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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Prisner.

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Speaker 2: On today's episode, we'll be taking a look at the

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Speaker 2: regulatory landscape for crypto in both Asia and the US

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Speaker 2: ahead of Donald Trump's inauguration next week. I'll be speaking

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Speaker 2: with Catherine Dowling. She is the chief compliance officer at

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Speaker 2: Bitwise Asset Management. But we begin with one of our

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Speaker 2: top stories. Mining giants Rio Tento Group and glen Core

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Speaker 2: have been discussing combining their businesses. If successful, a merger

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Speaker 2: of this sort would rank as the largest mining deal ever.

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Speaker 2: It also stands to create a rival to industry leader

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Speaker 2: BHP Group. For more on the story, we go to

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Speaker 2: Sydney and we are joined by Paul Allen, Bloomberg Australia correspondent.

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Speaker 2: It's been such a long time to have the chance

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Speaker 2: to visit with you. I'm glad we have the opportunity, Paul.

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Speaker 2: What do we know about what's happening for a potential

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Speaker 2: Rio tinto Glencore merger?

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Speaker 3: Yeah, we look. It's always great to be here and

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Speaker 3: let's get the disclaimers out of the way first. This

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Speaker 3: story comes from sources people familiar with the matter. They

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Speaker 3: don't want to be identified because obviously all of this

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Speaker 3: information is confidential. And the other thing is it's not

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Speaker 3: clear if the talks are still live or not, and

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Speaker 3: both Rio Tinto and Glencore are not really doing much

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Speaker 3: to clear that up. They are offering no official comment

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Speaker 3: at the moment, So the story itself is still live. Now,

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Speaker 3: you say that if this is true, as you point out,

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Speaker 3: this would be a behemoth. This is the big one.

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Speaker 3: Rio Tinto's got a market cap of about one hundred

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Speaker 3: and three billion, Glencore's worth about fifty five billion. If

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Speaker 3: you put those two together, Yeah, you'd get an entity

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Speaker 3: that surpasses the world's biggest minor BHP. So this would

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Speaker 3: be a huge, huge deal, the biggest ever in the

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Speaker 3: mining space if it goes ahead.

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Speaker 2: So I'm curious about not only what analysts are saying,

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Speaker 2: but the way the market is reacting to this.

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Speaker 3: Yeah, we saw some interesting market reac action when news

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Speaker 3: of this broke on Bloomberg. Glencore eight rs in the

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Speaker 3: US popped four percent. Rio Tinto ADRs meanwhile slumped about

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Speaker 3: two point six percent. And that was a trend that

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Speaker 3: we saw continue when Rio stock opened here in Australia.

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Speaker 3: Not long after that that the shares did decline, although

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Speaker 3: it's off session lows now. The reason for that is

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Speaker 3: everybody's been getting to the getting to the gate with

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Speaker 3: their analysis on this. Bloomberg Intelligence saw that look at

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Speaker 3: first Blush, this deal did seem to favor Glencore over

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Speaker 3: Rio Tinto. Glencall's production, for example, is stagnant according to

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Speaker 3: Bloomberg Intelligence. Rio Tinto meanwhile, among the world leaders. And

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Speaker 3: if you put these two entities together, you'd still have

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Speaker 3: a company where iron Ore accounts for just over half

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Speaker 3: of the earnings and Rio Tinto the bulk of its

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Speaker 3: earnings come from iron Ore as well. And obviously iron

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Speaker 3: Ores very closely linked to the fortunes of China, which

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Speaker 3: has had its construction boom sort of starting to peter out.

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Speaker 3: So does it really address the problems there? Perhaps not,

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Speaker 3: Bi says, the merits of the type for Rio not

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Speaker 3: so obvious. Then we had Goldman Sachs cut it's price

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Speaker 3: target for Yo by one percent on the news, although

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Speaker 3: at one hundred and forty six Australian dollars still well

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Speaker 3: above where we are now. RBC Capital Markets also weighed

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Speaker 3: in saying, look, the motivation for Rio not really clear here,

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Speaker 3: but for Glencore, it's a really great exit strategy for

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Speaker 3: some of those major shareholders.

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Speaker 2: Yes, and the fundamentals of the industry seem to argue

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Speaker 2: for a little bit of consolidation. You mentioned the China

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Speaker 2: story and the weak recovery that's going on there, and

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Speaker 2: we know that the Chinese industries that rely on things

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Speaker 2: like steelmaking are heavily reliant on a lot of what

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Speaker 2: these miners produce.

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Speaker 3: Absolutely, and you know the price for ironl is coming

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Speaker 3: under pressure. Price for copper meanwhile, well that's a different story.

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Speaker 3: You know, it's all about copper at the moment as

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Speaker 3: the world starts to move towards decarbonization. So that's really

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Speaker 3: where the action is at the moment. And we saw

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Speaker 3: that reflect just the day before this news broke because

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Speaker 3: Rio Tinto was out. That's third quarter production numbers, and

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Speaker 3: we saw iron all shipments slipping by one percent. Copper

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Speaker 3: shipments though, up twenty six percent. So it just underscores

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Speaker 3: how copper is the metal of the moment, if you like,

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Speaker 3: glen Core produces a million tons a year, Rio Tinto

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Speaker 3: produces about eight hundred thousand tons a year. They both

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Speaker 3: got quality minds all over the world, and if you

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Speaker 3: put these two together, you've got an entity that controls

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Speaker 3: seven percent of the global copper supply. So that's perhaps

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Speaker 3: the strongest synergy that we see in the steel But

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Speaker 3: there's other parts of the teal that will raise a

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Speaker 3: few questions.

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Speaker 2: Really, So if what we are hearing is accurate, isn't

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Speaker 2: this the second time that Rio Tinto and glen Core

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Speaker 2: tried to get together?

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Speaker 3: It is. Your history is very good. We have been

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Speaker 3: here before. I believe it was twenty fourteen this last

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Speaker 3: came up and it was iron All that that was

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Speaker 3: at the core of it. Then it was the theformacy

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Speaker 3: Ivan Glazenberg who spearheaded the approach ten years ago now,

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Speaker 3: and it's kind of interesting that Glazenberg still owns about

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Speaker 3: ten percent of Glencore. So look, we don't know, but

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Speaker 3: you've got you can't help but wonder that maybe his

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Speaker 3: hand isn't all of this as well.

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Speaker 2: So before I let you go, I know you're obviously

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Speaker 2: in Sydney, and I'm curious to get your take on

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Speaker 2: what this may mean for the Australian economy.

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Speaker 3: Yeah, that's an interesting question as well, and the local

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Speaker 3: media he has been weighing in on that also because

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Speaker 3: iron ore and coal have been so so important for

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Speaker 3: the Australian economy, well ever since that I've been working here.

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Speaker 3: In twenty twenty three, those two commodities combined brought in

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Speaker 3: one hundred and fifty billion US dollars in revenue for

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Speaker 3: the country. So really really important businesses. But as I mentioned,

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Speaker 3: they're sort of they're sort of on the outer Now.

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Speaker 3: Rio Tinto has in fact exited all of its coal holdings.

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Speaker 3: Glencall's still got a huge amount of coal holding, so

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Speaker 3: that's another question. What would happen to those coal assets

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Speaker 3: if these two were to be tied up. But in

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Speaker 3: terms of Australia, let's take a look at the locations

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Speaker 3: of some of the copper mines. I mean that there's

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Speaker 3: a couple here, but the really big ones for Glencore,

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Speaker 3: South America, Democratic Republic of Congo are Rio Tinto's big

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Speaker 3: mines are in Mongolia and Utah as well. So it's

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Speaker 3: like you start to think, well, where does Australia fit

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Speaker 3: into this picture. A lot of that revenue looks like

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Speaker 3: it might be drying up and fingers are getting pointed

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Speaker 3: at the governments along the lines of you didn't you

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Speaker 3: see this coming. Surely we need to do something to

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Speaker 3: make sure that the golden goose keeps on laying those eggs.

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Speaker 2: Right, Paul, thank you so much for helping us understand

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Speaker 2: the story. Mining giants Roe, Otento and Glencore have been

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Speaker 2: discussing a merger. We are told these talks are at

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Speaker 2: the early stage. They've been held, yes, although it's not

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Speaker 2: clear whether they're still live. Paul, always a pleasure. Thanks

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Speaker 2: so much. Paul. Allen there Bloomberg Australia correspond and joining

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Speaker 2: us on the Daybreak Asia podcast. Welcome back to the

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Speaker 2: Daybreak Asia Podcast. I'm deg Krisner. Donald Trump is just

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Speaker 2: days away from being sworn in as the forty seventh

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Speaker 2: US president, and his agenda will include elevating crypto as

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Speaker 2: a policy priority. We are told Trump will issue an

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Speaker 2: executive order to guide government agencies to work with the

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Speaker 2: crypto industry and to give industry insiders a voice within

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Speaker 2: the administration. Now the order could also include the creation

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Speaker 2: of a national bitcoin stockpile to help us understand the

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Speaker 2: current state of affairs in the crypto landscape. I'm joined

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Speaker 2: by Catherine Dowling. She is chief compliance officer at Bitwise

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Speaker 2: Asset Management. Catherine, thank you for making time to chat

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Speaker 2: with me. We'll get to the Trump story in a moment,

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Speaker 2: but I'd like to begin in Asia so we can

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Speaker 2: have a little bit of context. I know you're recently

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Speaker 2: back from a trip to the Apac region. What are

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Speaker 2: your takeaways?

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Speaker 1: Yeah, back from a trip and I'm headed there again

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Speaker 1: shortly in the end of February. There's a ton of energy,

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Speaker 1: a ton of interest, and I think really good participation

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Speaker 1: right when the last time I was there and upcoming

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Speaker 1: looking at setting up meetings. There's a lot of benchmarking

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Speaker 1: going on with what's happening in the rest of the country,

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Speaker 1: which I think is so important because it's a global asset.

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Speaker 1: So I think that putting that energy behind having dialogues

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Speaker 1: with other folks and other governments is actually a big

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Speaker 1: positive because each of the different nations are trying to

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Speaker 1: arrive at the right structure, and I think no one's

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Speaker 1: really fully solved that mouse trap. So the more you

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Speaker 1: can look to what others are doing, what's working, what's

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Speaker 1: not working, and use it as an example for your

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Speaker 1: own is very helpful, which is actually something we did

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Speaker 1: before the US had the spot Bitcoin ETF and the

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Speaker 1: spot e ETF that we launched last year in January

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Speaker 1: and July, respectively. We did a lot of benchmarking to

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Speaker 1: other countries that already had these products to be able

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Speaker 1: to show, hey, they're working, and here's how they're working,

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Speaker 1: and here are the mechanics behind it. And that was

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Speaker 1: actually a really important part of the dialogue behind getting

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Speaker 1: these products to be approved in the US, both with

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Speaker 1: the regulators and with members of Congress, in terms of

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Speaker 1: explaining how they work. Having it work abroad and be

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Speaker 1: successful actually brings it from the academic into the reality.

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Speaker 1: So it's super helpful to see if other products are

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Speaker 1: a little have a little more forward motion in other

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Speaker 1: countries and do that benchmarking. So that was a lot

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Speaker 1: of what I saw when I was there, and it'll

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Speaker 1: be interesting to see how that's progressed when I return.

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Speaker 2: So if you had to wait the influence of the

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Speaker 2: US in the regulatory regime from crypto markets in Asia,

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Speaker 2: would you have to say that it's extremely influential.

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Speaker 1: I think, especially now because of you know, Trump coming

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Speaker 1: onto the scene, being you know, the the self labeled

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Speaker 1: first crypto President. So I think I think all eyes

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Speaker 1: really are on what's happening right now and with the

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Speaker 1: new administration coming in, because I think the expectation is

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Speaker 1: that there will be a sea change in how crypto

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Speaker 1: has been treated, how it's been dialogued with, how the

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Speaker 1: industry members have been dialogued with by members of the

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Speaker 1: Biden administration. So I think with that sea change, we're

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Speaker 1: looking at a scenario where a lot of eyes are

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Speaker 1: on the US market and what's going to happen here

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Speaker 1: for what's going to happen with next steps.

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Speaker 2: When I think about crypto markets in Asia, I think

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Speaker 2: immediately of Hong Kong. What is happening there that we

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Speaker 2: should understand.

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Speaker 1: I think there's a lot of development. I think what

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Speaker 1: I what I what I would really like to see

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Speaker 1: more of is a little bit more of more transparency.

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Speaker 1: I think it's I think it's happening a little on

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Speaker 1: the sideline. I think they're the folks from Hong Kong

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Speaker 1: tend to be very active participants in the global conferences,

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Speaker 1: which I think is really good. I think they're out

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Speaker 1: there talking to different folks who are in the industry

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Speaker 1: and collecting information. I just think that the more we

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Speaker 1: can foster that and and share the information, the better.

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Speaker 2: In terms of new regulation, is there anything that you

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Speaker 2: would favor right now that you would think would do

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Speaker 2: a lot to create a more robust regulatory structure that

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Speaker 2: would protect people who want to put money to work

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Speaker 2: in the crypto market. Yes.

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Speaker 1: Absolutely, there's lots of steps, many many steps have been taken,

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Speaker 1: but there are a couple items that haven't. We haven't

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Speaker 1: been able to get quite over the finish line. And

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Speaker 1: some of those are on, you know, the pure regulatory side.

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Speaker 1: Some of those are on the legislative side. I think

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Speaker 1: the first thing I'd like to see is some legislative action,

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Speaker 1: and you know, we've gotten pretty close, and we've gotten

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Speaker 1: bipartisan energy and movement on a number of bills, but

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Speaker 1: we need to push that further. And I think that's

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Speaker 1: what a lot of the eyes will be on what

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Speaker 1: legislative movement we can get, specifically with regard to what

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Speaker 1: we call market structure legislation, where we will then have

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Speaker 1: a definition for different digital assets, and the definition of

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Speaker 1: the digital assets in terms of whether they are dubbed

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Speaker 1: a security or dubbed a commodity or dubbed some combination

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Speaker 1: of definition that changes over time based on the centralization

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Speaker 1: or the decentralization of that asset. That will be completely

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Speaker 1: helpful towards how we view which of the regulators will

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Speaker 1: will have jurisdiction over these assets. And that's been some

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Speaker 1: of the noise around for businesses. Different companies will come

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Speaker 1: in and say I'd like to launch this product and

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Speaker 1: you get stopped at the gates right out of the

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Speaker 1: outset because of this lack of foundational definition for these

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Speaker 1: digital assets. So the hope is that there's some forward

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Speaker 1: motion on that this market structure side that will put

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Speaker 1: those pen to paper, get that finalized, and then there

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Speaker 1: will be less gray area around what has to be

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Speaker 1: done from a regulatory standpoint and who who your regulator is.

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Speaker 1: And we're also hoping to see a little more dialogue

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Speaker 1: between the regulators as well.

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Speaker 2: So the outgoing chair of the SEC, Gary Gensler, was

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Speaker 2: not a friend of the industry. I think that's fair

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Speaker 2: to say. I mean, he was very critical of a

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Speaker 2: lot of what was being done and the need for

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Speaker 2: greater regulation. Are you of the view that this is

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Speaker 2: not something that the SEC should be involved in and

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Speaker 2: if that is the case, what would you prefer in

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Speaker 2: terms of another regulator, who would you prefer to see

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Speaker 2: in charge.

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Speaker 1: No, I'm definitely not of the view that the SEC

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Speaker 1: should not be involved. I think that there's a healthy

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Speaker 1: divide depending on the particular asset that's being looked at,

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Speaker 1: or the product, or the mix of assets that would

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Speaker 1: be in a product. I think what has happened or

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Speaker 1: what happened under Gensler's SEC is that it was far

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Speaker 1: too weighted to one side. It was a hammer nail approach.

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Speaker 1: It was everything's of security, and there was no willingness

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Speaker 1: to even think further on the definition. Everything was pushed

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Speaker 1: back to a pretty dated case involving orange Groves from

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Speaker 1: the forties, where everything under this SEC was it's an

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Speaker 1: investment contract. Look at this Howie case and that was

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Speaker 1: the end of the dialogue, and there wasn't any desire

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Speaker 1: to have a more kind of future forward dialogue about it.

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Speaker 1: And that put a lot of people into a tremendous

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Speaker 1: amount of gray area, because if you actually look at

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Speaker 1: the SEC's own guidelines about the Howie test, there were

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Speaker 1: probably about sixty plus factors you have to look through

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Speaker 1: and work through in order to place one of these

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Speaker 1: assets in the category or out of a category. So

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Speaker 1: it's very complex. You had a situation where law firms

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Speaker 1: weren't even willing to legally opine on this because they

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Speaker 1: didn't want to be wrong, and no one knew if

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Speaker 1: they were wrong or right based on the direction or

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Speaker 1: lack of direction that was being provided. And that's why

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Speaker 1: you saw a lot of the regulation by enforcement that

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Speaker 1: you would hear about from that SEC. It was just

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Speaker 1: not a collaborative approach and there wasn't an openness to

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Speaker 1: dialogue with the industry. And when people did dialogue, oftentimes

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Speaker 1: what they would then report is that they then got

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Speaker 1: slapped with some sort of action. So the goal is

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Speaker 1: not to get rid of the SEC or to deregulate.

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Speaker 1: That's definitely not the goal. The goal is to bring

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Speaker 1: the facts out in the clear light of day, talk

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Speaker 1: about them, get the legislative side of the house in

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Speaker 1: order work on some rules within regulation, allow for some

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Speaker 1: of the sandboxes that some of the other commissioners were

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Speaker 1: and have been behind, like Commissioner person u Ada, and

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Speaker 1: then also at the same time work together to really

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Speaker 1: create a pathway forward for the industry where they're not,

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Speaker 1: you know, looking at shadows and trying to look at Okay,

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Speaker 1: what's coming out of these enforcement actions that may or

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Speaker 1: may not be relevant to me.

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Speaker 2: Catherine, Before I let you go, i'd like to get

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Speaker 2: your take on what we are hearing, maybe an executive

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Speaker 2: order from President elect Trump once he is sworn in,

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Speaker 2: that he would create perhaps a national bitcoin stockpile. How

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Speaker 2: would you feel about that?

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Speaker 1: Yeah, I think I think it's actually a great idea.

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Speaker 1: I think I think we probably will see that executive order.

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Speaker 1: I think in the last administration, Trump had a number

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Speaker 1: of executive orders, so this does not surprise me. It's

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Speaker 1: something that we've already heard some you know, push for

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Speaker 1: from some senators as well, So it's I think it's

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Speaker 1: I think it's an excellent idea. I think it's something

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Speaker 1: we should do. It's something actually that companies are already doing.

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Speaker 1: I think we have over seventy companies that own bitcoin,

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Speaker 1: you know, the biggest of which is micro Strategy that

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Speaker 1: has about forty five billion of bitcoin on its book.

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Speaker 1: So you know, it's a strategy and I think it's

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Speaker 1: an important one that we should also consider. So I

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Speaker 1: would expect that that would be something that would there

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Speaker 1: would be a push forward for that action, and I

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Speaker 1: expect we would see that executive order.

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Speaker 2: Catherine, thank you so much for being with us and

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Speaker 2: helping us understand what's going on in the crypto space

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Speaker 2: these days. Katherine Dowling is Chief Compliance Officer at Bitwise

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Speaker 2: Asset Management. Joining us here on the Daybreak Asia Podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Chrisner and this is bloom Sorry.

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Speaker 1: M