Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,
Speaker 1: and I'm Stacy Murray Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Tuesday, October eleven. All the way back
Speaker 1: in March, President Biden issued an executive order that directed
Speaker 1: every relevant federal agency to work on guidance related to
Speaker 1: crypto and then within a couple of months to report back.
Speaker 1: This is the first or the strongest announcement or pronouncement
Speaker 1: that we've seen from President Biden in terms of crypto regulation.
Speaker 1: We've never seen this kind of action come out of
Speaker 1: the White House. We're now into that time to report
Speaker 1: back window, and the White House, along with other agencies,
Speaker 1: have started providing updates on their findings. On the White
Speaker 1: House end, for instance, policy record meundations include suggestions focused
Speaker 1: on better consumer and investor protections. But what about the
Speaker 1: big guys, the agencies like the Securities and Exchange Commission
Speaker 1: or the Commodity Futures Trading Commission, both of whom have
Speaker 1: a stake in crypto regulation. Here to break down the
Speaker 1: latest developments is Bloomberg report to Alison ver Spill. I
Speaker 1: think in terms of kind of government speak it is
Speaker 1: still very new. I think they're still kind of wrapping
Speaker 1: their arms around the technology and they don't want to
Speaker 1: move too fast and do something that has repercussions. Allison,
Speaker 1: welcome back to the podcast. Thanks for having me. I
Speaker 1: can't decide if it's like technically busy right now in
Speaker 1: regulation or not busy. We're in a weird place. The
Speaker 1: last time we chatted, the last time you won the show,
Speaker 1: we were anxiously awaiting the arrival of various reports that
Speaker 1: were tied to, you know, the big White House Executive
Speaker 1: Order on crypto that happened back in March. He gave
Speaker 1: various federal agencies, both financial regulators and some non financial regulators,
Speaker 1: mandates to look at different issues, to look at some
Speaker 1: of the concerns we have with the space, but also
Speaker 1: some of the benefits that the crypto industry and sector
Speaker 1: could provide, and come up with recommendations about what types
Speaker 1: of regulation are needed going forward. Were now in the
Speaker 1: period when they're starting to release those what's the content
Speaker 1: of those been, like? Is there anything in there that
Speaker 1: you've been surprised by? Is anything groundbreaking? What's the reception?
Speaker 1: You know? I was talking to someone about these reports,
Speaker 1: and I think the word that was used was unsatisfying.
Speaker 1: You know, the reports do they talk about a lot
Speaker 1: of the potential benefits Actually mostly focused though on the
Speaker 1: risks of digital assets, and you know, they kind of
Speaker 1: indicate areas of further study. For instance, Treasury has been
Speaker 1: tasked with, you know, studying the illicit financed risk of
Speaker 1: decentralized finance as well as non fungible tokens and we
Speaker 1: should be seeing those reports next year. But there was
Speaker 1: really not a lot of clear you know, we need
Speaker 1: regulation on X y Z or we're solving the question
Speaker 1: of whether digital assets are securities or commodities. So really
Speaker 1: these main questions that the industry has are are still
Speaker 1: an answered. I know the Crypto Council for Innovation, which
Speaker 1: is one of these big DC based trade groups, did
Speaker 1: say that the reports basically just kicked the can down
Speaker 1: the road and they said that it showed an outdated
Speaker 1: and unbalanced understanding of the technology. So I can think
Speaker 1: it's safe to say that the industry is not too
Speaker 1: happy with where these landed. So did they want regulation?
Speaker 1: Is it? The usual cry of clarity is what we
Speaker 1: desperately seek, like what what's the unsatisfactory part. You know,
Speaker 1: I don't know if I'm in the head of exactly
Speaker 1: what the industy he's going with here. They always say
Speaker 1: that they want clarity. I know, some especially some of
Speaker 1: the former you know, government officials that I'll talk to
Speaker 1: us say well, they want clarity, but they basically just
Speaker 1: say they want rules different from other industries. They want
Speaker 1: easier rules to follow. So it's hard to it's hard
Speaker 1: to say what the real motivation is, but I can
Speaker 1: say that I feel like a lot of the questions,
Speaker 1: at least that they had were not answered by these reports. Now, Avid,
Speaker 1: listeners of this podcast will have recently heard an episode
Speaker 1: that we did based on a Twitter spaces just for
Speaker 1: a maximum multimedia integration, but based on a Twitter spaces
Speaker 1: that you and our colleague David Pan conducted with someone
Speaker 1: who is advising the White House on crypto policy. The
Speaker 1: climate elements of this does seem to be one area
Speaker 1: where there were a few more specifics. Yes, I think
Speaker 1: the climate report, you know, offered more insight into where
Speaker 1: the White White House stands more some of them, maybe
Speaker 1: some of these other reports, you know, they did indicate
Speaker 1: that they were worried about out some forms of crypto mining,
Speaker 1: in particular, you know, proof of work, which is used
Speaker 1: to verify and mind transactions on the bitcoin blockchain. They
Speaker 1: also said that they think, you know, there needs to
Speaker 1: be more information disclosures so that they want more information
Speaker 1: from miners. They also would like the federal government to
Speaker 1: work with states to establish standards, and then if that
Speaker 1: doesn't work, they said, White House maybe consider executive actions
Speaker 1: or Congress maybe consider legislation. So there was some interesting
Speaker 1: aspects to it. I think again, it does still fall
Speaker 1: a little short of you know, here are the exact
Speaker 1: information disclosure requirements we're going to impose, and we're doing
Speaker 1: that by X time, you know, like there were not
Speaker 1: really any time frames in the report. So interesting, but
Speaker 1: still not not a lot of concrete information or timetables.
Speaker 1: There is it unusual for there to not have been
Speaker 1: any kind of concreteness or timelines just for people who
Speaker 1: don't avidly read reports from government agencies as their job.
Speaker 1: Was anything about this surprising? I don't know that it
Speaker 1: was surprising. You know. I did talk to someone who
Speaker 1: used to work in the government, and the person did
Speaker 1: kind of suggest that a lot of these times, these
Speaker 1: executive orders are sort of pencil pushing exercises is I
Speaker 1: think the other person described it. And then they also
Speaker 1: kind of gave the example of a lot of times
Speaker 1: we were seeing these requests for comments on on the
Speaker 1: reports that were about to come out about a month
Speaker 1: before the report was actually supposed to be released, or
Speaker 1: maybe two months, which isn't really a lot of time
Speaker 1: to kind of take in comments and digest them and
Speaker 1: then put something out. And so this person was sort
Speaker 1: of suggesting, without at the time knowing what was in
Speaker 1: the reports, was sort of suggesting like, I don't know
Speaker 1: how much we're actually going to get out of this.
Speaker 1: And from my understanding and talking with this person, it's
Speaker 1: not it's not abnormal for that kind of executive orders
Speaker 1: to result in these kinds of reports of you know,
Speaker 1: let's do more research. I think the interesting aspect is
Speaker 1: like it does show that the administration is still looking
Speaker 1: at this, that they do care about this subject, that
Speaker 1: it's probably not going away, that regulators and agencies are
Speaker 1: going to be interested in digital assets. But it does
Speaker 1: kind of show like we hadn't come to any conclusions
Speaker 1: on anything. It's funny that you say, you know, like
Speaker 1: a decision to do more homework. It's like it's almost
Speaker 1: like never ending academia. We invite you to study this
Speaker 1: additional proposal, um, I mean request comment on the reports?
Speaker 1: Are they continue to come. So we're going to have
Speaker 1: a report in October from the Financial Stability Oversight Council,
Speaker 1: which is led by Treasury, and that is going to
Speaker 1: be on financial stability risks and potential gaps and it's
Speaker 1: supposed to offer recommendations on how to close those gaps.
Speaker 1: So we were not done with the EO reports either.
Speaker 1: There's there's gonna be more so, so we'll see, we'll
Speaker 1: see what's in them. Can you talk a little bit
Speaker 1: about what the sec and the CFTC have been up
Speaker 1: to here? Sure? So the Securities and Exchange Commission, the
Speaker 1: chair there, Gary Gensler, has been really clear and I
Speaker 1: feel like he's, you know, only gotten more a little
Speaker 1: bit louder on this messaging that he thinks, you know,
Speaker 1: a lot of these exchanges should be registered with his agency.
Speaker 1: They're illegally offering securities. So he's been pretty clear in that,
Speaker 1: and he's been pretty clear that we should likely expect
Speaker 1: some enforcement in this area. I think one thing that's
Speaker 1: interesting is that a lot of folks I talked to
Speaker 1: were expecting this month to be very, very busy when
Speaker 1: it comes to crypto enforcement. And we've seen some cases
Speaker 1: and some cases that are pretty interesting, but that are
Speaker 1: hitting kind of smaller fish. You know, we haven't really
Speaker 1: seen a big company, you know, like a coin base
Speaker 1: or an f t X or something like that that
Speaker 1: would make a splashy headline that would say, you know,
Speaker 1: we're really going after the industry. We've we aren't afraid
Speaker 1: to go after big players. So it'll be interesting to
Speaker 1: see that how that develops and if if we start
Speaker 1: to see more action there over the rest of the year.
Speaker 1: Have there been more comments from folks like Ginsler in
Speaker 1: terms of the specificity of the things that he's thinking
Speaker 1: about to worried about, and has any of this evolved
Speaker 1: over time, Like are we seeing more focus on areas
Speaker 1: like stable coins compared to the earlier part of the year,
Speaker 1: or the stable coins still the thing that everyone's spoking about,
Speaker 1: like what's the trend right now? So I you know,
Speaker 1: on the sec side, he's talked a lot about the
Speaker 1: top issue of are you illegally offering securities? But then
Speaker 1: he's also talked a lot about companies needing to separate
Speaker 1: sort of their their custody functions, so you know, they're
Speaker 1: holding assets for customers from their market making functions, from
Speaker 1: basically just segregating these different parts of their businesses so
Speaker 1: that there's not a conflict of interest in how they're operating. So,
Speaker 1: I mean, that's that's been something he's been talking about lot.
Speaker 1: It started back in the spring, and it's kind of
Speaker 1: escalated from there. So, you know, in an area that
Speaker 1: we probably should be watching. When you say it's an
Speaker 1: area that we probably should be watching, do you have
Speaker 1: a sense is it even possible to have a sense
Speaker 1: going into three of what some of those priorities might be.
Speaker 1: It's hard to say. I mean, the EO reports, I
Speaker 1: guess one of the things that was interesting that came
Speaker 1: out of it was that the administration did encourage the SEC,
Speaker 1: and you know, it's sister organization that or sister agency,
Speaker 1: the CFTC, the Commodity features Trading Commission to continue using
Speaker 1: their existing authorities to take enforcement actions to carry out investigations.
Speaker 1: So it's clear there's some blessing there. So I think,
Speaker 1: you know, I think we could definitely watch to see
Speaker 1: if these agencies are are continuing to be more aggressive
Speaker 1: on the crypto space. On the central bank digital currency front,
Speaker 1: you know, the US has not come to any conclusions
Speaker 1: on whether or not it wants to move forward with
Speaker 1: its own CBDC. These reports did show that it's still
Speaker 1: a high priority to continue looking into this, but Treasury,
Speaker 1: I believe, said, you know, the research alone could take
Speaker 1: several years, so more more studying to happen. And I
Speaker 1: think actually interesting too is that you can see some
Speaker 1: sort of people walking back earlier estimates of how soon
Speaker 1: we might get a US CBDC um. Some strategist at
Speaker 1: Bank of America had originally predicted, you know, we're going
Speaker 1: to see one between now. In a recent report they said, okay,
Speaker 1: we think that might have been too optimistic. We're going
Speaker 1: to dial that back. They actually didn't even give a
Speaker 1: new time frame, but they just said that we don't
Speaker 1: know if it's going to come before now. I think
Speaker 1: that's another area to watch is as these other countries
Speaker 1: do start making a lot more progress, do we start
Speaker 1: seeing a lot more pressure on the U S side
Speaker 1: to do more. We'll be right back with boomboog reports
Speaker 1: of Alison Versprill on the leasest as it relates to
Speaker 1: the White House and crypto regulation. One I've spoken to
Speaker 1: folks in the past. One of the things that they've
Speaker 1: said is there's a lot of interest in the national
Speaker 1: security community for you know, a digital dollar. They're they're
Speaker 1: framing it as this is an important thing to maintain
Speaker 1: the integrity of US borders. They worry about the you know,
Speaker 1: like the rising influence of stable coins. They worry just
Speaker 1: kind of competitively about being left behind, as you've mentioned
Speaker 1: by other countries who might be further ahead. Are they
Speaker 1: still the loudest voices in the room on this or
Speaker 1: is that tenor changing at all? I think that's right.
Speaker 1: I think the national security folks, you know, and and
Speaker 1: Athon the White House National Security Council, you know, that's
Speaker 1: kind of top of mind when they think about the
Speaker 1: cbdc um And there was actually a recent hearing where
Speaker 1: a lot of what was talked about was you know,
Speaker 1: the national security concerns or you know, maintaining the prominence
Speaker 1: of the US dollars. So I think we'll start to
Speaker 1: hear more and more of that. I think it will
Speaker 1: probably get louder. And I think another thing to think
Speaker 1: about is you know, the US likes to be first
Speaker 1: on these kinds of things. They like to be the
Speaker 1: standard setters. So if they feel like these other countries
Speaker 1: are moving forward without them, I can imagine that's not
Speaker 1: sitting well with with some folks in the administration. So
Speaker 1: you might see some kind of internal pressures as well,
Speaker 1: and you know, I think I think we definitely should
Speaker 1: be keeping an eye on that. So this is kind
Speaker 1: of the tension between the let's do more homework and
Speaker 1: the let's get this done contingents. Yes, yeah, it's I mean,
Speaker 1: it's they're very interesting dynamics. I think part of this
Speaker 1: is this is all still very new. I mean, I
Speaker 1: know the crypto industry would say we've been around for
Speaker 1: a while now, but I think in terms of kind
Speaker 1: of government speak, it is still very new. I think
Speaker 1: they're still kind of wrapping their arms around the technology
Speaker 1: g and they don't want to, you know, move too
Speaker 1: fast and do something that has repercussions. And then you
Speaker 1: obviously look at they're facing some pushback on the CBDC
Speaker 1: front from the banking sector, which is a pretty strong
Speaker 1: lobby in the US. I would say, because the banking
Speaker 1: sector has said, you know, we think this is going
Speaker 1: to make commercial deposits less you know, desirable to us consumers,
Speaker 1: and then what's how's that going to affect us and
Speaker 1: the amount of credit that's out in the market. All right,
Speaker 1: so we gotta we gotta do like a nerd step
Speaker 1: back for two seconds, gause. I'm a bank, you're a customer.
Speaker 1: You currently have an accounted like Bank of s m
Speaker 1: I tons of money because you know, why not, why
Speaker 1: would the existence of a central bank digital currency compete
Speaker 1: with your desire to deposit money at the Bank of
Speaker 1: s m I. What people would say is, well, if
Speaker 1: it's the government is backing these tokens, that obviously is
Speaker 1: a much more desirable asset to have than having to
Speaker 1: rely on these private sector banks. So that's that's kind
Speaker 1: of the main concern I hear, and banks really feel
Speaker 1: like they don't have an opportunity to compete in in
Speaker 1: that kind of instance, which is why there are many
Speaker 1: ways that folks are looking at doing a central act
Speaker 1: digital currency. And as much as I might laugh about
Speaker 1: homework as a person who loves homework, you know, in
Speaker 1: in kind of the details of some of these proposals
Speaker 1: or things like well, one of the things that banks offer.
Speaker 1: You know, one of the things that I would offer
Speaker 1: to you to incentivize you to maintain that account is interest, right,
Speaker 1: you know, it's like you, I mean, in this current environment,
Speaker 1: you're you're getting better interest rates on your deposits than
Speaker 1: you might have been a while ago. I also potentially
Speaker 1: offer a suite of different services, like maybe I offer
Speaker 1: you credit cards or you know, the ability to get
Speaker 1: a home loan or an also loan, which are not
Speaker 1: necessarily things that the government might offer to somebody who's
Speaker 1: banking with them. So this is definitely a devil in
Speaker 1: the details thing, but it's it's not so clear to
Speaker 1: me at least that the bank lobby is going to
Speaker 1: be as vulnerable as they're making it out to be.
Speaker 1: You know, in the letters that I've read from the
Speaker 1: banking industry, they've talked about, you know, even if the
Speaker 1: government or to not offer interest on people's CBDC holdings,
Speaker 1: or even if the government were to put a cap
Speaker 1: on how much CBDC people could actually have in their accounts,
Speaker 1: they continue to kind of make the argument that it
Speaker 1: would still have a very negative effect on banking. So
Speaker 1: they've kind of taken to consideration maybe the things that
Speaker 1: the government would do to sort of help out the
Speaker 1: banking sector and there, and they're still you know, pushing
Speaker 1: back a bit on this. I'm definitely going to be
Speaker 1: watching to see how this whole dynamic plays out going forward. Well,
Speaker 1: I can't promise that we will still be talking about
Speaker 1: backing regulation on the podcast in or whenever USCBDC actually happens,
Speaker 1: but hopefully some of the other proposed changes will go
Speaker 1: from proposed to possible in the not too distant future,
Speaker 1: and we will absolutely be having you back for an
Speaker 1: update then. Alright, I look forward to it. All right, terrific.
Speaker 1: Thank you again for coming on the show. Thanks for
Speaker 1: having me. You can find more of Allison's reporting on
Speaker 1: the Bloomberg Terminal on Bloomberg dot com and on Twitter.
Speaker 1: On Twitter, she's at ali verse brill. That's a l
Speaker 1: L y V E R s P R I L
Speaker 1: L E. On the next episode of Bloomberg Crypto, one
Speaker 1: of the more or maybe less unexpected side effects of
Speaker 1: this crypto winter has been an absolute outbreak of CEOs
Speaker 1: rushing for the exit. We'll be talking crypto ceo succession.
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Speaker 1: music by Leo Sidrin. I'm Stacy Marieml. We'll be back
Speaker 1: tomorrow