1
00:00:02,640 --> 00:00:05,880
Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg

2
00:00:05,960 --> 00:00:09,119
Speaker 1: mus and this is Bloomberg Crypto at Daily Bloomberg I

3
00:00:09,200 --> 00:00:26,319
Speaker 1: Heart Podcast. It's Monday, August two. It can feel like

4
00:00:26,400 --> 00:00:30,360
Speaker 1: we hear and say the words crypto and regulation mentioned

5
00:00:30,360 --> 00:00:33,960
Speaker 1: in the same sentence a lot these days. That's because

6
00:00:33,960 --> 00:00:37,040
Speaker 1: there are multiple pieces of proposed crypto legislation making their

7
00:00:37,080 --> 00:00:41,800
Speaker 1: way through the US political machine right now. Representative Maxine Waters,

8
00:00:42,159 --> 00:00:45,120
Speaker 1: who's the chair of the powerful House Financial Services Committee,

9
00:00:45,360 --> 00:00:49,320
Speaker 1: and ranking Member Patrick McHenry want to regulate stable coins.

10
00:00:49,880 --> 00:00:53,239
Speaker 1: Senators Cynthia Lamas and Kristin gila Brand have proposed several

11
00:00:53,280 --> 00:00:57,280
Speaker 1: significant changes to the crypto regulation regime in a build

12
00:00:57,280 --> 00:01:00,600
Speaker 1: that they're calling the Responsible Financial in a Asian Act,

13
00:01:01,120 --> 00:01:04,600
Speaker 1: And earlier this year, President Joe Biden himself issued his

14
00:01:04,680 --> 00:01:09,360
Speaker 1: Executive Order on Ensuring Responsible Development as Digital Assets, which

15
00:01:09,360 --> 00:01:13,720
Speaker 1: basically mandated every relevant federal agency to figure out or

16
00:01:13,720 --> 00:01:17,399
Speaker 1: at least define their position on crypto and of course,

17
00:01:17,520 --> 00:01:20,840
Speaker 1: to identify ways to protect consumer rights as well as

18
00:01:20,920 --> 00:01:24,520
Speaker 1: the rights of investors. Joining me today for a discussion

19
00:01:24,520 --> 00:01:27,960
Speaker 1: of these many complicated pieces of potential crypto legislation in

20
00:01:28,000 --> 00:01:32,440
Speaker 1: the US is Nathan Dean, a senior analyst at Bloomberg Intelligence.

21
00:01:32,840 --> 00:01:35,000
Speaker 1: Very few times in my career if I ever heard

22
00:01:35,360 --> 00:01:38,080
Speaker 1: did an industry wants more regulation? But that is something

23
00:01:38,120 --> 00:01:47,840
Speaker 1: that the crypto industry wants. Nathan, Thank you so much

24
00:01:47,840 --> 00:01:50,040
Speaker 1: for joining us today. It seems like there's a lot

25
00:01:50,120 --> 00:01:52,400
Speaker 1: happening in Washington, d C. As it relates to crypto

26
00:01:52,480 --> 00:01:56,840
Speaker 1: and regulations right now. Yeah. Actually, you know, two is

27
00:01:56,960 --> 00:01:59,880
Speaker 1: the year of the crypto industry providing a lot of

28
00:02:00,120 --> 00:02:04,080
Speaker 1: education and a lot of information to policymakers and regulators

29
00:02:04,120 --> 00:02:06,840
Speaker 1: on what they should do in twenty three. It's a

30
00:02:06,880 --> 00:02:11,000
Speaker 1: story of regulatory clarity. If you come from the SEC's perspective, well,

31
00:02:11,040 --> 00:02:14,079
Speaker 1: there's a lot of clarity out there. The tokens out

32
00:02:14,080 --> 00:02:16,880
Speaker 1: there at the moment are considered securities. This is SEC

33
00:02:17,040 --> 00:02:21,160
Speaker 1: Chairman Gary Ginsler. Many of these tokens have the attributes

34
00:02:21,639 --> 00:02:25,280
Speaker 1: of securities. They're raising money from the public, and the

35
00:02:25,320 --> 00:02:29,799
Speaker 1: public is anticipating profits based upon the efforts of others.

36
00:02:29,840 --> 00:02:32,480
Speaker 1: On the other side. From the industry's point of view,

37
00:02:32,520 --> 00:02:34,880
Speaker 1: you will you have a new digital asset class. You know,

38
00:02:34,960 --> 00:02:38,160
Speaker 1: this is something that nine three era securities law does

39
00:02:38,200 --> 00:02:41,360
Speaker 1: not work for and neither side is willing to acquiesce

40
00:02:41,400 --> 00:02:43,680
Speaker 1: to the other. So what happens we're in this stalemate

41
00:02:44,320 --> 00:02:46,239
Speaker 1: and what the industry is doing right now is there

42
00:02:46,280 --> 00:02:48,440
Speaker 1: essentially waiting for one of two things. One for the

43
00:02:48,560 --> 00:02:51,480
Speaker 1: SEC to start cracking down via enforcement actions and the

44
00:02:51,520 --> 00:02:54,359
Speaker 1: SEC has sort of done some of that. Or two

45
00:02:54,440 --> 00:02:56,840
Speaker 1: and this is in the industry's more preferred solution is

46
00:02:56,840 --> 00:03:00,679
Speaker 1: is that they move forward with congressional legislation. You know,

47
00:03:00,760 --> 00:03:04,680
Speaker 1: we've seen a fury uh several key pieces of legislation

48
00:03:05,200 --> 00:03:07,880
Speaker 1: coming out over the last few weeks, whether it's stable coins,

49
00:03:07,880 --> 00:03:11,279
Speaker 1: a comprehensive bill that came from Senators Loomis and jillibrand

50
00:03:11,639 --> 00:03:14,480
Speaker 1: most recently, you know, we have a bipartisan bill that

51
00:03:14,520 --> 00:03:17,520
Speaker 1: comes from the Senate agg Committee. Uh. None of this

52
00:03:17,600 --> 00:03:19,840
Speaker 1: legislation is going to pass this year, but what they

53
00:03:19,880 --> 00:03:23,200
Speaker 1: are doing is they're actually sending the stage for legislation

54
00:03:23,240 --> 00:03:27,079
Speaker 1: to pass in three And it sounds like, you know,

55
00:03:28,080 --> 00:03:30,320
Speaker 1: in three, as you say, we're going to see a

56
00:03:30,320 --> 00:03:32,880
Speaker 1: lot of all of these efforts pay off. So what's

57
00:03:32,880 --> 00:03:36,040
Speaker 1: happening right now? You know, in your role on Bloomberg Intelligence,

58
00:03:36,080 --> 00:03:38,960
Speaker 1: you analyze these things that are coming through one of

59
00:03:38,960 --> 00:03:41,400
Speaker 1: the big things recently was the Biden White House executive

60
00:03:41,520 --> 00:03:45,440
Speaker 1: Order that essentially directed various of the federal agencies to

61
00:03:45,520 --> 00:03:48,480
Speaker 1: figure out their crypto strategy. What have been some of

62
00:03:48,480 --> 00:03:50,520
Speaker 1: the things coming out of that. Do you expect to

63
00:03:50,560 --> 00:03:55,440
Speaker 1: bear fruits in that timeline? Okay? So you know, going

64
00:03:55,480 --> 00:03:57,560
Speaker 1: back to the earlier part of this year in March,

65
00:03:57,920 --> 00:04:00,640
Speaker 1: President Biden put on an executive order. In that executive

66
00:04:00,720 --> 00:04:04,400
Speaker 1: order essentially directed agencies under his directions. So this is

67
00:04:04,880 --> 00:04:08,040
Speaker 1: like Treasury, Homeland Security, and so forth like that to

68
00:04:08,120 --> 00:04:12,560
Speaker 1: go forth and come back with reports uh and recommendations

69
00:04:12,560 --> 00:04:15,360
Speaker 1: and what they should do moving forward. Those reports and

70
00:04:15,400 --> 00:04:18,840
Speaker 1: recommendations should be out between now and let's say the

71
00:04:18,960 --> 00:04:22,440
Speaker 1: end of October. So that's one thing that's been happening. Now.

72
00:04:22,480 --> 00:04:25,080
Speaker 1: The second thing that's been happening is the sec and

73
00:04:25,120 --> 00:04:27,560
Speaker 1: the CFTC and even a little bit to the Consumer

74
00:04:27,560 --> 00:04:30,360
Speaker 1: Financial Protection Bureau in the FED have been doing a

75
00:04:30,440 --> 00:04:33,400
Speaker 1: lot of their own analysis on the crypto industry and

76
00:04:33,480 --> 00:04:36,719
Speaker 1: looking at risks. Now, this is where it differs a

77
00:04:36,720 --> 00:04:39,240
Speaker 1: little bit. You know, the Securities and Exchange Commission, they

78
00:04:39,360 --> 00:04:43,240
Speaker 1: view anything out there, the tokens out there is securities

79
00:04:43,880 --> 00:04:47,599
Speaker 1: for purposes Essentially Bitcoin and to a certain extent, Ether

80
00:04:47,760 --> 00:04:51,360
Speaker 1: are considered commodities. Now that's something that the legislation will address,

81
00:04:51,360 --> 00:04:53,520
Speaker 1: and I'll get there in a second, but for right now,

82
00:04:54,480 --> 00:04:58,359
Speaker 1: the tokens in the SEC's mind, our securities. Now, the

83
00:04:58,400 --> 00:05:02,080
Speaker 1: CFTC doesn't really have much authority over crypto at the

84
00:05:02,120 --> 00:05:05,600
Speaker 1: moment other than you know, bitcoin futures, anything you know

85
00:05:05,680 --> 00:05:09,520
Speaker 1: that's over at the CME or at the Intercontinental Exchange.

86
00:05:09,800 --> 00:05:12,080
Speaker 1: But then you have the Federal Reserve looking at stable coins,

87
00:05:12,120 --> 00:05:14,800
Speaker 1: and so there's all these different pieces of the puzzle

88
00:05:14,880 --> 00:05:17,760
Speaker 1: that's been going on, and the industry just doesn't know

89
00:05:17,839 --> 00:05:21,240
Speaker 1: how to react to it. It's actually very frustrating, I

90
00:05:21,240 --> 00:05:23,880
Speaker 1: think for the industry to be able to prepare, how

91
00:05:23,880 --> 00:05:26,919
Speaker 1: do I actually go forth and grow my company and

92
00:05:26,960 --> 00:05:30,160
Speaker 1: grow as an industry when I don't know what the

93
00:05:30,279 --> 00:05:32,800
Speaker 1: rules are. I don't know if the SEC is gonna

94
00:05:32,839 --> 00:05:35,200
Speaker 1: come down and give me an enforcement action next year. Now,

95
00:05:35,240 --> 00:05:38,440
Speaker 1: what this legislation most likely will do is it will

96
00:05:38,480 --> 00:05:42,920
Speaker 1: actually give regulatory clarity to the crypto industry. And now

97
00:05:42,960 --> 00:05:46,760
Speaker 1: the Senate Agricultural Committee has released a bipartisan bill that

98
00:05:46,760 --> 00:05:50,160
Speaker 1: would essentially this is called the Digital Commodities Consumer Protection

99
00:05:50,160 --> 00:05:54,600
Speaker 1: Act of two. But this bill would actually give CFTC

100
00:05:54,800 --> 00:05:58,719
Speaker 1: the Commodity Futures Training Commission authority over cash markets, good

101
00:05:58,839 --> 00:06:01,400
Speaker 1: spot markets. It would so give them authority over what

102
00:06:01,560 --> 00:06:03,760
Speaker 1: is deemed to be digital commodities. This would be a

103
00:06:03,800 --> 00:06:08,200
Speaker 1: new asset class. Now, the securities would still remain, so

104
00:06:08,240 --> 00:06:10,640
Speaker 1: the debate over whether a token is a security or

105
00:06:10,680 --> 00:06:13,680
Speaker 1: a commodity that would still remain. But what the industry

106
00:06:13,760 --> 00:06:16,360
Speaker 1: is most looking for and what the industry is most

107
00:06:16,360 --> 00:06:19,520
Speaker 1: likely going to get, and this is coin based FTX binance.

108
00:06:20,000 --> 00:06:24,720
Speaker 1: Whoever registers as a crypto exchange, is you know, regulatory

109
00:06:24,800 --> 00:06:29,640
Speaker 1: certainty in terms of avoiding enforcement actions. I want to

110
00:06:29,640 --> 00:06:31,880
Speaker 1: ask you something there before we get into the enforcement actions,

111
00:06:31,920 --> 00:06:35,680
Speaker 1: which is is there in your observation you know kind

112
00:06:35,680 --> 00:06:38,240
Speaker 1: of what you're hearing. Is there a preference for who

113
00:06:38,320 --> 00:06:41,599
Speaker 1: people want to be regulated by? And is that related

114
00:06:41,720 --> 00:06:46,160
Speaker 1: to the potential severity of those enforcements actions? Absolutely, very

115
00:06:46,200 --> 00:06:48,640
Speaker 1: few times in my career have I ever heard then

116
00:06:48,680 --> 00:06:51,320
Speaker 1: an industry wants more regulation. But that is something that

117
00:06:51,360 --> 00:06:53,919
Speaker 1: the crypto industry wants, uh and they want to be

118
00:06:53,960 --> 00:06:57,159
Speaker 1: regulated by the Commodity Futures Training Commission the reason being

119
00:06:57,279 --> 00:07:00,360
Speaker 1: is the CFTC has what is known as prince sipples

120
00:07:00,400 --> 00:07:04,160
Speaker 1: based regulation over at the SEC. It's prescriptive base. So

121
00:07:04,200 --> 00:07:06,720
Speaker 1: if I'm at the Commodity Futureist Training Commission and I'm

122
00:07:06,800 --> 00:07:09,159
Speaker 1: f t X or coin base, I can create my

123
00:07:09,160 --> 00:07:11,240
Speaker 1: own rule book, I can create my own rules, I

124
00:07:11,280 --> 00:07:14,400
Speaker 1: can create my own governance procedures, and as long as

125
00:07:14,440 --> 00:07:17,560
Speaker 1: they meet the principle of the regulation, the CFTC says,

126
00:07:17,600 --> 00:07:20,680
Speaker 1: you're good. If you're over on the SEC side, well

127
00:07:20,800 --> 00:07:23,080
Speaker 1: then it gets a little bit more in depth than

128
00:07:23,160 --> 00:07:26,360
Speaker 1: in granulear and in the weeds, and each group would

129
00:07:26,360 --> 00:07:28,200
Speaker 1: have to create their own system and have to make

130
00:07:28,240 --> 00:07:30,080
Speaker 1: sure that all the eyes are dotted and all the

131
00:07:30,120 --> 00:07:32,760
Speaker 1: tas are cross and so forth. So, you know, the

132
00:07:32,760 --> 00:07:35,760
Speaker 1: the industry certainly wants to go to the CFTC, and

133
00:07:35,840 --> 00:07:38,880
Speaker 1: that education and that information that they've been providing to

134
00:07:39,000 --> 00:07:42,800
Speaker 1: lawmakers in two is paying off, because you're seeing this

135
00:07:42,880 --> 00:07:46,040
Speaker 1: both from Democrats and Republicans in the sense that they

136
00:07:46,120 --> 00:07:50,320
Speaker 1: to the Democrats and Republicans are also starting to lean

137
00:07:50,400 --> 00:07:53,560
Speaker 1: towards having the CFTC be the main crypto regulative. Correct

138
00:07:53,560 --> 00:07:56,040
Speaker 1: crypto is funny because it's not really a bipartisan issue.

139
00:07:56,040 --> 00:07:59,080
Speaker 1: It's more of a generational issue. And what that means

140
00:07:59,200 --> 00:08:02,080
Speaker 1: is that you have Democrats who are very much okay

141
00:08:02,120 --> 00:08:05,200
Speaker 1: with the idea of the crypto industry going to the CFTC,

142
00:08:05,800 --> 00:08:07,520
Speaker 1: you have Republicans are okay with it, and then you

143
00:08:07,600 --> 00:08:10,800
Speaker 1: have Democrats and Republicans who are against that. Now, the

144
00:08:10,960 --> 00:08:14,280
Speaker 1: big issue for you know, let's just say, giving the

145
00:08:14,280 --> 00:08:18,880
Speaker 1: CFTC oversight over the crypto industry is that, you know,

146
00:08:19,080 --> 00:08:22,520
Speaker 1: it allows the crypto firms to essentially go to a

147
00:08:22,560 --> 00:08:28,960
Speaker 1: new regulatory framework and avoid threats of enforcement actions because

148
00:08:29,720 --> 00:08:34,120
Speaker 1: SEC Chairman Gary Gensler has said consistently that you know,

149
00:08:34,200 --> 00:08:36,800
Speaker 1: current regulation applies. You know, we don't need new rules,

150
00:08:36,880 --> 00:08:39,480
Speaker 1: we don't need new legislation. All firms need to do

151
00:08:39,559 --> 00:08:41,400
Speaker 1: is come in register, to come in and talk to us.

152
00:08:41,440 --> 00:08:44,040
Speaker 1: Coming to register, You're going to do what we can.

153
00:08:44,880 --> 00:08:49,160
Speaker 1: But right now there's far too many of these platforms

154
00:08:49,200 --> 00:08:55,000
Speaker 1: that haven't come in uh to basically comply with the

155
00:08:55,040 --> 00:09:00,000
Speaker 1: law and register. He says this almost every interview. He said,

156
00:09:00,040 --> 00:09:03,080
Speaker 1: as but nobody has really done that. And the reason

157
00:09:03,160 --> 00:09:04,800
Speaker 1: being is, and I have a I have a Star

158
00:09:04,800 --> 00:09:07,000
Speaker 1: Wars joke here, is that it's like you know, the

159
00:09:07,040 --> 00:09:09,920
Speaker 1: Return of the Jedi. It's this Admiral Lackbar that with

160
00:09:10,720 --> 00:09:15,040
Speaker 1: Creature who leads the rebelry. Yeah, he streams it's a trap. Well,

161
00:09:15,080 --> 00:09:17,400
Speaker 1: if you go talk to the SEC, it could be

162
00:09:17,440 --> 00:09:21,120
Speaker 1: a trap because the SEC would then take a look

163
00:09:21,160 --> 00:09:23,120
Speaker 1: and say, Okay, this is great, thank you very much

164
00:09:23,160 --> 00:09:25,360
Speaker 1: for coming in and talk to ing to us. But

165
00:09:25,559 --> 00:09:27,960
Speaker 1: for the last two years you've been operating outside of

166
00:09:28,000 --> 00:09:31,600
Speaker 1: securities law and therefore you need to you know, pay

167
00:09:31,640 --> 00:09:35,400
Speaker 1: for that. So if this legislation passes next year, not

168
00:09:35,520 --> 00:09:38,079
Speaker 1: only does the industry get clarity, but they almost get

169
00:09:38,200 --> 00:09:39,439
Speaker 1: like I don't want to call it get out of

170
00:09:39,520 --> 00:09:41,440
Speaker 1: jail free card, but they get you know, they get

171
00:09:41,600 --> 00:09:44,719
Speaker 1: away from that threat of the SEC enforcement, which is

172
00:09:44,760 --> 00:09:47,840
Speaker 1: of course what the industry would have everyone believe right

173
00:09:47,880 --> 00:09:49,760
Speaker 1: that the main thing here is clarity as opposed to

174
00:09:49,800 --> 00:09:53,640
Speaker 1: being subject to what they perceive as more onerous rules

175
00:09:53,640 --> 00:09:55,880
Speaker 1: and regulations. Yeah. I mean, if you look at the

176
00:09:55,920 --> 00:09:58,880
Speaker 1: nineteen thirty three Securities Act, I mean it's only about

177
00:09:58,880 --> 00:10:02,520
Speaker 1: forty pages. I mean it's it's very light and so uh,

178
00:10:02,600 --> 00:10:06,199
Speaker 1: it's very broad, and you know, the SEC has taken

179
00:10:06,240 --> 00:10:08,640
Speaker 1: the approach that these firms just need to come in

180
00:10:08,640 --> 00:10:11,160
Speaker 1: and register. And if you go in and register, then

181
00:10:11,240 --> 00:10:13,360
Speaker 1: and start from the beginning. Let's just say there is

182
00:10:13,480 --> 00:10:15,360
Speaker 1: a new company and you want to follow the SEC

183
00:10:15,520 --> 00:10:18,360
Speaker 1: standard and you're going to register. Well, then you go

184
00:10:18,440 --> 00:10:21,439
Speaker 1: in and you produce all this different types of governance

185
00:10:21,440 --> 00:10:23,800
Speaker 1: and these rule books and these you know, the technology

186
00:10:23,880 --> 00:10:27,360
Speaker 1: requirements and clients and examinations so forth. And it costs

187
00:10:27,360 --> 00:10:29,640
Speaker 1: a lot of money. Now you do that at the

188
00:10:29,679 --> 00:10:32,160
Speaker 1: same time that others in the industry aren't registering with

189
00:10:32,160 --> 00:10:35,000
Speaker 1: the SEC, and so now you're spending a lot more

190
00:10:35,080 --> 00:10:38,800
Speaker 1: money when I the retail customer doesn't don't really care

191
00:10:38,800 --> 00:10:42,200
Speaker 1: about things like governance and you know, you know, like

192
00:10:42,240 --> 00:10:46,400
Speaker 1: the behind the scenes operational aspects if you will. So

193
00:10:46,920 --> 00:10:49,760
Speaker 1: you know, the industry really hasn't made any decision, or

194
00:10:49,880 --> 00:10:52,080
Speaker 1: the industry has really taking the point of, you know,

195
00:10:52,200 --> 00:10:55,920
Speaker 1: let's not register until we have to, and instead, let's

196
00:10:55,960 --> 00:10:59,400
Speaker 1: lobby Congress to try and give us a regulatory framework

197
00:10:59,400 --> 00:11:02,080
Speaker 1: that we can work with, and ultimately I think that's

198
00:11:02,080 --> 00:11:05,520
Speaker 1: gonna pay off. Now, the SEC has not done yet though,

199
00:11:05,720 --> 00:11:08,920
Speaker 1: because like I said before, you know, I do anticipate

200
00:11:09,000 --> 00:11:13,760
Speaker 1: legislation moving next year. But what type of legislation, because

201
00:11:13,920 --> 00:11:15,920
Speaker 1: there was a bill that came out earlier this year

202
00:11:16,000 --> 00:11:18,360
Speaker 1: from Senators Loomis and Jill Brand and this was the

203
00:11:18,400 --> 00:11:22,120
Speaker 1: first comprehensive bill. And the question here is stable coins,

204
00:11:22,160 --> 00:11:24,120
Speaker 1: because if you look at the lobbying that has been

205
00:11:24,120 --> 00:11:28,000
Speaker 1: done to Congress this year, stable coins has become a

206
00:11:28,080 --> 00:11:31,079
Speaker 1: bigger issue than just the crypto industry, a bit large.

207
00:11:31,360 --> 00:11:34,440
Speaker 1: Seeing a stable coin fail is something that goes into

208
00:11:34,480 --> 00:11:37,560
Speaker 1: the news cycle, and that's something a politician can understand.

209
00:11:38,920 --> 00:11:41,320
Speaker 1: It's a little bit easier for them than understanding what,

210
00:11:41,480 --> 00:11:45,240
Speaker 1: you know, registration requirements for the Commodity Futures Training Commission

211
00:11:45,240 --> 00:11:48,679
Speaker 1: can be. And so you know certain folks on on

212
00:11:48,920 --> 00:11:51,080
Speaker 1: up on Capitol Hill taking the approach of well, let's

213
00:11:51,120 --> 00:11:54,400
Speaker 1: do stable coins first and then let's do the rest later.

214
00:11:54,480 --> 00:11:57,240
Speaker 1: And in fact, the House Financial Services Committee, this is

215
00:11:57,400 --> 00:12:01,079
Speaker 1: UH chair Chairwoman Maxine Waters and Rank member mckenry from

216
00:12:01,360 --> 00:12:04,800
Speaker 1: North Carolina, they're going to have a stable coin bill

217
00:12:04,840 --> 00:12:07,400
Speaker 1: that comes out in September, so you know there's gonna

218
00:12:07,400 --> 00:12:10,040
Speaker 1: be momentum to try and get stable coin legislation done

219
00:12:10,480 --> 00:12:15,800
Speaker 1: before the crypto exchange registration issue. And now the question is, well,

220
00:12:15,800 --> 00:12:17,880
Speaker 1: what do we do and when do we do stable coins,

221
00:12:17,880 --> 00:12:20,920
Speaker 1: do we do commodity in futures? Do we do spot markets?

222
00:12:21,480 --> 00:12:23,720
Speaker 1: And that eats up a lot of political capital. But

223
00:12:24,160 --> 00:12:27,360
Speaker 1: the order is, the question is do they move on

224
00:12:27,400 --> 00:12:30,280
Speaker 1: stable coins first? You know, the House Financial Service Committee

225
00:12:30,360 --> 00:12:33,280
Speaker 1: versus the Senate Agricultural Committee. I mean, who has the

226
00:12:33,320 --> 00:12:36,679
Speaker 1: ability to move their legislation first? You know, do they

227
00:12:36,679 --> 00:12:38,600
Speaker 1: move them at the same time, do they move the differently?

228
00:12:38,679 --> 00:12:41,240
Speaker 1: So that's where it's just gonna get a little bit messy.

229
00:12:41,280 --> 00:12:45,400
Speaker 1: But ultimately, with this legislation passing, probably with by a

230
00:12:45,480 --> 00:12:48,720
Speaker 1: year from now. Up next, more of my conversation with

231
00:12:48,840 --> 00:12:52,160
Speaker 1: Nathan Dean of Bloomberg Intelligence will discuss more of the

232
00:12:52,200 --> 00:12:56,560
Speaker 1: regulatory conundrum facing federal agencies trying to balance the interests

233
00:12:56,559 --> 00:13:08,520
Speaker 1: of consumers, investors, and digital asset companies. I want to

234
00:13:08,520 --> 00:13:10,959
Speaker 1: go back to the conversation about stable coins because, as

235
00:13:10,960 --> 00:13:14,040
Speaker 1: you said, there's lots of reasons why it's getting so

236
00:13:14,120 --> 00:13:17,000
Speaker 1: much attention, but there's one I want us to call out,

237
00:13:17,120 --> 00:13:19,680
Speaker 1: which is, you know, various regulators around the world have

238
00:13:19,760 --> 00:13:23,160
Speaker 1: identified two things about stable coins that stressed amount. One

239
00:13:23,679 --> 00:13:26,600
Speaker 1: the possibility of like the global transmission of risk. Right,

240
00:13:26,600 --> 00:13:29,960
Speaker 1: because you have people in lots of different countries using

241
00:13:30,400 --> 00:13:34,520
Speaker 1: these very liquid, supposedly stable assets, and you know, as

242
00:13:34,520 --> 00:13:36,960
Speaker 1: you mentioned, like consumers can get burned by these and

243
00:13:37,000 --> 00:13:39,120
Speaker 1: when they collapse, it's a news cycle, and that is

244
00:13:39,160 --> 00:13:42,800
Speaker 1: always like politically fraught. But the second thing is some

245
00:13:42,880 --> 00:13:48,800
Speaker 1: governments perceive them as competitive to their own sovereign currencies.

246
00:13:49,360 --> 00:13:52,240
Speaker 1: And I'm wondering if there's anything about the current focus

247
00:13:52,280 --> 00:13:54,720
Speaker 1: on stable coins or any other elements that you're getting

248
00:13:54,800 --> 00:13:57,560
Speaker 1: from this proposed regulation that has a sense of like

249
00:13:57,600 --> 00:14:01,600
Speaker 1: a national security consideration. That's a great question, and in

250
00:14:01,679 --> 00:14:03,560
Speaker 1: fact there's two aspects of the way that I would

251
00:14:03,600 --> 00:14:06,960
Speaker 1: answer that. Um. The first is, specifically when it comes

252
00:14:07,000 --> 00:14:09,840
Speaker 1: to stable coins, the legislation that's coming out from the

253
00:14:09,840 --> 00:14:12,959
Speaker 1: House Financial Services Committee is more essentially just going to

254
00:14:13,080 --> 00:14:16,240
Speaker 1: require both banks and non banks who issue stable coins

255
00:14:16,679 --> 00:14:19,840
Speaker 1: to be backed up by high quality liquid assets. It

256
00:14:19,960 --> 00:14:23,360
Speaker 1: really doesn't get into the national security argument all that much,

257
00:14:23,360 --> 00:14:25,840
Speaker 1: so view that more of as a tactical bill, and

258
00:14:25,960 --> 00:14:28,280
Speaker 1: that's the one that we anticipate that's going to come

259
00:14:28,320 --> 00:14:32,760
Speaker 1: out next year. The more strategic national risk aspect, though,

260
00:14:32,920 --> 00:14:35,160
Speaker 1: comes from the Federal Reserve in this creation of a

261
00:14:35,160 --> 00:14:38,760
Speaker 1: central bank digital currency now you know the one. I

262
00:14:38,800 --> 00:14:40,880
Speaker 1: don't think it was really well reported at the time.

263
00:14:40,880 --> 00:14:43,840
Speaker 1: But when President Biden put out the Executive Order in March,

264
00:14:44,520 --> 00:14:47,640
Speaker 1: there was a directive in that executive Order to direct

265
00:14:47,760 --> 00:14:50,240
Speaker 1: the Department of Treasury to come back with a report

266
00:14:50,280 --> 00:14:53,280
Speaker 1: on whether or not a central bank digital currency is

267
00:14:53,320 --> 00:14:57,440
Speaker 1: advisable and if so, it directed the Attorney General to

268
00:14:57,520 --> 00:15:01,880
Speaker 1: create legislative language do in that. Congress will ignore it.

269
00:15:02,040 --> 00:15:05,120
Speaker 1: But that's much further step than I anticipated that the

270
00:15:05,120 --> 00:15:07,720
Speaker 1: Biden administration would take. Now, if you go to the

271
00:15:07,760 --> 00:15:10,480
Speaker 1: FED and you asked Jerome Powell, you you ask Governor

272
00:15:10,520 --> 00:15:13,840
Speaker 1: Brainerd on whether or not the federal create a central

273
00:15:13,840 --> 00:15:17,320
Speaker 1: bank digital currency. Chairman Powell has said that he would

274
00:15:17,320 --> 00:15:20,360
Speaker 1: only do so if he was directed by Congress or

275
00:15:20,400 --> 00:15:24,320
Speaker 1: the Executive branch. Now, Congress really tried to hammer him

276
00:15:24,320 --> 00:15:25,720
Speaker 1: down and whether or not he would do it without

277
00:15:25,720 --> 00:15:29,200
Speaker 1: a Congressional action. But Governor Brainard has been open to

278
00:15:29,240 --> 00:15:31,800
Speaker 1: the idea of a central bank digital currency, with the

279
00:15:31,840 --> 00:15:34,560
Speaker 1: caveat that it would take up to five years. And

280
00:15:34,600 --> 00:15:36,880
Speaker 1: the reason why I think the vet will will eventually

281
00:15:36,920 --> 00:15:39,760
Speaker 1: approve a central bank digital currency is just because of

282
00:15:39,800 --> 00:15:42,800
Speaker 1: the argument that if the United States doesn't, others will.

283
00:15:43,480 --> 00:15:46,720
Speaker 1: The United States needs to do one before other countries

284
00:15:46,920 --> 00:15:49,440
Speaker 1: end up getting the amount of liquidity that goes to

285
00:15:49,480 --> 00:15:52,920
Speaker 1: the point where the US is harmed by bat Generally,

286
00:15:53,000 --> 00:15:55,560
Speaker 1: when the crypto industry comes to Washington, they say, well,

287
00:15:55,600 --> 00:15:57,720
Speaker 1: if you don't do this, we're going to fall behind.

288
00:15:58,280 --> 00:16:00,360
Speaker 1: The argument that the United States needs to create a

289
00:16:00,440 --> 00:16:04,440
Speaker 1: central being digital currency before others create liquidity to the

290
00:16:04,480 --> 00:16:07,480
Speaker 1: point where it begins to harm US interests. That is

291
00:16:07,520 --> 00:16:10,400
Speaker 1: actually working a little bit over the fed with the

292
00:16:10,520 --> 00:16:13,760
Speaker 1: caveat that this could take. And just on that notes

293
00:16:13,800 --> 00:16:15,960
Speaker 1: about you know, things that you think folks might not

294
00:16:16,000 --> 00:16:18,520
Speaker 1: be fully paying attention to, things that have been under reported.

295
00:16:18,640 --> 00:16:22,200
Speaker 1: Is there any other element of either this regulation or

296
00:16:22,240 --> 00:16:24,520
Speaker 1: the kind of you know, the conversations and discussions that

297
00:16:24,560 --> 00:16:26,600
Speaker 1: you might be having or a privy to that you

298
00:16:26,640 --> 00:16:29,360
Speaker 1: think people really need to be paying much more attention

299
00:16:29,400 --> 00:16:32,640
Speaker 1: to than they potentially are right now. So I wouldn't

300
00:16:32,720 --> 00:16:36,760
Speaker 1: underestimate SEC Chairman Gary Gensler. Um. You know, we've said

301
00:16:36,760 --> 00:16:38,960
Speaker 1: that this legislation we think will pass next year, or

302
00:16:39,000 --> 00:16:41,920
Speaker 1: some form of this legislation will pass next year. But

303
00:16:42,160 --> 00:16:44,560
Speaker 1: you know the SEC chairman is taking in the approach

304
00:16:44,600 --> 00:16:49,000
Speaker 1: that these tokens out there securities and as a result,

305
00:16:49,040 --> 00:16:52,240
Speaker 1: the crypto exchanges that are offering these securities aren't following

306
00:16:52,280 --> 00:16:55,760
Speaker 1: securities law, and therefore we are just waiting for enforcement

307
00:16:55,800 --> 00:16:59,920
Speaker 1: actions to occur. You know. In fact, we've even seen

308
00:17:00,120 --> 00:17:02,200
Speaker 1: statements from him over the last few weeks that just

309
00:17:02,240 --> 00:17:04,639
Speaker 1: go as far as to say that maybe the sec

310
00:17:04,760 --> 00:17:07,199
Speaker 1: should get into the business of writing a rulemaking on

311
00:17:07,240 --> 00:17:10,960
Speaker 1: how crypto exchanges can operate. So you know, that's the

312
00:17:11,119 --> 00:17:15,000
Speaker 1: question of Okay, this legislation will pass, but you know,

313
00:17:15,040 --> 00:17:18,280
Speaker 1: there are several Democrats and Republicans out there who are

314
00:17:18,400 --> 00:17:21,639
Speaker 1: not comfortable with this, and ultimately President Biden has to

315
00:17:21,640 --> 00:17:24,680
Speaker 1: sign it. And you know, I don't think anybody really

316
00:17:24,680 --> 00:17:27,320
Speaker 1: knows what President Biden's view on cryptocurrency is. But there

317
00:17:27,320 --> 00:17:30,160
Speaker 1: are going to be several catalyst of moments between now

318
00:17:30,200 --> 00:17:32,920
Speaker 1: and say August of next year that are going to

319
00:17:33,000 --> 00:17:35,520
Speaker 1: make things a little bit more challenging from the crypto industry.

320
00:17:35,600 --> 00:17:37,880
Speaker 1: But ultimately, we think, if you were to say three

321
00:17:37,960 --> 00:17:40,359
Speaker 1: or five years from now, are you do you have

322
00:17:40,440 --> 00:17:44,720
Speaker 1: this regulatory clarity? You do? And most of the times

323
00:17:44,760 --> 00:17:46,920
Speaker 1: when we've seen a new regulation and I'm not talking

324
00:17:46,920 --> 00:17:49,280
Speaker 1: about crypto here, but just whenever you see a new

325
00:17:49,320 --> 00:17:53,679
Speaker 1: form of financial regulation come in that disrupts markets, it

326
00:17:53,800 --> 00:17:58,320
Speaker 1: ultimately benefits the bigger players that have compliance teams and

327
00:17:58,400 --> 00:18:00,960
Speaker 1: monilarity teams and so forth, to the detriment of the

328
00:18:00,960 --> 00:18:04,040
Speaker 1: moment pops out there. Nathan, thank you so much. That

329
00:18:04,080 --> 00:18:08,440
Speaker 1: has been such a helpful and I think insightful overview

330
00:18:08,600 --> 00:18:10,840
Speaker 1: of what folks can or should be expecting as it

331
00:18:10,880 --> 00:18:13,359
Speaker 1: relates to us crypto regulation. Really appreciate you taking the

332
00:18:13,400 --> 00:18:15,760
Speaker 1: time to come in the podcast today. No, thank you

333
00:18:15,840 --> 00:18:17,560
Speaker 1: very much for having me. It was an absolute joy.

334
00:18:17,920 --> 00:18:20,040
Speaker 1: You can find more of Nathan Dean's analysis on the

335
00:18:20,040 --> 00:18:24,000
Speaker 1: Bloomberg Terminal or follow him on Twitter at Nathan Dean

336
00:18:24,440 --> 00:18:32,800
Speaker 1: d C. On the next Bloomberg Crypto. London is one

337
00:18:32,800 --> 00:18:36,040
Speaker 1: of the world's top destination for banks and financial services firms,

338
00:18:36,359 --> 00:18:39,400
Speaker 1: but it's had a harder time attracting and keeping crypto

339
00:18:39,480 --> 00:18:44,960
Speaker 1: companies because of regulatory uncertainty around the status of digital assets. Tomorrow,

340
00:18:45,359 --> 00:18:47,920
Speaker 1: my colleague Emily Nicole will tackle how the Law Commission

341
00:18:47,920 --> 00:18:51,119
Speaker 1: of England and Whales is working to rebuild that reputation

342
00:18:51,280 --> 00:18:59,280
Speaker 1: for regulatory innovation. This is Bloomberg Crypto a daily podcast

343
00:18:59,320 --> 00:19:02,439
Speaker 1: from Bloomberg and I Heart Radio. For more shows from

344
00:19:02,480 --> 00:19:05,879
Speaker 1: I Heart Radio, visit the I Heart Radio app, Apple Podcasts,

345
00:19:06,040 --> 00:19:10,000
Speaker 1: or wherever you get your podcasts. Send us your comments, questions,

346
00:19:10,040 --> 00:19:13,120
Speaker 1: or suggestions for the show to Crypto at Bloomberg dot net,

347
00:19:13,680 --> 00:19:18,639
Speaker 1: or find us lunch with We're at Crypto. The supervising

348
00:19:18,640 --> 00:19:21,960
Speaker 1: producer of Bloomberg Crypto is Vicky ver Galina. Our senior

349
00:19:21,960 --> 00:19:26,639
Speaker 1: producer is Janet Babin. Our producer is Sharon Barriro. Associate

350
00:19:26,640 --> 00:19:30,320
Speaker 1: producer is Ty Butler. Desta wonder At is our engineer.

351
00:19:30,840 --> 00:19:35,560
Speaker 1: Original music by Leo Sidrin. I'm Stacy Marie SMaL. We'll

352
00:19:35,560 --> 00:19:36,280
Speaker 1: be back tomorrow