WEBVTT - The Latest on the US's Approach to Crypto

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<v Speaker 1>This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,

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<v Speaker 1>and I'm Stacy Murray Ishmael, Managing editor of Crypto for

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<v Speaker 1>Bloomberg News. It's Tuesday, October eleven. All the way back

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<v Speaker 1>in March, President Biden issued an executive order that directed

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<v Speaker 1>every relevant federal agency to work on guidance related to

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<v Speaker 1>crypto and then within a couple of months to report back.

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<v Speaker 1>This is the first or the strongest announcement or pronouncement

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<v Speaker 1>that we've seen from President Biden in terms of crypto regulation.

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<v Speaker 1>We've never seen this kind of action come out of

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<v Speaker 1>the White House. We're now into that time to report

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<v Speaker 1>back window, and the White House, along with other agencies,

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<v Speaker 1>have started providing updates on their findings. On the White

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<v Speaker 1>House end, for instance, policy record meundations include suggestions focused

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<v Speaker 1>on better consumer and investor protections. But what about the

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<v Speaker 1>big guys, the agencies like the Securities and Exchange Commission

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<v Speaker 1>or the Commodity Futures Trading Commission, both of whom have

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<v Speaker 1>a stake in crypto regulation. Here to break down the

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<v Speaker 1>latest developments is Bloomberg report to Alison ver Spill. I

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<v Speaker 1>think in terms of kind of government speak it is

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<v Speaker 1>still very new. I think they're still kind of wrapping

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<v Speaker 1>their arms around the technology and they don't want to

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<v Speaker 1>move too fast and do something that has repercussions. Allison,

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<v Speaker 1>welcome back to the podcast. Thanks for having me. I

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<v Speaker 1>can't decide if it's like technically busy right now in

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<v Speaker 1>regulation or not busy. We're in a weird place. The

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<v Speaker 1>last time we chatted, the last time you won the show,

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<v Speaker 1>we were anxiously awaiting the arrival of various reports that

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<v Speaker 1>were tied to, you know, the big White House Executive

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<v Speaker 1>Order on crypto that happened back in March. He gave

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<v Speaker 1>various federal agencies, both financial regulators and some non financial regulators,

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<v Speaker 1>mandates to look at different issues, to look at some

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<v Speaker 1>of the concerns we have with the space, but also

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<v Speaker 1>some of the benefits that the crypto industry and sector

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<v Speaker 1>could provide, and come up with recommendations about what types

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<v Speaker 1>of regulation are needed going forward. Were now in the

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<v Speaker 1>period when they're starting to release those what's the content

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<v Speaker 1>of those been, like? Is there anything in there that

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<v Speaker 1>you've been surprised by? Is anything groundbreaking? What's the reception?

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<v Speaker 1>You know? I was talking to someone about these reports,

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<v Speaker 1>and I think the word that was used was unsatisfying.

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<v Speaker 1>You know, the reports do they talk about a lot

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<v Speaker 1>of the potential benefits Actually mostly focused though on the

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<v Speaker 1>risks of digital assets, and you know, they kind of

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<v Speaker 1>indicate areas of further study. For instance, Treasury has been

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<v Speaker 1>tasked with, you know, studying the illicit financed risk of

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<v Speaker 1>decentralized finance as well as non fungible tokens and we

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<v Speaker 1>should be seeing those reports next year. But there was

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<v Speaker 1>really not a lot of clear you know, we need

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<v Speaker 1>regulation on X y Z or we're solving the question

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<v Speaker 1>of whether digital assets are securities or commodities. So really

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<v Speaker 1>these main questions that the industry has are are still

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<v Speaker 1>an answered. I know the Crypto Council for Innovation, which

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<v Speaker 1>is one of these big DC based trade groups, did

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<v Speaker 1>say that the reports basically just kicked the can down

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<v Speaker 1>the road and they said that it showed an outdated

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<v Speaker 1>and unbalanced understanding of the technology. So I can think

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<v Speaker 1>it's safe to say that the industry is not too

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<v Speaker 1>happy with where these landed. So did they want regulation?

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<v Speaker 1>Is it? The usual cry of clarity is what we

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<v Speaker 1>desperately seek, like what what's the unsatisfactory part. You know,

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<v Speaker 1>I don't know if I'm in the head of exactly

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<v Speaker 1>what the industy he's going with here. They always say

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<v Speaker 1>that they want clarity. I know, some especially some of

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<v Speaker 1>the former you know, government officials that I'll talk to

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<v Speaker 1>us say well, they want clarity, but they basically just

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<v Speaker 1>say they want rules different from other industries. They want

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<v Speaker 1>easier rules to follow. So it's hard to it's hard

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<v Speaker 1>to say what the real motivation is, but I can

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<v Speaker 1>say that I feel like a lot of the questions,

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<v Speaker 1>at least that they had were not answered by these reports. Now, Avid,

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<v Speaker 1>listeners of this podcast will have recently heard an episode

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<v Speaker 1>that we did based on a Twitter spaces just for

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<v Speaker 1>a maximum multimedia integration, but based on a Twitter spaces

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<v Speaker 1>that you and our colleague David Pan conducted with someone

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<v Speaker 1>who is advising the White House on crypto policy. The

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<v Speaker 1>climate elements of this does seem to be one area

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<v Speaker 1>where there were a few more specifics. Yes, I think

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<v Speaker 1>the climate report, you know, offered more insight into where

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<v Speaker 1>the White White House stands more some of them, maybe

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<v Speaker 1>some of these other reports, you know, they did indicate

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<v Speaker 1>that they were worried about out some forms of crypto mining,

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<v Speaker 1>in particular, you know, proof of work, which is used

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<v Speaker 1>to verify and mind transactions on the bitcoin blockchain. They

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<v Speaker 1>also said that they think, you know, there needs to

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<v Speaker 1>be more information disclosures so that they want more information

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<v Speaker 1>from miners. They also would like the federal government to

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<v Speaker 1>work with states to establish standards, and then if that

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<v Speaker 1>doesn't work, they said, White House maybe consider executive actions

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<v Speaker 1>or Congress maybe consider legislation. So there was some interesting

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<v Speaker 1>aspects to it. I think again, it does still fall

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<v Speaker 1>a little short of you know, here are the exact

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<v Speaker 1>information disclosure requirements we're going to impose, and we're doing

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<v Speaker 1>that by X time, you know, like there were not

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<v Speaker 1>really any time frames in the report. So interesting, but

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<v Speaker 1>still not not a lot of concrete information or timetables.

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<v Speaker 1>There is it unusual for there to not have been

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<v Speaker 1>any kind of concreteness or timelines just for people who

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<v Speaker 1>don't avidly read reports from government agencies as their job.

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<v Speaker 1>Was anything about this surprising? I don't know that it

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<v Speaker 1>was surprising. You know. I did talk to someone who

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<v Speaker 1>used to work in the government, and the person did

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<v Speaker 1>kind of suggest that a lot of these times, these

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<v Speaker 1>executive orders are sort of pencil pushing exercises is I

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<v Speaker 1>think the other person described it. And then they also

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<v Speaker 1>kind of gave the example of a lot of times

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<v Speaker 1>we were seeing these requests for comments on on the

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<v Speaker 1>reports that were about to come out about a month

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<v Speaker 1>before the report was actually supposed to be released, or

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<v Speaker 1>maybe two months, which isn't really a lot of time

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<v Speaker 1>to kind of take in comments and digest them and

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<v Speaker 1>then put something out. And so this person was sort

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<v Speaker 1>of suggesting, without at the time knowing what was in

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<v Speaker 1>the reports, was sort of suggesting like, I don't know

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<v Speaker 1>how much we're actually going to get out of this.

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<v Speaker 1>And from my understanding and talking with this person, it's

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<v Speaker 1>not it's not abnormal for that kind of executive orders

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<v Speaker 1>to result in these kinds of reports of you know,

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<v Speaker 1>let's do more research. I think the interesting aspect is

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<v Speaker 1>like it does show that the administration is still looking

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<v Speaker 1>at this, that they do care about this subject, that

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<v Speaker 1>it's probably not going away, that regulators and agencies are

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<v Speaker 1>going to be interested in digital assets. But it does

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<v Speaker 1>kind of show like we hadn't come to any conclusions

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<v Speaker 1>on anything. It's funny that you say, you know, like

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<v Speaker 1>a decision to do more homework. It's like it's almost

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<v Speaker 1>like never ending academia. We invite you to study this

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<v Speaker 1>additional proposal, um, I mean request comment on the reports?

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<v Speaker 1>Are they continue to come. So we're going to have

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<v Speaker 1>a report in October from the Financial Stability Oversight Council,

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<v Speaker 1>which is led by Treasury, and that is going to

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<v Speaker 1>be on financial stability risks and potential gaps and it's

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<v Speaker 1>supposed to offer recommendations on how to close those gaps.

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<v Speaker 1>So we were not done with the EO reports either.

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<v Speaker 1>There's there's gonna be more so, so we'll see, we'll

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<v Speaker 1>see what's in them. Can you talk a little bit

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<v Speaker 1>about what the sec and the CFTC have been up

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<v Speaker 1>to here? Sure? So the Securities and Exchange Commission, the

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<v Speaker 1>chair there, Gary Gensler, has been really clear and I

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<v Speaker 1>feel like he's, you know, only gotten more a little

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<v Speaker 1>bit louder on this messaging that he thinks, you know,

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<v Speaker 1>a lot of these exchanges should be registered with his agency.

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<v Speaker 1>They're illegally offering securities. So he's been pretty clear in that,

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<v Speaker 1>and he's been pretty clear that we should likely expect

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<v Speaker 1>some enforcement in this area. I think one thing that's

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<v Speaker 1>interesting is that a lot of folks I talked to

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<v Speaker 1>were expecting this month to be very, very busy when

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<v Speaker 1>it comes to crypto enforcement. And we've seen some cases

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<v Speaker 1>and some cases that are pretty interesting, but that are

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<v Speaker 1>hitting kind of smaller fish. You know, we haven't really

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<v Speaker 1>seen a big company, you know, like a coin base

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<v Speaker 1>or an f t X or something like that that

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<v Speaker 1>would make a splashy headline that would say, you know,

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<v Speaker 1>we're really going after the industry. We've we aren't afraid

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<v Speaker 1>to go after big players. So it'll be interesting to

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<v Speaker 1>see that how that develops and if if we start

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<v Speaker 1>to see more action there over the rest of the year.

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<v Speaker 1>Have there been more comments from folks like Ginsler in

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<v Speaker 1>terms of the specificity of the things that he's thinking

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<v Speaker 1>about to worried about, and has any of this evolved

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<v Speaker 1>over time, Like are we seeing more focus on areas

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<v Speaker 1>like stable coins compared to the earlier part of the year,

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<v Speaker 1>or the stable coins still the thing that everyone's spoking about,

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<v Speaker 1>like what's the trend right now? So I you know,

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<v Speaker 1>on the sec side, he's talked a lot about the

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<v Speaker 1>top issue of are you illegally offering securities? But then

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<v Speaker 1>he's also talked a lot about companies needing to separate

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<v Speaker 1>sort of their their custody functions, so you know, they're

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<v Speaker 1>holding assets for customers from their market making functions, from

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<v Speaker 1>basically just segregating these different parts of their businesses so

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<v Speaker 1>that there's not a conflict of interest in how they're operating. So,

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<v Speaker 1>I mean, that's that's been something he's been talking about lot.

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<v Speaker 1>It started back in the spring, and it's kind of

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<v Speaker 1>escalated from there. So, you know, in an area that

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<v Speaker 1>we probably should be watching. When you say it's an

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<v Speaker 1>area that we probably should be watching, do you have

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<v Speaker 1>a sense is it even possible to have a sense

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<v Speaker 1>going into three of what some of those priorities might be.

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<v Speaker 1>It's hard to say. I mean, the EO reports, I

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<v Speaker 1>guess one of the things that was interesting that came

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<v Speaker 1>out of it was that the administration did encourage the SEC,

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<v Speaker 1>and you know, it's sister organization that or sister agency,

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<v Speaker 1>the CFTC, the Commodity features Trading Commission to continue using

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<v Speaker 1>their existing authorities to take enforcement actions to carry out investigations.

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<v Speaker 1>So it's clear there's some blessing there. So I think,

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<v Speaker 1>you know, I think we could definitely watch to see

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<v Speaker 1>if these agencies are are continuing to be more aggressive

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<v Speaker 1>on the crypto space. On the central bank digital currency front,

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<v Speaker 1>you know, the US has not come to any conclusions

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<v Speaker 1>on whether or not it wants to move forward with

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<v Speaker 1>its own CBDC. These reports did show that it's still

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<v Speaker 1>a high priority to continue looking into this, but Treasury,

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<v Speaker 1>I believe, said, you know, the research alone could take

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<v Speaker 1>several years, so more more studying to happen. And I

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<v Speaker 1>think actually interesting too is that you can see some

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<v Speaker 1>sort of people walking back earlier estimates of how soon

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<v Speaker 1>we might get a US CBDC um. Some strategist at

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<v Speaker 1>Bank of America had originally predicted, you know, we're going

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<v Speaker 1>to see one between now. In a recent report they said, okay,

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<v Speaker 1>we think that might have been too optimistic. We're going

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<v Speaker 1>to dial that back. They actually didn't even give a

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<v Speaker 1>new time frame, but they just said that we don't

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<v Speaker 1>know if it's going to come before now. I think

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<v Speaker 1>that's another area to watch is as these other countries

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<v Speaker 1>do start making a lot more progress, do we start

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<v Speaker 1>seeing a lot more pressure on the U S side

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<v Speaker 1>to do more. We'll be right back with boomboog reports

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<v Speaker 1>of Alison Versprill on the leasest as it relates to

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<v Speaker 1>the White House and crypto regulation. One I've spoken to

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<v Speaker 1>folks in the past. One of the things that they've

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<v Speaker 1>said is there's a lot of interest in the national

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<v Speaker 1>security community for you know, a digital dollar. They're they're

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<v Speaker 1>framing it as this is an important thing to maintain

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<v Speaker 1>the integrity of US borders. They worry about the you know,

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<v Speaker 1>like the rising influence of stable coins. They worry just

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<v Speaker 1>kind of competitively about being left behind, as you've mentioned

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<v Speaker 1>by other countries who might be further ahead. Are they

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<v Speaker 1>still the loudest voices in the room on this or

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<v Speaker 1>is that tenor changing at all? I think that's right.

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<v Speaker 1>I think the national security folks, you know, and and

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<v Speaker 1>Athon the White House National Security Council, you know, that's

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<v Speaker 1>kind of top of mind when they think about the

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<v Speaker 1>cbdc um And there was actually a recent hearing where

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<v Speaker 1>a lot of what was talked about was you know,

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<v Speaker 1>the national security concerns or you know, maintaining the prominence

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<v Speaker 1>of the US dollars. So I think we'll start to

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<v Speaker 1>hear more and more of that. I think it will

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<v Speaker 1>probably get louder. And I think another thing to think

0:13:12.760 --> 0:13:15.600
<v Speaker 1>about is you know, the US likes to be first

0:13:15.640 --> 0:13:17.520
<v Speaker 1>on these kinds of things. They like to be the

0:13:17.600 --> 0:13:20.840
<v Speaker 1>standard setters. So if they feel like these other countries

0:13:20.880 --> 0:13:23.960
<v Speaker 1>are moving forward without them, I can imagine that's not

0:13:24.000 --> 0:13:26.880
<v Speaker 1>sitting well with with some folks in the administration. So

0:13:27.400 --> 0:13:30.560
<v Speaker 1>you might see some kind of internal pressures as well,

0:13:30.600 --> 0:13:32.920
<v Speaker 1>and you know, I think I think we definitely should

0:13:32.920 --> 0:13:35.160
<v Speaker 1>be keeping an eye on that. So this is kind

0:13:35.200 --> 0:13:37.480
<v Speaker 1>of the tension between the let's do more homework and

0:13:37.520 --> 0:13:43.000
<v Speaker 1>the let's get this done contingents. Yes, yeah, it's I mean,

0:13:43.080 --> 0:13:46.760
<v Speaker 1>it's they're very interesting dynamics. I think part of this

0:13:46.840 --> 0:13:49.520
<v Speaker 1>is this is all still very new. I mean, I

0:13:49.720 --> 0:13:51.719
<v Speaker 1>know the crypto industry would say we've been around for

0:13:51.760 --> 0:13:54.640
<v Speaker 1>a while now, but I think in terms of kind

0:13:54.640 --> 0:13:56.840
<v Speaker 1>of government speak, it is still very new. I think

0:13:56.880 --> 0:14:00.000
<v Speaker 1>they're still kind of wrapping their arms around the technology

0:14:00.080 --> 0:14:02.000
<v Speaker 1>g and they don't want to, you know, move too

0:14:02.040 --> 0:14:05.320
<v Speaker 1>fast and do something that has repercussions. And then you

0:14:05.400 --> 0:14:08.680
<v Speaker 1>obviously look at they're facing some pushback on the CBDC

0:14:08.880 --> 0:14:11.480
<v Speaker 1>front from the banking sector, which is a pretty strong

0:14:11.559 --> 0:14:14.240
<v Speaker 1>lobby in the US. I would say, because the banking

0:14:14.280 --> 0:14:16.800
<v Speaker 1>sector has said, you know, we think this is going

0:14:16.840 --> 0:14:22.760
<v Speaker 1>to make commercial deposits less you know, desirable to us consumers,

0:14:22.800 --> 0:14:24.800
<v Speaker 1>and then what's how's that going to affect us and

0:14:24.960 --> 0:14:27.320
<v Speaker 1>the amount of credit that's out in the market. All right,

0:14:27.360 --> 0:14:29.120
<v Speaker 1>so we gotta we gotta do like a nerd step

0:14:29.160 --> 0:14:33.840
<v Speaker 1>back for two seconds, gause. I'm a bank, you're a customer.

0:14:34.440 --> 0:14:36.840
<v Speaker 1>You currently have an accounted like Bank of s m

0:14:36.880 --> 0:14:40.200
<v Speaker 1>I tons of money because you know, why not, why

0:14:40.320 --> 0:14:45.640
<v Speaker 1>would the existence of a central bank digital currency compete

0:14:45.840 --> 0:14:49.680
<v Speaker 1>with your desire to deposit money at the Bank of

0:14:49.800 --> 0:14:53.040
<v Speaker 1>s m I. What people would say is, well, if

0:14:53.080 --> 0:14:56.960
<v Speaker 1>it's the government is backing these tokens, that obviously is

0:14:57.000 --> 0:15:00.080
<v Speaker 1>a much more desirable asset to have than having to

0:15:00.120 --> 0:15:03.160
<v Speaker 1>rely on these private sector banks. So that's that's kind

0:15:03.160 --> 0:15:07.600
<v Speaker 1>of the main concern I hear, and banks really feel

0:15:07.680 --> 0:15:11.240
<v Speaker 1>like they don't have an opportunity to compete in in

0:15:11.280 --> 0:15:15.400
<v Speaker 1>that kind of instance, which is why there are many

0:15:15.440 --> 0:15:18.280
<v Speaker 1>ways that folks are looking at doing a central act

0:15:18.280 --> 0:15:20.280
<v Speaker 1>digital currency. And as much as I might laugh about

0:15:20.280 --> 0:15:23.040
<v Speaker 1>homework as a person who loves homework, you know, in

0:15:23.040 --> 0:15:25.320
<v Speaker 1>in kind of the details of some of these proposals

0:15:25.400 --> 0:15:28.680
<v Speaker 1>or things like well, one of the things that banks offer.

0:15:29.080 --> 0:15:31.040
<v Speaker 1>You know, one of the things that I would offer

0:15:31.120 --> 0:15:34.960
<v Speaker 1>to you to incentivize you to maintain that account is interest, right,

0:15:35.040 --> 0:15:37.600
<v Speaker 1>you know, it's like you, I mean, in this current environment,

0:15:38.200 --> 0:15:41.640
<v Speaker 1>you're you're getting better interest rates on your deposits than

0:15:41.640 --> 0:15:43.920
<v Speaker 1>you might have been a while ago. I also potentially

0:15:44.000 --> 0:15:46.200
<v Speaker 1>offer a suite of different services, like maybe I offer

0:15:46.200 --> 0:15:48.960
<v Speaker 1>you credit cards or you know, the ability to get

0:15:49.040 --> 0:15:51.480
<v Speaker 1>a home loan or an also loan, which are not

0:15:51.560 --> 0:15:55.400
<v Speaker 1>necessarily things that the government might offer to somebody who's

0:15:55.440 --> 0:15:58.040
<v Speaker 1>banking with them. So this is definitely a devil in

0:15:58.040 --> 0:16:00.480
<v Speaker 1>the details thing, but it's it's not so clear to

0:16:00.600 --> 0:16:04.720
<v Speaker 1>me at least that the bank lobby is going to

0:16:04.800 --> 0:16:07.320
<v Speaker 1>be as vulnerable as they're making it out to be.

0:16:09.520 --> 0:16:10.960
<v Speaker 1>You know, in the letters that I've read from the

0:16:10.960 --> 0:16:14.400
<v Speaker 1>banking industry, they've talked about, you know, even if the

0:16:14.480 --> 0:16:18.440
<v Speaker 1>government or to not offer interest on people's CBDC holdings,

0:16:18.600 --> 0:16:21.160
<v Speaker 1>or even if the government were to put a cap

0:16:21.240 --> 0:16:25.200
<v Speaker 1>on how much CBDC people could actually have in their accounts,

0:16:26.480 --> 0:16:28.840
<v Speaker 1>they continue to kind of make the argument that it

0:16:28.840 --> 0:16:32.120
<v Speaker 1>would still have a very negative effect on banking. So

0:16:32.160 --> 0:16:35.200
<v Speaker 1>they've kind of taken to consideration maybe the things that

0:16:35.240 --> 0:16:37.720
<v Speaker 1>the government would do to sort of help out the

0:16:37.720 --> 0:16:40.520
<v Speaker 1>banking sector and there, and they're still you know, pushing

0:16:40.520 --> 0:16:42.560
<v Speaker 1>back a bit on this. I'm definitely going to be

0:16:42.560 --> 0:16:47.000
<v Speaker 1>watching to see how this whole dynamic plays out going forward. Well,

0:16:47.040 --> 0:16:48.960
<v Speaker 1>I can't promise that we will still be talking about

0:16:49.000 --> 0:16:53.520
<v Speaker 1>backing regulation on the podcast in or whenever USCBDC actually happens,

0:16:53.880 --> 0:16:57.960
<v Speaker 1>but hopefully some of the other proposed changes will go

0:16:58.120 --> 0:17:02.000
<v Speaker 1>from proposed to possible in the not too distant future,

0:17:02.000 --> 0:17:03.760
<v Speaker 1>and we will absolutely be having you back for an

0:17:03.840 --> 0:17:07.280
<v Speaker 1>update then. Alright, I look forward to it. All right, terrific.

0:17:07.320 --> 0:17:09.240
<v Speaker 1>Thank you again for coming on the show. Thanks for

0:17:09.280 --> 0:17:12.720
<v Speaker 1>having me. You can find more of Allison's reporting on

0:17:12.760 --> 0:17:15.479
<v Speaker 1>the Bloomberg Terminal on Bloomberg dot com and on Twitter.

0:17:15.960 --> 0:17:19.639
<v Speaker 1>On Twitter, she's at ali verse brill. That's a l

0:17:19.800 --> 0:17:22.800
<v Speaker 1>L y V E R s P R I L

0:17:23.000 --> 0:17:34.000
<v Speaker 1>L E. On the next episode of Bloomberg Crypto, one

0:17:34.040 --> 0:17:37.520
<v Speaker 1>of the more or maybe less unexpected side effects of

0:17:37.520 --> 0:17:41.159
<v Speaker 1>this crypto winter has been an absolute outbreak of CEOs

0:17:41.359 --> 0:17:45.679
<v Speaker 1>rushing for the exit. We'll be talking crypto ceo succession.

0:17:48.560 --> 0:17:51.720
<v Speaker 1>This is Bloomberg Crypto, a daily podcast from Bloomberg and

0:17:51.760 --> 0:17:54.720
<v Speaker 1>I Heart Radio. For more shows from I Heart Radio,

0:17:54.960 --> 0:17:58.080
<v Speaker 1>visit the I Heart Radio app, Apple Podcasts, or wherever

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0:18:01.680 --> 0:18:04.720
<v Speaker 1>suggestions for the show to Crypto at Bloomberg dot net

0:18:05.280 --> 0:18:09.959
<v Speaker 1>or find us on Twitter. We're at Crypto. The supervising

0:18:09.960 --> 0:18:13.760
<v Speaker 1>producer of Bloomberg Crypto is Vicky Verglina. Our senior producer

0:18:13.840 --> 0:18:18.240
<v Speaker 1>is Janet Babin. Our producer is Sharon Barrero. Associate producer

0:18:18.359 --> 0:18:22.240
<v Speaker 1>is Ty Butler. Desta wonder At is our engineer. Original

0:18:22.320 --> 0:18:26.800
<v Speaker 1>music by Leo Sidrin. I'm Stacy Marieml. We'll be back

0:18:26.840 --> 0:18:27.240
<v Speaker 1>tomorrow