Speaker 1: Look, I think the crypto industry more broadly, if it's
Speaker 1: going to have any success going forward, has to come
Speaker 1: into compliance with basic public policy about disclosure, about avoiding conflicts,
Speaker 1: about properly segregating customer funds, and guarding against fraud manipulation.
Speaker 1: Without that, this whole area stands the chances of collapsing
Speaker 1: like a house of cards.
Speaker 2: That very serious sounding person is Gary Gensler. He's the
Speaker 2: chairman of the US Securities and Exchange Commission and perhaps
Speaker 2: the most feared and loathed man in the world of cryptocurrency.
Speaker 2: In the eight months since the shocking implosion of Sam
Speaker 2: Bankman Freed's FTX exchange, Gensler and other federal officials have
Speaker 2: stepped up their demands for stricter federal regulation of the industry.
Speaker 2: The sec has also launched lawsuits against two of its
Speaker 2: large players. Bloomberg's Hannah Miller and Alison Versuero report that
Speaker 2: all this government's scrutiny has spooked some investors and raised
Speaker 2: serious questions about the future of crypto.
Speaker 3: Yes, it got this mainstream recognition, but the stakes were
Speaker 3: that much higher. So these falls, these scandals, these implosions,
Speaker 3: they've just hit the industry super hard.
Speaker 4: One of the things that we have to remember with
Speaker 4: these two lawsuits we've seen so far is that they
Speaker 4: could just be the tip of the iceberg.
Speaker 2: I'm Wes Kasova today on the Big Take Ken Washington
Speaker 2: and Crypto Learn to get along.
Speaker 5: Sam Bankman Freed has been arrested in the Bahamas, and
Speaker 5: we got that confirmation from the Bahamas attorney.
Speaker 3: Just try to.
Speaker 6: Calculate the contagion here because investors are not expecting much
Speaker 6: in terms of their funds here.
Speaker 5: I've been so many twists and turns in the case
Speaker 5: that US officials are building against FTX founder Sam Bankman Free.
Speaker 2: But now we have Hannah. I think by now all
Speaker 2: of us are really familiar with the spectacular failure of
Speaker 2: Sam Bankman Freed's FTX exchange. And in fact, just to
Speaker 2: give you a shout out, you recorded a whole podcast
Speaker 2: with Bloomberg and Wondering called Spellcaster The Fall of Sam
Speaker 2: Bankman Freed. It is terrific, by the way, and I
Speaker 2: encourage everyone to give it a listen. Can you start
Speaker 2: by telling us what's happened since? Because the entire industry
Speaker 2: has really been shaken to its bones.
Speaker 3: We're still seeing fallout from the collapse of FTX. There
Speaker 3: are companies like Block five that had FTX exposure that
Speaker 3: had to file for bankruptcy. There have been lawsuits against
Speaker 3: celebrities who endorse FTX. I'm talking about Steph Curry, Tom Brady,
Speaker 3: Gissell Bunchin. The other thing, too, is that the cryptocurrency
Speaker 3: market is still reeling. I mean, it's lost about one
Speaker 3: point eight trillion dollars in value, and you know, there
Speaker 3: are a lot of questions on whether this industry can survive,
Speaker 3: nevermind thrive. The US Securities and Exchange Commission recently filed
Speaker 3: two lawsuits against Binance and Coinbase, which are the two
Speaker 3: biggest crypto exchanges.
Speaker 6: Have two different things happening on two different days. You
Speaker 6: have Binance, the largest exchange in the world, but some
Speaker 6: of the allegations being made against Binance are very different
Speaker 6: than the ones being made against Coinbase. Here at Binance.
Speaker 3: Coinbase is based in the US. Binance does not have
Speaker 3: an official headquarters, but is you know, sprawling across the
Speaker 3: world and has run into issues with regulators around the globe.
Speaker 3: So these are two you know, very powerful companies, very
Speaker 3: different in their own ways, but both of them are
Speaker 3: facing regulatory trouble at the moment, and.
Speaker 2: We're going to get into all the details about those
Speaker 2: lawsuits in just a little bit, But Helle, I wanted
Speaker 2: to ask you, because you cover financial regulation Washington, it's
Speaker 2: been taken a really hard look at crypto from the
Speaker 2: very beginning. Why has it been so hard for them
Speaker 2: to kind of put guardrails on this industry the way
Speaker 2: they do with others?
Speaker 4: So, I mean, it's been really difficult because it comes
Speaker 4: down to basic characterization, right nobody knows necessarily, or at least,
Speaker 4: there's a gray area over which digital assets are securities
Speaker 4: that would be regulated by the sec or are commodities
Speaker 4: that currently you know, if you have a futures based
Speaker 4: product on something like bitcoin, that can be regulated by
Speaker 4: the Commodity Futures Trading Commission, but anything kind of in
Speaker 4: the underlying commodity basket would be regulated at the state level.
Speaker 2: Right now, all right, So let's take a second and
Speaker 2: to find our arms here, because this gets pretty weedy,
Speaker 2: and yet it's really really important to understand. And one
Speaker 2: of the big tensions here is is crypto currency a
Speaker 2: security or is it a commodity? And can you tell
Speaker 2: us just a bit about the difference between those two
Speaker 2: things and why it matters so much.
Speaker 4: Yeah, so securities were kind of are regulated under this
Speaker 4: test that's called the Howie test.
Speaker 7: It's from a nineteen forty six.
Speaker 4: Supreme Court ruling was actually related to sales of tracks
Speaker 4: of of Florida centrist growths to investors. So nothing to
Speaker 4: do with you know what we traditionally think of securities now,
Speaker 4: which are stocks?
Speaker 2: Really? I think most people would think of it as
Speaker 2: you know, a security, as a stock or a bond,
Speaker 2: something that you would invest in.
Speaker 4: Yeah, I mean, at the simplest level, it's basically anything
Speaker 4: that involves investors kicking money with the intention of profiting
Speaker 4: from the efforts of an organization's leadership. So, you know stocks,
Speaker 4: for instance, if I invest in Apple stock, you know,
Speaker 4: I expect that Tim Cook or Apple's leadership are going
Speaker 4: to make certain decisions that will increase the value of
Speaker 4: that stock.
Speaker 2: So you're investing in an enterprise like a company, yes,
Speaker 2: or even like in the case of a bond, a government right.
Speaker 4: And you know, so if you're not a security which
Speaker 4: is regulated by the sec then maybe you're a commodity
Speaker 4: with which could eventually be regulated by the CFTC if
Speaker 4: Congress acts, and so you know a lot of people
Speaker 4: will say that they think digital assets are more like commodities,
Speaker 4: that they're more like digital gold. And there's actually laws
Speaker 4: that kind of just list out what commodities are. So
Speaker 4: that's wheat, gold, you know, some of those other things
Speaker 4: we think of. And so the main test that the
Speaker 4: industry is kind of put on itself is, you know,
Speaker 4: is there some sort of central entity that's making decisions
Speaker 4: to you know, increase the price of a crypto asset.
Speaker 4: And the industry has kind of increasingly develop their projects
Speaker 4: to try to get more.
Speaker 7: Decentralized is how they call it.
Speaker 4: And so that's kind of a development that we've seen
Speaker 4: over the last couple of years. It's also you know,
Speaker 4: I will point out that the crypto industry would prefer
Speaker 4: to not be regulated by the SEC. This is something
Speaker 4: that would be really costly for them. They are all
Speaker 4: of these disclosures, they are stricter investor protections, even though
Speaker 4: the CFTC will say, you know, our rules are just
Speaker 4: as strong. And there's also this question right now, you know,
Speaker 4: the CFTC doesn't have the ability right now to directly
Speaker 4: regulate cryptotokens. It would need Congress to act to actually
Speaker 4: make that possible. They can regulate bitcoin futures, ether futures,
Speaker 4: but not necessarily the tokens themselves.
Speaker 2: Hannah, you've written in great detail about the really rough
Speaker 2: state of the crypto industry, and when you look back
Speaker 2: to bitcoin's high point in twenty twenty one, when I
Speaker 2: think crypto was at like sixty nine thousand dollars, what
Speaker 2: surprises you most about where the industry finds itself now.
Speaker 3: Yeah, well, the crypto industry is no stranger to scam scandals, crimes,
Speaker 3: things like that, but I think the scale of these
Speaker 3: obstacles that it's faced in the past year or so
Speaker 3: was just unimaginable. Prior to this, I mean, nobody saw
Speaker 3: the collapse of FTX coming. That was preceded by, you know,
Speaker 3: the implosion of three Hourro's Capital, which was a major
Speaker 3: crypto hedge fund. Celsius, a crypto las went into bankruptcy.
Speaker 3: So it's just been one thing after the other and
Speaker 3: the pace of that has really just thrown the industry off.
Speaker 3: And it's been very interesting to see you know, both
Speaker 3: founders and venture capital investors who were once the industry's
Speaker 3: biggest cheerleaders. It's been very startling to see some of
Speaker 3: them start to migrate away and look at other industries
Speaker 3: like artificial intelligence. You know, that's like the newest tech
Speaker 3: trend that's you surve crypto at this point.
Speaker 2: And also a lot of people who weren't big name
Speaker 2: investors got burned too.
Speaker 3: I mean, there are still people waiting to get their
Speaker 3: money back from FTX. They have no idea whether they're
Speaker 3: going to be able to recover, in some cases, their
Speaker 3: entire life savings that they put on this crypto exchange.
Speaker 3: And I think what also sets the crypto industry apart
Speaker 3: is that so many celebrities, you know, started promoting crypto companies,
Speaker 3: doing commercials promoting coins on social media, particularly in ftx's web.
Speaker 3: You know, they did a commercial with Larry David during
Speaker 3: the Super Bowl, you know, where he was supposed to
Speaker 3: be this crypto skeptic, but was overall, you know, lending
Speaker 3: his face and his fame to this company.
Speaker 2: Like I was saying, it's FTX, it's a safe and
Speaker 2: easy way to get into a crypto.
Speaker 4: I don't think so, and I'm never wrong about this
Speaker 4: stuff never.
Speaker 3: So I think that has also put a lot of
Speaker 3: people on edge that here you have these very wealthy individuals,
Speaker 3: these famous people promoting these companies and cryptocurrencies, profiting from it,
Speaker 3: and they may have not seen the same fallout that
Speaker 3: just individual investors have. And you know FTX. They renamed
Speaker 3: an arena in Miami where the Heat.
Speaker 7: Plays after FTX.
Speaker 3: You could see Coinbase's logo on basketball courts for NBA games.
Speaker 3: MLB umpires wore FTX patches on their uniforms. Like these
Speaker 3: companies were everywhere, and it was really crazy to see
Speaker 3: them breaking over into the mainstream.
Speaker 2: After the break, government takes crypto to court. Ellie, we
Speaker 2: mentioned a little bit earlier about these two lawsuits that
Speaker 2: have been filed against the two biggest of the crypto exchanges.
Speaker 2: One is against Binance. Can you tell us about finance
Speaker 2: and what the charges are against it?
Speaker 7: Sure?
Speaker 4: So, Binance is actually facing two lawsuits. There's one from
Speaker 4: the CFTC that was actually filed first earlier this year,
Speaker 4: and then we had one filed in June by the SEC.
Speaker 4: Both of these have registration failures essentially, you know, operating
Speaker 4: as unregistered exchanges or clearing agencies.
Speaker 7: But then we also have a slew of.
Speaker 4: Kind of different accusations over mishandling customer funds. That feels
Speaker 4: a little bit FTX.
Speaker 1: Like parallels here to the FTX of fraud and minute
Speaker 1: pulation that we saw and we allege against Sam Bakmin
Speaker 1: Freed where he had sister organization Alameda and the special
Speaker 1: arrangements with that trading platform FTX.
Speaker 4: For instance, the SEC alleged that a total of at
Speaker 4: least one hundred and ninety million dollars was transferred from
Speaker 4: the US based Binance Exchange to an account with this
Speaker 4: company called Sigma Chain, which was a trading firm that
Speaker 4: the SEC said was controlled by Binance's CEO, Chenpeng Jao,
Speaker 4: who goes by cz.
Speaker 1: SO here Binance. At his sister organization controlled by mister
Speaker 1: Zao called Sigma Chain, we alleged that they had corrupted
Speaker 1: their trading volumes by a lack of risk controls about
Speaker 1: their affiliate Sigma Chain and wash trading. There are challenges
Speaker 1: of custody throughout this space. There's a business model that
Speaker 1: bundles and co mingles functions that we don't see nor
Speaker 1: would we allow elsewhere in finance.
Speaker 4: And so basically they also said from that amount there
Speaker 4: was eleven million dollars I was drawn to purchase a yacht.
Speaker 4: Some of that money was customer funds. There was another
Speaker 4: firm that was controlled by CZ that also was kind
Speaker 4: of seeing co mingled customer money and company money. We've
Speaker 4: also seen in the CFTC side of things, they're alleging
Speaker 4: that Binance took kind of purposeful steps to evade US
Speaker 4: laws to allow American VIPs, for instance, to access the
Speaker 4: International Exchange illegally. Also not having sort of effective anti
Speaker 4: money laundering procedures or safeguards for determining the true identity
Speaker 4: of customers. So we're seeing a lot of different allegations
Speaker 4: thrown out there against Finance.
Speaker 2: Can you tell us a bit about Binance?
Speaker 3: Finance is the leading crypto exchange in terms of trading volume.
Speaker 3: It really outpaces its competitors. It's probably the biggest name
Speaker 3: in the industry, and there's been a lot of i
Speaker 3: think intrigue and interest in this company. It has this
Speaker 3: very global presence. It does not have, you know, an
Speaker 3: official headquarters.
Speaker 7: It does have a.
Speaker 3: Big office in Dubai, but this company has clashed with
Speaker 3: regulators in many of the countries it's done business in
Speaker 3: including in the US, and it's CEO CZ You know,
Speaker 3: he's a very interesting figure in crypto. He has sort
Speaker 3: of this cult following. He's active on Twitter. He is
Speaker 3: very confident in the business's company does and the influence
Speaker 3: that they have over the industry. So it's been very
Speaker 3: interesting to see how they've reacted to the lawsuit. You know,
Speaker 3: Caz kind of shook it off. He has this signal
Speaker 3: that he tweets to followers, which is the number four,
Speaker 3: and that means to ignore FUD, which stands for fear,
Speaker 3: uncertainty and doubt. It was number four on his list
Speaker 3: of New Year's that was it ignore fuds. So when
Speaker 3: he does for that's what he's talking about. It's a
Speaker 3: company that is really leading the way. So for it
Speaker 3: to have these issues in the US, I think at
Speaker 3: this time it's really questionable about whether Binance can ever
Speaker 3: do business in the US.
Speaker 7: And I'll jump in there too.
Speaker 4: I mean, I think one of the things that we
Speaker 4: have to remember with these two lawsuits we've seen so
Speaker 4: far is that they could just be the tip of
Speaker 4: the iceberg. So we know from prior reporting, including our own,
Speaker 4: that the Justice Department, the IRS's Criminal investigation unit. They're
Speaker 4: also investigating Binance, so we could see charges come from
Speaker 4: those avenues as well. You know, those things are still ongoing,
Speaker 4: so we haven't had any sort of resolution, but it's
Speaker 4: something to keep an eye on.
Speaker 2: And Allie you mentioned something that I think is important,
Speaker 2: which is that the government is coming after them in
Speaker 2: part for their failure to register, and that kind of
Speaker 2: gets at the heart of it, right, because these crypto
Speaker 2: exchanges say, well, they're not subject to the sorts of
Speaker 2: regulations that would make them have to file, So what
Speaker 2: do they say about that charge.
Speaker 4: Finance is an interesting case, right because you have Binance
Speaker 4: kind of the international company, and then you have this
Speaker 4: separate entity called Binance US that it is supposed to
Speaker 4: be separate. But you know, these lawsuits both sort of
Speaker 4: allege that that's not actually the case, that Finance US
Speaker 4: is just sort of a front for.
Speaker 7: The international company.
Speaker 4: But even so, setting that aside, a lot of US
Speaker 4: based crypto exchanges will say, you know, we don't have
Speaker 4: to register with the SEC because the tokens that we
Speaker 4: have on our platform are not securities. We've done internal vetting,
Speaker 4: we've determined they don't meet the how we test that
Speaker 4: test of about Citrus Groves that I mentioned earlier, and
Speaker 4: so that's kind of the argument they've made. They've also
Speaker 4: said that at times they've tried to attempt to work
Speaker 4: with the SEC to register, and that they claim, you know,
Speaker 4: SEC chair Gary Gensler is just doesn't really want them
Speaker 4: to register, doesn't provide a pathway for them. And so
Speaker 4: that's kind of the point that we're at it right now.
Speaker 2: And so those are the cases against Finance. Let's now
Speaker 2: move to Coinbase because they too are the subject of
Speaker 2: a lot of scrutiny.
Speaker 4: So in the SEC Coinbase case, they basically said the
Speaker 4: company was operating unregistered securities exchange broker clearing Agency Chair
Speaker 4: Gensler has repeatedly said he thinks these different functions, like
Speaker 4: if you're holding assets for customers and allowing them to trade,
Speaker 4: that these should be separate, regulated entities.
Speaker 7: So that's kind of what they're dinging them on here,
Speaker 7: plan that.
Speaker 6: The SEC is making that they are acting as an
Speaker 6: unregistered broker dealer and listing on registered securities, which has
Speaker 6: been up for debate in the cryptocommunity when it comes
Speaker 6: to regulators at least for a long time now. Coinbase
Speaker 6: we know says that a lot of the things that
Speaker 6: they've listed are not securities, while the Securities and Exchange
Speaker 6: Commission believes they are, and they have a varia And.
Speaker 4: They also said that thirteen of the different cryptotokens listed
Speaker 4: by the exchange were actually securities. Obviously things that Coinbase
Speaker 4: has denied.
Speaker 2: And Hannah tell us about Coinbase.
Speaker 3: Coinbase is the first publicly traded crypto exchange in the US.
Speaker 3: It's CEO, Brian Armstrong, is a force within the industry.
Speaker 3: They have really made a name for themselves. They follow
Speaker 3: behind Binance in terms of trading volume when you look
Speaker 3: at crypto exchange rankings and Brian Armstrong, you know, he's
Speaker 3: really tried defending against the SEC's allegations by pointing out that, hey,
Speaker 3: you guys have proved us to go public, how can
Speaker 3: you say now that we're in violation of federal securities laws?
Speaker 3: But in talking to legal experts, they've said that this
Speaker 3: is actually not an adequate legal defense, that just because
Speaker 3: you get an IPO approved does not keep you from
Speaker 3: being accused of federal security law violations.
Speaker 2: And Hennery, when you talked to Coinbase and talked to Binance,
Speaker 2: what do they say about these charges.
Speaker 3: They've really always kind of directed to the responses that
Speaker 3: their respective CEOs have put online. Finance also did an
Speaker 3: extensive blog posts denying the allegations. Both Coinbase and Finance
Speaker 3: have also been extremely critical of the SEC's approach here
Speaker 3: that they say, you know, we've been asking for regulatory
Speaker 3: clarity in the US, and you've just provided enforcement, like
Speaker 3: you've never laid the groundwork for us to effectively register
Speaker 3: our tokens a securities. So there's I think a lot
Speaker 3: of tension here between these crypto exchanges and between the regulators,
Speaker 3: and what a lot of people in the industry are
Speaker 3: pending hopes on is that these lawsuits will drag out
Speaker 3: for years and that there will be time for changes
Speaker 3: and developments within the industry and that maybe they'll find
Speaker 3: some way to adapt or.
Speaker 4: Even you know, a change in the administration someone maybe
Speaker 4: you have a Republican president or folks come in that
Speaker 4: are a little bit more sympathetic to the crypto industry.
Speaker 4: But also, you know, i'd like to point out with
Speaker 4: the argument about this going public, and you know, you
Speaker 4: allowed us to go public, so it's unfair that you've
Speaker 4: brought this lawsuit now and talking with former officials, they've
Speaker 4: made sort of the same argument, and they've said it's
Speaker 4: mostly when companies go public, it's about disclosure and making
Speaker 4: sure that they're making proper disclosures. And you see that
Speaker 4: in the early filings that coinbase made. You know, they
Speaker 4: say that the rules around digital assets and what's a
Speaker 4: security and what's a commodity are unclear that they could
Speaker 4: potentially face regulatory scrutiny, So a lot of that is
Speaker 4: kind of forewarned in those documents.
Speaker 2: And Hannah, we've been hearing about how the argument of
Speaker 2: the industry is that crypto is not a commodity, crypto
Speaker 2: is not a security and shouldn't be regulated. But why
Speaker 2: do they say that, Like, what is their argument to say,
Speaker 2: you should buy this, but it should be entirely free
Speaker 2: of regulation.
Speaker 3: The industry has long argued for decentralization. You know that
Speaker 3: they are focused on peer to peer interactions with people
Speaker 3: can engage directly with each other, that men are cut
Speaker 3: out like brokers, And I think they've also argued that
Speaker 3: crypto is different, that this is a financial tool, that
Speaker 3: this is a technology that can change the world. And yes,
Speaker 3: they've argued for regulatory clarity and you know, clearer guidelines
Speaker 3: and things like that, but that doesn't change the fact
Speaker 3: that there are serious questions over whether cryptotokens are actually securities.
Speaker 2: So they're arguing that they're intrinsically different than other forms
Speaker 2: of investment that are.
Speaker 4: Regularly The argument that they'll make is, for instance, if
Speaker 4: you're a token issuer, so you issue you know, X,
Speaker 4: y Z token, they'll argue that, you know, the current
Speaker 4: rules just don't make sense, that there are unique aspects
Speaker 4: of blockchain technology that aren't you conceived of in existing rules,
Speaker 4: And so they'll say, SEC, we really need you to
Speaker 4: come in and update this because we actually can't even
Speaker 4: register because we can't abide by the current disclosure forms
Speaker 4: are the current rules, And the SEC will say that's
Speaker 4: all blow ny. You know, it seems both sides are
Speaker 4: sort of entrenched right now and kind of their thinking.
Speaker 2: So, Alison, we have these multiple lawsuits among government entities.
Speaker 2: When you look ahead, where do you see this going?
Speaker 2: How long will it take for these cases to kind
Speaker 2: of play themselves out?
Speaker 4: You know, I think we could see these going on
Speaker 4: for years. We also see on the fringes of other
Speaker 4: regulators getting involved. So banking regulators putting out warnings about
Speaker 4: banks kind of working with crypto firms or taking deposits
Speaker 4: from crypto companies. We're definitely going to continue to see
Speaker 4: Congress attempting to write legislation, though getting something across the
Speaker 4: finish line is always difficult, as we've seen in the past.
Speaker 4: The main pieces that we have right now are Patrick McHenry,
Speaker 4: he leads the House Financial Services Committee, and Glenn Thompson,
Speaker 4: who leads the House Ad Committee, have a big bill
Speaker 4: that they've been working on to kind of make it
Speaker 4: clear what's a commodity, what's the security. Can you start
Speaker 4: as a security and then be a commodity, which the
Speaker 4: crypto industry argues for a lot of the tokens Through.
Speaker 8: Your leadership, this year's Exchange Commissions brought nearly fifty separate
Speaker 8: enforcement actions against digital asset firms. At the same time,
Speaker 8: you've refused to provide clarity on whether digital assets offered
Speaker 8: as part of an investment contract or subject to securities laws,
Speaker 8: and more importantly, how these firms should comply with those laws.
Speaker 8: You're punishing digital asset firms for allegedly not adhering to
Speaker 8: the law when they don't know it will apply to
Speaker 8: them it's nonsensical, so.
Speaker 4: That legislation's being worked on, but right now it's mostly
Speaker 4: Republican backing, so we'll see if it can get democratic support,
Speaker 4: especially in the Senate that it would need to get enacted.
Speaker 2: When we come back. What do crypto purists think about
Speaker 2: the government's plans to regulate the industry, And I guess
Speaker 2: I'm kind of wondering how we got to this point,
Speaker 2: because when crypto first started, it was this kind of new,
Speaker 2: exciting thing, a little seed of the pan. It grew
Speaker 2: very quickly, probably much faster than anyone expected, and that
Speaker 2: was part of the allure for a lot of the
Speaker 2: early investors. Can you talk about what these kind of
Speaker 2: founding principles of crypto are and do they still exist
Speaker 2: or are they now just kind of evaporated as we've
Speaker 2: seen how crypto works in the real world.
Speaker 3: I talked a little earlier about this idea of decentralization
Speaker 3: and peer to peer transactions. So, you know, cryptocurrencies like bitcoin,
Speaker 3: we're seen as ways for people to easily exchange money
Speaker 3: in a trusted, simple, decentralized way, and it's been very
Speaker 3: interesting to see in the evolution of the industry that yes,
Speaker 3: there are people who still want it to be decentralized,
Speaker 3: but centralized entities like coinbase, like finance have really stepped
Speaker 3: in and gained a lot of influence over the industry
Speaker 3: as a whole. So I think for crypto, it's gone
Speaker 3: through many evolutions. A lot of people point to the
Speaker 3: nature of crypto that you have these booms and busts,
Speaker 3: but that it always comes back. I think what's different
Speaker 3: this time around is that the scale at which everything
Speaker 3: has happened, Like you saw these extraordinary highs and these
Speaker 3: incredible falls, and crypto did break over to the mainstream,
Speaker 3: like people knew what bitcoin was. You know, my grandma
Speaker 3: was asking me questions about dogecoin, which is a joke
Speaker 3: cryptocurrency that.
Speaker 2: Actually took off and people invested in it, like we
Speaker 2: started as a joke but then became a.
Speaker 7: Real Yeah exactly.
Speaker 3: So, yes, it got this mainstream recognition, but the stakes
Speaker 3: were that much higher. So these falls, these scandals, these implosions,
Speaker 3: they've just hit the industry super hard.
Speaker 1: Ell.
Speaker 2: You mentioned earlier that Congress has taken a hard look
Speaker 2: at this, and there are some bills at least advancing
Speaker 2: through committees. Who gets to decide ultimately how crypto is regulated.
Speaker 4: I mean, so right now it's kind of being left
Speaker 4: up to enforcement actions and it's sort of a battle
Speaker 4: of wills right now between the SEC and the CFTC.
Speaker 4: I mean, you'll see the Binance lawsuit is a really
Speaker 4: good example. Both of them listed Binance USD, which is
Speaker 4: a type of token called a stable coins pegged to
Speaker 4: like the US dollar, and basically one of them said
Speaker 4: it was a security, the other said it was a commodity.
Speaker 4: So you'll see those kinds of things continuing to pop
Speaker 4: up in lawsuits and then that'll have to.
Speaker 7: Get worked out by the courts.
Speaker 4: Congress can step in and to define these things, and
Speaker 4: the bill I mentioned from McHenry and Thompson right now,
Speaker 4: they do kind of require the two agencies to come
Speaker 4: together and decide on certain definitions, decide on regulations. It
Speaker 4: does sort of keep you know, anything that kind of
Speaker 4: qualifies under the Howie test I mentioned that's still under
Speaker 4: the SEC's raimit and crypto firms can come in and
Speaker 4: say we think we're decentralized enough. They certify that to
Speaker 4: the SEC. SEC can object, and you know, we kind
Speaker 4: of go through this process to make things a lot clearer,
Speaker 4: you probably need Congress to step in. But you know,
Speaker 4: that's kind of the place we're at right now.
Speaker 2: And as you say, I mean, that's so dependent on politics,
Speaker 2: where you have a very activist sec under Joe Biden,
Speaker 2: whereas if you had a Republican president, maybe they wouldn't
Speaker 2: be as activists if you have a Republican Congress versus
Speaker 2: the Democratic Congress. So so much of this is at
Speaker 2: the whims of just Washington politics.
Speaker 7: It is.
Speaker 4: And I will say, you know, one of the points
Speaker 4: that people have made to me is with the crypto
Speaker 4: bills or proposals that we're seeing right now, they've kind
Speaker 4: of said if nothing advances by this fall or maybe
Speaker 4: even the end of this year, that it probably won't
Speaker 4: advance before the presidential elections, because everyone knows that once
Speaker 4: you start getting into kind of campaign season, things sort
Speaker 4: of slow down on the hill. So it could mean
Speaker 4: that we're still waiting a year, two years, you know,
Speaker 4: maybe longer before there is actually any sort of congressional action.
Speaker 2: Anna you've written. They given all the troubles of the
Speaker 2: industry is having in the US, that coinbase is now
Speaker 2: looking at other markets around the world, are they getting
Speaker 2: a warmer reception outside the US. Yeah.
Speaker 3: So I had the chance to sit down with a
Speaker 3: coin based executive who helps oversee their international strategy, and
Speaker 3: he really spoke about how they're doubling down on their
Speaker 3: efforts outside of the US. So for right now, their
Speaker 3: top international market is the UK. We've seen the UK
Speaker 3: government express, you know, some friendliness towards crypto, and you've
Speaker 3: already seen people sees on that. Andreson Horowitz, which has
Speaker 3: one of the biggest crypto venture funds, actually is planning
Speaker 3: to open a new office in London in cite it
Speaker 3: this warm environment there for crypto, So you know, we've
Speaker 3: already seen it happening. People are looking abroad, they're recruiting
Speaker 3: talent abroad. Other markets that are interesting is you know,
Speaker 3: just Europe as a whole. They actually have regional legislation
Speaker 3: for crypto that people see as a better approach than
Speaker 3: the enforcement actions that US regulators have taken. And then
Speaker 3: also in Asia, Singapore and now Hong Kong. Hong Kong
Speaker 3: was previously pretty anti crypto and has kind of come
Speaker 3: back the other way. So those are two growing crypto
Speaker 3: hubs in Asia.
Speaker 2: So despite all this scrutiny. Despite the whip sign up
Speaker 2: and down a Bitcoin, all the collapses, all the drama
Speaker 2: we've seen, people still want to put their money in this.
Speaker 3: Yeah, there are still true believers. There are still people
Speaker 3: who you know are holding on to their bitcoin for
Speaker 3: dear life and you know are invested in this industry.
Speaker 2: Hannah Ali, thanks so much for coming on the show.
Speaker 7: Thanks for having me, Thank you for having.
Speaker 2: Me, Thanks for listening to us here at The Big Take.
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Speaker 2: the producer of this episode is Vicky Bergalina. Our senior
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Speaker 2: original music was composed by Leo Sidrin. I'm west Kosova.
Speaker 2: We'll be back tomorrow with another Big Take.