Speaker 1: Emily Nicole. You can find more of her reporting on
Speaker 1: the Bloomberg Terminal and on Bloomberg dot com. For more,
Speaker 1: be sure to check out our twice weekly newsletter, Bloomberg Crypto.
Speaker 1: This is Bloomberg Crypto, a daily podcast from Bloomberg and iHeartRadio.
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Speaker 1: The supervising producer of Bloomberg Crypto is Vicky Vergelina. Our
Speaker 1: senior producer is Janet Babin. Our producers are Mohammed Faroup,
Speaker 1: and Sharon Berrio. Our associate producers are Ty Butler and
Speaker 1: Moses on um Desta wonder At is our engineer. Original
Speaker 1: music by Leo Sidron. I'm Stacy Mariashmal. We'll be back
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