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

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Speaker 2: We do want to talk a little bit about what's

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Speaker 2: going on in the regulatory space when it comes to

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Speaker 2: cryptocurrencies and much more. It was a recent IMF working

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Speaker 2: paper that found that crypto mining could generate about sevent

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Speaker 2: tens percent of global carbon dioxide missions emissions by twenty

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Speaker 2: twenty seven. We talk about crypto mining and the impact

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Speaker 2: it has on the environment.

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Speaker 1: Yeah, indeed, and look, it's one of those key issues

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Speaker 1: that we're thinking about as this issue, as this sector

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Speaker 1: in crypto has been the focus of so much attention.

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Speaker 1: It's come up repeatedly in the presidential race this year

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Speaker 1: as well. It's just one of the many issues that

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Speaker 1: we want to get into with the Chairman of the

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Speaker 1: US Commodity Futures Training Commission at Russian benham Ross, who

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Speaker 1: joins us with us here in the Plaza Hotel Russ.

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Speaker 1: Great to see you, Thanks so much, welcome for joining us. Look,

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Speaker 1: we're talking about climate issues first, and this is why

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Speaker 1: we're thinking about the impact of crypto, but also more broadly,

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Speaker 1: this is an area that you have lots of tentacles

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Speaker 1: in your regulatory position.

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Speaker 3: Talk to us about the question.

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Speaker 1: Of environmental impact when it comes to crypto, where are

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Speaker 1: we thinking about regulation of Ryan Bosch, What sort of

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Speaker 1: rules are needed, what does the THEFTC have power over.

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Speaker 4: Well, before we even get to the climate impact of

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Speaker 4: crypto and crypto mining, I think the larger question in

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Speaker 4: the US is the regulatory structure, or really the lack

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Speaker 4: of one. I've advocated for almost three years now that

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Speaker 4: there's a gap in regulation, and this is just a

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Speaker 4: product of the way the US regulatory.

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Speaker 3: System is set up.

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Speaker 4: Multiple agencies, couple market regulators banking regulators, and for better

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Speaker 4: or for worse, we've seen a sustainability in the marketplace,

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Speaker 4: sustained demand by customers, both retail and institutional, and really

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Speaker 4: what we have to do is make sure that we

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Speaker 4: regulate it properly so that customers are protected.

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Speaker 3: Market stability is their market resiliency.

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Speaker 4: If we can get there, and I think that would

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Speaker 4: be my priority, then I think the conversations about climate

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Speaker 4: impact energy usage for mining are important to ask an answer,

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Speaker 4: and I think those have been actually within the domain

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Speaker 4: of questions asked over the past couple of years. A

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Speaker 4: couple efforts by some of the miners to co locate

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Speaker 4: near power sources that are renewable or even nuclear, some

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Speaker 4: other efforts to change the way mining is done to.

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Speaker 3: Reduce the carbon footprint.

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Speaker 4: But as we worked with Congress over the past couple

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Speaker 4: of years to think about legislative efforts, I know this

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Speaker 4: issue specifically was on their mind, and they wanted to

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Speaker 4: think about disclosures, transparency, information to get to the market

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Speaker 4: so that those economic incentives and preferences can essentially be

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Speaker 4: manifest through decisions about what tokens to buy or not buy.

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Speaker 2: Well, and the energy component so much an important aspect

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Speaker 2: of the reliability right making sure that it continues to work.

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Speaker 2: I want to go back to the regulatory side. Donald

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Speaker 2: Trump has kind of come out and said he's a

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Speaker 2: friend of crypto. It seems like Kamala Harris's campaign is

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Speaker 2: increasingly embracing towards the crypto world. In terms of your

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Speaker 2: push for more oversight of the crypto world, Would you

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Speaker 2: continue to do so under a Harris administration?

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Speaker 3: Yeah, and I just to be no matter who.

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Speaker 2: Yeah, and as friendly as they might be.

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Speaker 4: Yeah, to be clear, it's oversight driven by regulatory protection

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Speaker 4: and customer protections. This is not me as chair of

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Speaker 4: the CFTC advocating for the industry saying that crypto is

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Speaker 4: going to be the next great thing.

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Speaker 3: This is about my observation as the head.

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Speaker 4: Of a market regulator, saying there is a giant gap

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Speaker 4: in regulation. There are a lot of customers who are

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Speaker 4: either uninformed or don't really know the associated risks with crypto,

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Speaker 4: and we have to put the guardrails around this industry.

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Speaker 4: And those guardrails are the same guardrails that we put

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Speaker 4: around equity markets, derivatives markets, fixed income markets, et cetera.

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Speaker 4: No different, no different, but we have to think about Look,

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Speaker 4: there are going to be differences on custody, cybersecurity. There

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Speaker 4: are components of the financial asset digital assets themselves that

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Speaker 4: are very unique from securities or derivatives.

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Speaker 3: There's no doubt about that.

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Speaker 4: But if we think broadly from a principles based standpoint,

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Speaker 4: the markets structure components that have been put in place

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Speaker 4: for decades and have worked quite well for US markets

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Speaker 4: are the same ones we need to think about for

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Speaker 4: digital assets because there's a lot of questions about the

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Speaker 4: sustainability of digital assets. But here we are twenty twenty four,

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Speaker 4: moving into twenty twenty five FTX, other crises finance a

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Speaker 4: lot that we have brought on the enforcement side, and

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Speaker 4: there is still I don't know about insatiable demand, but

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Speaker 4: there is still demand from retail and institutional and they're

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Speaker 4: looking for regulatory structure so that they can increase those flows.

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Speaker 1: How open is the industry to regulation. I mean, it's

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Speaker 1: obviously a conversation that's ongoing, and you've outlined the complexity

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Speaker 1: of how the different agencies work in this front as well.

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Speaker 3: Are they engaging?

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Speaker 1: Is this something that you're actually able to see productive

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Speaker 1: results that won't end open a risk of overregulation.

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Speaker 3: Yeah.

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Speaker 4: So this is really the tricky part of this because

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Speaker 4: I think I argue this often the US capital markets

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Speaker 4: are the best in the world because of the regulatory

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Speaker 4: structure we have, because of the legal structure we have,

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Speaker 4: because of the accountability there is is for bad actors

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Speaker 4: and those who violate the law.

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Speaker 3: So there are many actors.

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Speaker 4: I can't speak for the entire crypto community, but there

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Speaker 4: are many who have been very engaged with Washington, both

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Speaker 4: in Congress and the executive branch, to see what kind

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Speaker 4: of regulatory structure could work around digital assets. Will this

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Speaker 4: benefit them most likely? I've said this publicly in the past. Again,

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Speaker 4: to my point, US regulation is the reason in part

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Speaker 4: why US capital markets are the strongest, deepest, and most

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Speaker 4: liquid in the world, So they see a benefit to regulation.

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Speaker 3: The word often thrown around is legitimacy.

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Speaker 4: But again I want to pull back to what my

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Speaker 4: responsibilities are, Protecting customers, protecting market resiliency and in essence

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Speaker 4: sometimes financial stability. And as I continue to see this

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Speaker 4: market EBB and flow and go through it's sort of

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Speaker 4: organic growth, I can't help but raise a red flag

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Speaker 4: and say, look, we're seeing this market grow.

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Speaker 3: We need to protect customers.

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Speaker 2: That's what would you say in terms of the powers

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Speaker 2: that are necessary in order for any kind of over

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Speaker 2: crypto by the CFTC to really work.

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Speaker 4: Yeah, this is a unique part, like we have two

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Speaker 4: market regulators CFTC SEC.

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Speaker 3: There is a question about around some tokens.

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Speaker 4: I've articulated and advocated that bigcoin and ether are commodities

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Speaker 4: under existing law.

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Speaker 3: Congress wants to change existing law. That's we still debate.

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Speaker 4: Sure, but look, we've brought a lot of enforcement cases

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Speaker 4: and we bring them through. You know, the authority we

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Speaker 4: have over commodity assets, which in many cases is bitcoin

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Speaker 4: and ethereum, but ultimately it's registration of exchanges, it's registration

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Speaker 4: of broker dealers, it's registration of custodians, clearing houses, data repositories,

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Speaker 4: the same again, core components and core regulatory tools that

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Speaker 4: we use, and with those registration requirements come ability to

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Speaker 4: surveil markets, ability to collect data, and ability to examine

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Speaker 4: market participants.

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Speaker 1: What is from what you're hearing from the election compaign

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Speaker 1: because we ask about it, because it's coming up with

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Speaker 1: alarming regularity, someone would say, in how often it's mentioned,

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Speaker 1: what are you hearing that sounds like a good idea

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Speaker 1: or that sounds like a bad idea in terms of

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Speaker 1: where regular regulation should be going from here.

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Speaker 4: So, look, we don't want to undermine existing law. We

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Speaker 4: don't want to change existing protections that exist for markets

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Speaker 4: like derivatives like stocks and bonds.

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Speaker 3: We want to.

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Speaker 4: Apply what we've learned and what we have in terms

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Speaker 4: of authority to regulate markets to crypto. And it's about engagement.

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Speaker 4: It's about understanding what the technology is. It's understanding what

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Speaker 4: new risks or new variations on existing regulatory tools we

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Speaker 4: would have to apply. But I often go and I've

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Speaker 4: had conversations with lawmakers in both the Senate the House.

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Speaker 4: There have been a lot of really interesting efforts and

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Speaker 4: credit to those who have led the way in both

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Speaker 4: the House and the Senate to draft bills to contemplate

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Speaker 4: giving the CFDC the authority. It's a unique circumstance where

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Speaker 4: the CFTC regularly it's commodity derivatives markets, but not the

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Speaker 4: underlying market. So we have this gap in commodity cash

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Speaker 4: markets or spot markets, and this is where we find

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Speaker 4: ourselves with digital assets, all right, So.

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Speaker 2: We're still trying to figure out digital assets. We throw

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Speaker 2: artificial intelligence into the mix, right increasingly, not new finance

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Speaker 2: community has been using it for a long time. I

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Speaker 2: do wonder if you guys are planning what tools you

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Speaker 2: need to have in place to kind of oversee that aspect.

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Speaker 3: So, yeah, it's important question.

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Speaker 4: And at this point, almost nine or ten months ago,

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Speaker 4: we put out an advisory, a request for comment, a

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Speaker 4: consultation document, and in my mind, the steps we needed

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Speaker 4: to take as an agency was one information gathering, engagement,

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Speaker 4: getting better and smarter ourselves so that we can think

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Speaker 4: about what existing rules apply to AI and where there may.

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Speaker 3: May be gaps in the space. So we're working through

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Speaker 3: some of those comments.

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Speaker 4: I'm hopefully going to come out with some form of

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Speaker 4: advisory guidance in the near future.

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Speaker 3: But it really is can hingin on us being.

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Speaker 4: Thoughtful about how AI has been used thus far and

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Speaker 4: how it may be used in the future.

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Speaker 2: Are you talking to big tech about this?

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Speaker 4: We look, when we consult we are as we cast

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Speaker 4: a very wide net. We want to learn from everyone,

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Speaker 4: and that not only includes the individuals who are directly

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Speaker 4: registered or participate in our markets, but it certainly is

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Speaker 4: the tech companies who are building these AI platforms and

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Speaker 4: models that are essentially being used by the financial institutions.

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Speaker 1: We're here, of course talking about climate issues, the global

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Speaker 1: business form or kind of take it that into the start

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Speaker 1: of it now in just over thirty minutes time, the

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Speaker 1: CFTC recently product guidance on voluntary carbon credits. I'm curious

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Speaker 1: about the voluntary nature of that, whether that's something that's

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Speaker 1: going to be relevant and enforceable, given that that's the

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Speaker 1: framing that we're given on this area.

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Speaker 4: Yeah, so not unlike crypto in some respects, we've seen

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Speaker 4: voluntary carbon credit futures contracts listed over the past couple

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Speaker 4: of year, derivatives and once we have futures and derivatives

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Speaker 4: listed on our registered exchanges.

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Speaker 3: I use this phrase a lot we have as.

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Speaker 4: An agency of vested in in the health of the

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Speaker 4: underlying market, and in this case it's a voluntary carbon market.

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Speaker 4: We want to make sure there's resilience in health and

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Speaker 4: high integrity in that cash market, so it's reflected in

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Speaker 4: the markets we regulate. Ultimately, from a broad perspective, if

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Speaker 4: we're going to transition and hit our twenty fifty targets,

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Speaker 4: our one point five target, we're gonna need voluntary carbon markets.

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Speaker 4: We're not gonna be able to wean ourselves off of

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Speaker 4: coal and some fossil based carbon based energy sources. So

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Speaker 4: we're going to need a way to allocate capital transition

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Speaker 4: to the Global South and other nations that need to

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Speaker 4: transition to low carbon intensive energy sources.

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Speaker 2: Twenty seconds Election betting. I know you guys don't like it.

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Speaker 2: You've recently lost a court case very quickly. Nothing you'll

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Speaker 2: warm up to.

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Speaker 4: It's not about what I like or don't like. It's

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Speaker 4: not about what the agency likes or doesn't like. It's

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Speaker 4: about what the law says, and the law in our

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Speaker 4: view says that election betting is against.

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Speaker 1: The law that's found them. Thanks very much for joining us,

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Speaker 1: THEFTC chair