WEBVTT - ICYMI: There’s a Dedicated Conference for Crypto Skeptics 0:00:02.560 --> 0:00:05.720 This is Bloomberg Crypto, a daily Bloomberg I Heard podcast, 0:00:05.960 --> 0:00:09.440 and I'm Stacy Marie Ishmael, Managing editor of Crypto for 0:00:09.480 --> 0:00:27.200 Bloomberg News. It's Wednesday, September. I'm Emily Nicole, crypto blogger 0:00:27.240 --> 0:00:31.640 for Bloomberg News. In today for Stacy Marie. If you've 0:00:31.640 --> 0:00:35.040 ever found yourself on crypto Twitter, you'll be familiar with 0:00:35.080 --> 0:00:38.000 the hype machine that keeps the industries. Thousands of projects 0:00:38.000 --> 0:00:41.840 going rallying cries of wag me an acronym for we're 0:00:41.880 --> 0:00:45.000 all going to make it, and to the moon abound 0:00:45.479 --> 0:00:48.879 found in tweets from accounts with colorful graphic profile pictures 0:00:49.240 --> 0:00:52.640 and usually a hashtag or two. But there are always 0:00:52.680 --> 0:00:54.960 two sides to a coin. And if you've come across 0:00:54.960 --> 0:00:58.120 the Twitter display name featuring the tulip emoji, you might 0:00:58.200 --> 0:01:02.080 have found a crypto skeptic. In add a reference to 0:01:02.120 --> 0:01:07.800 the Dutch to the Mania of the six hundreds these figures, technologists, academics, 0:01:07.840 --> 0:01:11.279 and writers among them are working to counteract cryptos steady 0:01:11.360 --> 0:01:14.480 rise to the top with a dose of reality. Today, 0:01:14.520 --> 0:01:17.000 I'm joined by Stephen Deal. I'm the author of the 0:01:17.000 --> 0:01:19.160 book Popping the Crypto Bobble. I'm one of the more 0:01:19.200 --> 0:01:24.600 outspoken critics of the cryptocurrency industry, a software engineer by trade, 0:01:24.760 --> 0:01:28.120 a leading crypto skeptic, author, and now co founder of 0:01:28.160 --> 0:01:32.119 the recently established Center for Emerging Technology Policy, I think 0:01:32.120 --> 0:01:35.720 tank set up to ensure regulators, policymakers and more are 0:01:35.800 --> 0:01:39.320 informed about where cryptos promises of a brighter tomorrow might 0:01:39.360 --> 0:01:51.840 actually be closer to me. So you often write about 0:01:51.960 --> 0:01:55.400 kind of the common misconceptions around crypto and blockchain and 0:01:55.400 --> 0:01:57.400 the things that the promises to solve. We're here to 0:01:57.400 --> 0:02:00.880 talk about those particular kinds of myths to day. So 0:02:01.000 --> 0:02:03.040 what are some of those problems can you explain them to? 0:02:03.200 --> 0:02:08.200 So cryptocurrencies are broadly speaking, a new form of highly 0:02:08.240 --> 0:02:11.399 speculative investment. Let's emerged in the last few years out 0:02:11.400 --> 0:02:15.720 of the birth of bitcoin, and the entire industry is 0:02:15.760 --> 0:02:18.280 wrapped in a level of sort of myth making about 0:02:18.400 --> 0:02:20.520 this new technology being the birth of like to say, 0:02:20.560 --> 0:02:24.639 a new Internet, or it's a new form of monetary policy, um, 0:02:25.360 --> 0:02:28.960 and not a lot of those stories actually kind of 0:02:28.960 --> 0:02:32.040 match the lived reality on the ground under the technology, 0:02:32.120 --> 0:02:35.079 on the economics or the financial side of the reality 0:02:35.160 --> 0:02:40.240 of the industry. I know you think a lot about, 0:02:40.880 --> 0:02:44.080 you know, how blockchain is a solution works for parts 0:02:44.080 --> 0:02:46.440 of financial services. It's something that if we think about 0:02:46.480 --> 0:02:49.560 the Bank of England and particularly speakers like Deputy Governor 0:02:49.639 --> 0:02:52.160 John con If they often espouse, you know, the benefits 0:02:52.200 --> 0:02:55.000 of crypto technology financial services and how it's going to 0:02:55.040 --> 0:02:57.280 transform the way that we do finance as we know 0:02:57.320 --> 0:03:00.160 it today. And I know that you don't necessarily red 0:03:00.200 --> 0:03:04.200 with the perspective. Yeah, there's a lot of rhetoric coming 0:03:04.360 --> 0:03:08.680 from inside government about you know, the transformative nature of 0:03:08.720 --> 0:03:11.919 say the blockchain technology to solves certain either civic or 0:03:11.960 --> 0:03:16.200 financial problems, and unfortunately you look at the reality every 0:03:16.200 --> 0:03:18.960 time the blockchain has been applied to specific applications and 0:03:19.000 --> 0:03:21.120 financial services, there's not a whole lot of track record 0:03:21.120 --> 0:03:25.359 of success for these projects. Because UM blockchain is a 0:03:25.440 --> 0:03:27.280 solution is something we've not had to build for about 0:03:27.400 --> 0:03:30.440 thirty years. It's not a new idea to build append 0:03:30.560 --> 0:03:34.960 only UM digital ledgers. We've known how to do this 0:03:35.000 --> 0:03:38.520 for quite some time UM and so in that sense, 0:03:38.880 --> 0:03:42.120 blockchain is really only useful for one real application, which 0:03:42.160 --> 0:03:45.160 is building cryptocurrencies, which is the whole other topic onto 0:03:45.160 --> 0:03:48.960 itself of discuss But if you look at specific applications 0:03:48.960 --> 0:03:53.000 of saying, I don't know, applying blocking technology for payment systems, 0:03:53.040 --> 0:03:56.960 your settlement and clearing, or you tracking of provenance for 0:03:57.040 --> 0:04:00.920 specific supply chains, um, most of these applications of this 0:04:01.000 --> 0:04:04.360 technology are strictly worse than using technology that's been around 0:04:04.360 --> 0:04:09.760 for thirty years and already exists. Do you think that 0:04:09.960 --> 0:04:12.920 is your fundamental objection to crypto or was there something 0:04:12.960 --> 0:04:15.200 deeper as well that happens within the industry that you 0:04:15.200 --> 0:04:18.000 think is the fundamental part of why you dislike it. 0:04:18.760 --> 0:04:21.000 I would say there's crypto assets and then there's blockchain. 0:04:21.040 --> 0:04:23.200 Blockchain I dislike from a sense that like, I don't 0:04:23.200 --> 0:04:26.320 think it's a particularly good solution, but that's really a 0:04:26.320 --> 0:04:28.680 matter of like a software architecture perspective. I don't think 0:04:28.680 --> 0:04:31.279 there's a whole lot of public harm concerns related to 0:04:31.360 --> 0:04:33.919 append only databases. But then you over look over at 0:04:33.920 --> 0:04:37.719 crypto assets. These are financial products that are sold to 0:04:37.880 --> 0:04:44.760 the public, which exists specifically to arbitual securities laws UM 0:04:44.839 --> 0:04:48.520 and to create extremely risky assets that are sold directly 0:04:48.560 --> 0:04:51.680 to the public, oftentimes masked in this kind of veneer 0:04:51.880 --> 0:04:56.640 of techno solutionism or you know, some sort of revolutionary technology, 0:04:57.000 --> 0:05:00.640 and the technology itself is questionable at best, and the 0:05:00.680 --> 0:05:03.960 financial assets themselves come wrapped in an enormous amount of 0:05:04.080 --> 0:05:08.560 risks and some very dubious economics. And what about the 0:05:08.640 --> 0:05:11.599 social side of this too, Because a frequent retort in 0:05:11.640 --> 0:05:14.800 crypto is that tokenized versions of assets are going to 0:05:14.839 --> 0:05:17.440 fix a variety of issues, and developing countries are Carl 0:05:17.520 --> 0:05:20.760 Salvador banking the unbanked. That's something I always get told 0:05:20.760 --> 0:05:22.840 when we asked about bitcoin is that it's an alternative 0:05:22.839 --> 0:05:25.799 monetary system that's going to bring everybody out of poverty 0:05:25.839 --> 0:05:29.520 and save the world from censorship. The reason that most 0:05:29.560 --> 0:05:31.360 people are on bank is simply because they don't have 0:05:31.480 --> 0:05:35.440 enough money to hold a bank account. UM. And it's 0:05:35.520 --> 0:05:39.159 unclear to me that's you know, it's this private money 0:05:39.240 --> 0:05:44.360 issued by corporations UM, which is highly volatile its value, 0:05:44.520 --> 0:05:46.480 is actually going to address any of those issues. And 0:05:46.600 --> 0:05:49.800 so I fundamentally disagree with the notion that creating new 0:05:49.960 --> 0:05:53.160 private forms of money is the solution to the unbanked. 0:05:53.360 --> 0:05:56.400 What's the unbanked need is probably like basic bank account 0:05:56.440 --> 0:05:59.479 subsidized by the government UM and enough money to be 0:05:59.520 --> 0:06:02.640 able to, you know, hold those accounts, and those are 0:06:02.680 --> 0:06:04.560 hard problems to solved. I don't the crypto has many 0:06:04.560 --> 0:06:06.960 answers to those. You need only look at All Salvador 0:06:07.360 --> 0:06:10.680 because in the last year they've been running an experiment 0:06:10.760 --> 0:06:13.719 by trying to use bitcoin as legal tender there and 0:06:14.560 --> 0:06:17.560 it's not going well. But blackly, we had several speakers 0:06:17.640 --> 0:06:20.400 from the Crypto Policies and Posium come who are all 0:06:20.440 --> 0:06:23.240 Salvadorian citizens and talk about their lived experience on the 0:06:23.279 --> 0:06:26.400 ground in All Salvador, and it turns out really bitcoin, 0:06:27.080 --> 0:06:31.320 because of its very basic economic design, cannot function as 0:06:31.320 --> 0:06:33.840 money um and when you try to roll it out 0:06:34.000 --> 0:06:36.440 as a means of exchange inside of the country, it 0:06:36.480 --> 0:06:44.400 goes very badly. They cannot um fund their government wallet 0:06:44.720 --> 0:06:48.960 with their bank account as easy as other people can, 0:06:49.040 --> 0:06:52.400 like they had to physically go to key d M 0:06:52.920 --> 0:06:56.239 in a consulate location that sometimes it's really far away 0:06:56.279 --> 0:06:59.320 from where they live. People have to drive six hours 0:06:59.360 --> 0:07:02.960 eight hours to reach the nearest consulate and it's not 0:07:03.040 --> 0:07:08.080 a practical thing to do. And particularly as well this year, 0:07:08.120 --> 0:07:10.200 we've seen a lot of incidents in crypto that I 0:07:10.240 --> 0:07:12.080 think have brought this to front of my view, has 0:07:12.120 --> 0:07:14.000 created a bit of more of an urgency than I 0:07:14.000 --> 0:07:16.280 think you've had to face in previous years, you know, 0:07:16.360 --> 0:07:20.160 with bankruptcy is happening, with Celsius and the Quorn and 0:07:20.200 --> 0:07:23.400 the collapse of Tara Luna. It's definitely been a year 0:07:23.480 --> 0:07:26.200 that regulators probably want to hear from you more than ever. 0:07:27.120 --> 0:07:28.880 They certainly do, and we've had a lot of productive 0:07:28.920 --> 0:07:32.560 conversations with regulators and both sides of the pond. Um certainly, 0:07:32.600 --> 0:07:34.880 what you're seeing is sort of the inevitable outcome of 0:07:34.880 --> 0:07:38.880 an industry that has been purposely built outside of regulation, 0:07:39.400 --> 0:07:41.960 and unfortunately, there's nothing new under the sun. What you're 0:07:41.960 --> 0:07:44.040 seeing is a lot of the same kind of financial 0:07:44.040 --> 0:07:46.360 catastrophes that occurred both in two thousand eight and sort 0:07:46.400 --> 0:07:50.880 of the pre the Securities Act era, unfortunately, and it 0:07:50.880 --> 0:07:54.480 turns out when people don't have um, you know, sensible 0:07:54.680 --> 0:08:00.400 disclosures and sensible investor protections and sensible rules around romans 0:08:00.400 --> 0:08:02.040 and custody of funds, then you get a lot of 0:08:02.080 --> 0:08:04.560 sort of accidents in the financial services industry and a 0:08:04.600 --> 0:08:07.680 lot of retail investors get hurt. And I think we 0:08:07.720 --> 0:08:09.960 all recognized that even on the crypto industry that there 0:08:09.960 --> 0:08:12.680 needs to be some framework put in place so that 0:08:13.120 --> 0:08:15.800 members of the general public are not so much exposed 0:08:15.800 --> 0:08:20.120 to these financial risks. Coming up more from Stephen Deal 0:08:20.280 --> 0:08:22.960 on what tools cryptos skeptics are using to make their 0:08:23.040 --> 0:08:47.640 voices heard on the global stage. And so you're American, 0:08:47.679 --> 0:08:50.000 but you're based in London. I'm also in London and 0:08:50.000 --> 0:08:52.920 I interviewed you earlier this year for a series of 0:08:52.960 --> 0:08:56.360 mini profiles we did about crypto's most influential players in 0:08:56.360 --> 0:08:58.679 the UK, which I'm sure is a monica you didn't 0:08:58.720 --> 0:09:01.800 expect to receive. UM. But you've done a lot of 0:09:01.800 --> 0:09:05.040 work recently with regulators in the UK and Europe and 0:09:05.080 --> 0:09:09.720 in the US as well on cryptos encroachment into finance particularly, 0:09:09.720 --> 0:09:13.080 We've had several regulations announced this year alone in the 0:09:13.160 --> 0:09:15.760 UK and Europe. UM. What trends have you been seeing 0:09:15.760 --> 0:09:18.360 in the financial services industry with crypto and how do 0:09:18.400 --> 0:09:21.160 you think policymakers should approach that either you know to 0:09:21.240 --> 0:09:24.760 be to be containing it, providing rules for it, or 0:09:24.800 --> 0:09:31.040 should you know banks be running away with blockchain. There's 0:09:31.040 --> 0:09:35.240 definitely been a rise in interest UM in crypto assets 0:09:35.320 --> 0:09:38.000 from what I've considered the traditional financial service sector. It's 0:09:38.040 --> 0:09:41.720 still very much sort of a separate world because there's 0:09:41.800 --> 0:09:45.720 sort of the regulated world of banks and normal financial institutions, 0:09:45.720 --> 0:09:48.360 and there's the crypto world, which is largely you know, 0:09:48.440 --> 0:09:52.320 set up in offshore tax shelters and exists largely outside 0:09:52.320 --> 0:09:55.839 of the regulatory perimeter at the moment. The Securities Act 0:09:56.000 --> 0:09:58.840 from the nineteen thirties is a very broadbrush and it 0:09:58.960 --> 0:10:01.679 paints a very robust framework that we've been using for 0:10:01.720 --> 0:10:05.920 almost last hundred years. And I agree with Chairman Ginsler 0:10:06.000 --> 0:10:09.320 from the Securiity Exchange Commissions that almost all crypto assets 0:10:09.360 --> 0:10:12.640 or securities contracts, and we know how to regulate securities 0:10:12.679 --> 0:10:18.719 contracts UM. There's some rather robust framework around disclosures, reporting, 0:10:19.320 --> 0:10:23.840 UM and investor protections around these assets that we know 0:10:24.040 --> 0:10:28.000 very well. And just because security has offered on a 0:10:28.040 --> 0:10:31.680 blockchain versus a like a stock certificate doesn't really change 0:10:31.720 --> 0:10:36.600 the underlying legal reality of what are and once crypto 0:10:36.640 --> 0:10:40.800 assets are brought within the regulatory premature and classify as securities, 0:10:41.200 --> 0:10:46.640 I think a lot of the risks go away. Finally, 0:10:46.640 --> 0:10:49.800 I wanted to find out where you think crypto will 0:10:49.840 --> 0:10:52.679 be in five or ten years time. You know, do 0:10:52.760 --> 0:10:56.040 you think that it's going to be a fully legally 0:10:56.080 --> 0:10:59.320 regulated industry and everyone will be registered as broken dealers 0:10:59.320 --> 0:11:01.720 and that will be, you know, all above board, or 0:11:01.800 --> 0:11:03.720 do you think we might have a version that looks 0:11:03.760 --> 0:11:05.360 a little bit like how we have it today. You know, 0:11:05.400 --> 0:11:09.200 we're still having booms and busts and customers losing out. 0:11:10.880 --> 0:11:13.640 The question of where crypto was going is ultimately a 0:11:13.760 --> 0:11:18.679 question about what comparable assets can you find to crypto? 0:11:18.880 --> 0:11:21.679 And I think many of the tokens that are being 0:11:21.720 --> 0:11:25.040 issued today look very much like securities. They're being used 0:11:25.080 --> 0:11:29.880 to raise funds common enterprise with the entrepreneurial efforts of others, 0:11:29.960 --> 0:11:32.400 where the investors are expecting our return, right, So in 0:11:32.400 --> 0:11:34.679 that sense, they're basically like a stock. And I think 0:11:34.679 --> 0:11:36.559 there's a very sensible framework that we've had for a 0:11:36.600 --> 0:11:38.679 hundred years. But how to deal with those? And then 0:11:38.720 --> 0:11:40.840 you have some other ones, you know, your doge coins, 0:11:41.000 --> 0:11:44.079 you have your you know, sheet booty news, and it's 0:11:44.160 --> 0:11:46.839 unclear what the purpose of these projects are. And if 0:11:46.840 --> 0:11:49.760 we were to look at sort of the fundamentals of 0:11:49.880 --> 0:11:53.240 these investments, you know, there's zero sum write any money 0:11:53.240 --> 0:11:55.680 that any person makes off of them, is ultimately money 0:11:55.679 --> 0:11:58.120 that someone else lost. They're not going to fund a 0:11:58.440 --> 0:12:02.400 common enterprise or any kind of platform. They're just they 0:12:02.400 --> 0:12:04.960 exist kind of ostilate up and down randomly, and in 0:12:05.000 --> 0:12:09.600 that sense, they look very much like gambling products. Um, 0:12:09.640 --> 0:12:13.320 they look verty much like you know, wagering on sports betting. 0:12:13.520 --> 0:12:16.400 And if I were to say that the latter category 0:12:16.480 --> 0:12:19.360 probably should follow in the same kind of regulatory framework 0:12:19.400 --> 0:12:21.560 that you know, like the Gambling Commission has right, they 0:12:21.559 --> 0:12:25.720 should be treated like sports betting. And I think under 0:12:25.720 --> 0:12:29.240 both those frameworks the market probably collapses down into something much, much, 0:12:29.320 --> 0:12:32.239 much smaller than itself right now because those are industries. 0:12:32.600 --> 0:12:34.840 So crypto will shrink down into a much smaller version 0:12:34.880 --> 0:12:39.400 of itself and be regulated as either digital equities or 0:12:39.520 --> 0:12:41.960 as gambling products. All right, well, thank you for your 0:12:41.960 --> 0:12:45.000 insights and thanks for joining us today. You can find 0:12:45.040 --> 0:12:48.000 more reporting like this on the Bloomberg terminal, on Bloomberg 0:12:48.080 --> 0:12:51.160 dot com in the Bloomberg Crypto News set up, and 0:12:51.200 --> 0:12:53.679 you can follow me on Twitter at Emily je Nicole. 0:12:54.679 --> 0:13:04.760 I'm Emily Nicole. In today the Stacy Murray Ishmael On 0:13:04.840 --> 0:13:08.320 the next episode of Bloomberg Crypto Climate Change, It's real, 0:13:08.720 --> 0:13:11.200 it's happening, and it's got consequences for how the US 0:13:11.280 --> 0:13:14.640 government thinks about crypto. We spoke to Costos Samaras, who 0:13:14.640 --> 0:13:17.040 works at the White House. He's the Chief Advisor for 0:13:17.120 --> 0:13:20.000 Energy Policy in the Office of Science and Technology Policy, 0:13:20.440 --> 0:13:22.640 and we asked him all about crypto and the climate. 0:13:26.360 --> 0:13:29.480 This is Bloomberg Crypto, a daily podcast from Bloomberg and 0:13:29.559 --> 0:13:32.480 I Heart Radio. For more shows from I Heart Radio, 0:13:32.720 --> 0:13:35.840 visit the I Heart Radio app, Apple Podcasts, or wherever 0:13:35.880 --> 0:13:39.439 you get your podcasts. Send us your comments, questions, or 0:13:39.440 --> 0:13:42.480 suggestions for the show to Crypto at Bloomberg dot net 0:13:43.040 --> 0:13:48.000 or find us on Twitter. We're at Crypto. The supervising 0:13:48.000 --> 0:13:51.800 producer of Bloomberg Crypto is Vicky very Galina. Our senior 0:13:51.800 --> 0:13:56.960 producer is Janet Babin. Our producer is Mohammed Farouk. Associate 0:13:56.960 --> 0:14:01.120 producer is Moses on m Desto One Rod is our engineer. 0:14:01.880 --> 0:14:07.320 Original music by Leo Sidron. I'm Stacy Maria Shmaal. We'll 0:14:07.320 --> 0:14:08.040 be back tomorrow.