WEBVTT - The US Has a Renewed Urgency to Regulate Crypto Post-FTX 0:00:03.520 --> 0:00:06.480 This is Bloomberg Crypto and Daily Bloomberg I HUD Podcast, 0:00:06.640 --> 0:00:09.360 and I'm Mike Reagan ins today for Stacy Marie Ishmol. 0:00:09.640 --> 0:00:27.360 It's Tuesday, January one. The bankruptcy of crypto Exchange ft 0:00:27.640 --> 0:00:30.120 X and the arrest of its former CEO, Sam Bakman 0:00:30.160 --> 0:00:33.400 Freed have obviously had a lasting effect on the digital 0:00:33.440 --> 0:00:37.479 assets sector, but it's also made an indelible impact on 0:00:37.520 --> 0:00:41.479 the politicians and policymakers who are supposed to regulate the industry. 0:00:42.280 --> 0:00:44.760 There already was a fire lit under some lawmakers when 0:00:44.760 --> 0:00:48.440 it comes to imposing regulations on crypto. Last year, President 0:00:48.440 --> 0:00:51.960 Biden issued an executive order asking agencies to take coordinated 0:00:52.000 --> 0:00:55.760 action on digital assets, and in the summer, Senators Cynthia 0:00:55.960 --> 0:00:59.760 Lummis and Kristen Gillibrand issued a bipartisan crypto bill that, 0:01:00.000 --> 0:01:03.160 among other things, would step up oversight on stable coins 0:01:03.680 --> 0:01:06.800 and crypto energy usage. And then there is the ongoing 0:01:06.840 --> 0:01:09.759 debate between the Securities and Exchange Commission and the Commodities 0:01:09.800 --> 0:01:13.880 Futures Trading Commission over whether cryptocurrencies should be regulated as 0:01:13.880 --> 0:01:18.480 securities were commodities. But with an ongoing wave of crypto 0:01:18.520 --> 0:01:21.640 bankruptcies linked to fd X, government officials are confronted with 0:01:21.720 --> 0:01:25.600 a new sense of urgency surrounding digital asset regulation. Here 0:01:25.600 --> 0:01:28.840 to talk about this are Bloomberg reporters Ali Verspiel and 0:01:29.040 --> 0:01:41.679 Lydia Bayoud Ali, Lydia welcome. So Ali, uh, now that 0:01:41.959 --> 0:01:45.399 one of the largest crypto exchanges has collapsed? Has that 0:01:45.600 --> 0:01:50.360 changed the debate on regulation? What's changed in the conversations 0:01:50.400 --> 0:01:54.040 among regulators after FDx? You know, so, I'll say that 0:01:54.080 --> 0:01:57.800 there's definitely a lot more urgency and the conversations that 0:01:57.880 --> 0:02:01.720 we're hearing both at regulator d's groups like the Financial 0:02:01.760 --> 0:02:05.920 Stability Oversight Council, which is led by Treasury, um at 0:02:06.400 --> 0:02:09.200 you know, the lawmaker level, you're definitely seeing a lot 0:02:09.240 --> 0:02:13.320 more skepticism and you know, talks about trying to, you know, 0:02:13.560 --> 0:02:16.640 maybe put some new rules in place. UM. For instance, 0:02:16.960 --> 0:02:20.280 Senator Shared Brown, who's the chairman of the Senate Banking Committee, 0:02:20.840 --> 0:02:23.240 you know, he recently sent a letter to Treasury Secretary 0:02:23.320 --> 0:02:25.239 Janet Yellen saying, you know, we'd like to work with 0:02:25.280 --> 0:02:29.240 the agencies to put out crypto oversight framework of some sort. 0:02:29.760 --> 0:02:32.440 You know, so you're definitely seeing those conversations happen. UM. 0:02:32.480 --> 0:02:34.280 You know, to some extent, we were seeing a little 0:02:34.280 --> 0:02:37.359 bit of the conversation into last year. You know, there 0:02:37.480 --> 0:02:40.760 was some turmoil before FTX, and obviously f t X 0:02:40.840 --> 0:02:43.640 was a huge event though, and so you know, there 0:02:43.680 --> 0:02:49.279 have been talks ongoing about regulating stable coins and potentially 0:02:49.720 --> 0:02:53.079 you know, offering broader rules as well. I think now 0:02:53.080 --> 0:02:55.880 we're going to see a lot of focus on things 0:02:55.919 --> 0:02:59.840 like fraud, things like protecting customer assets. Um so it'll 0:02:59.880 --> 0:03:02.680 be interesting to see how that plays outgoing forward, and 0:03:02.880 --> 0:03:05.360 just out on the CFTC side, there's also been i 0:03:05.400 --> 0:03:08.200 think more interest using again f t X as this 0:03:08.400 --> 0:03:11.400 kind of Markie example of what can go wrong. The 0:03:11.440 --> 0:03:14.320 CFTC is also interested interested as you know, Congress is 0:03:14.360 --> 0:03:17.760 considering ways to change UH and bring more more direct 0:03:17.800 --> 0:03:22.760 regulation of these exchanges into being. You know, they have testified, 0:03:22.800 --> 0:03:25.960 the chairs testified and other commissioners there have testified that 0:03:26.320 --> 0:03:28.320 they're really limited in their ability to kind of like 0:03:28.480 --> 0:03:30.959 look through, you know, if there's a U S entity 0:03:31.080 --> 0:03:33.880 like FTX actually had a drivers exchange that was regulated 0:03:33.880 --> 0:03:35.720 here with it by the CFTC, but they weren't able 0:03:35.760 --> 0:03:38.200 to look through to the international exchange and kind of 0:03:38.200 --> 0:03:42.440 see that there's this constellation of subsidiaries and sister companies, 0:03:42.520 --> 0:03:44.640 and they they're not able to kind of find out 0:03:44.640 --> 0:03:48.040 all the corporate governance stuff, you know, barring having a 0:03:48.040 --> 0:03:51.119 whistleblower tip or some reason to bring any sort of 0:03:51.280 --> 0:03:54.760 investigation or enforcement action. And you know, they've flagged that 0:03:54.760 --> 0:03:58.360 that's potentially an issue for this very specific market. And uh, 0:03:58.400 --> 0:04:01.120 there were some recent speeches where commisions have asked Congress to, 0:04:01.200 --> 0:04:03.560 you know, consider that fact as they're trying to perhaps 0:04:03.640 --> 0:04:06.160 address some of the lessons learned from f t x 0:04:06.320 --> 0:04:12.200 s and other companies collapse this past year, Lydia, how 0:04:12.200 --> 0:04:15.400 about from the CFTC, and is there any new sense 0:04:15.440 --> 0:04:18.400 of urgency, any new priorities do you think? Yeah? So, 0:04:18.440 --> 0:04:20.880 I think what was notable in the sort of immediate 0:04:20.920 --> 0:04:22.960 fallout of f t x is bankruptcy is that the 0:04:23.040 --> 0:04:25.200 chair of the CFTC had to come before the Senate 0:04:25.560 --> 0:04:28.200 Ad Committee, which is a committee where he had actually 0:04:28.240 --> 0:04:31.440 been a senior staffer at one point, and testify about 0:04:31.480 --> 0:04:35.479 their oversight of kind of a smaller player within the 0:04:35.520 --> 0:04:38.480 f t X universe that had been seeking to do 0:04:38.680 --> 0:04:45.080 an interesting derivatives trading operation with with cryptocurrency and had 0:04:45.120 --> 0:04:48.200 that had never progressed, but also f t X was 0:04:48.320 --> 0:04:50.640 kind of in many ways seen as aligned with the 0:04:50.680 --> 0:04:53.160 CFTC and was helping push legislation that would have given 0:04:53.200 --> 0:04:55.719 it a lot more authority in a way that other 0:04:55.760 --> 0:04:58.919 players in the crypto community thought might also be beneficial 0:04:58.960 --> 0:05:01.479 to them. Said that happened, and it was kind of 0:05:01.520 --> 0:05:06.360 noticeable that the SEC didn't have so much scrutiny from 0:05:06.360 --> 0:05:08.120 the Hill and in terms of getting kind of hauled 0:05:08.200 --> 0:05:11.479 up there to to testify. So since then, I think 0:05:11.520 --> 0:05:13.560 that the CFTC has been very keen to make the 0:05:13.600 --> 0:05:15.839 case that, you know, we can be a strong regulator 0:05:15.839 --> 0:05:18.960 in the space and sort of trying to dismantle this 0:05:19.000 --> 0:05:21.240 perception that they were really closely aligned with Sambing and 0:05:21.279 --> 0:05:22.960 Freed and f t X, And it's also given more 0:05:22.960 --> 0:05:25.719 immunition to the SEC to say, like, hey, we should 0:05:26.040 --> 0:05:28.320 we should be a strong regulator in this space. You know. 0:05:28.520 --> 0:05:31.560 It's interesting to me because in the early years of crypto, 0:05:31.880 --> 0:05:36.000 it seemed almost like the SEC and the CFTC, at 0:05:36.040 --> 0:05:37.960 least the appearance was neither one of them wanted to 0:05:38.000 --> 0:05:39.720 go near it. They didn't think it was their problem. 0:05:39.800 --> 0:05:42.920 But now they're both on the case that you get 0:05:42.960 --> 0:05:45.599 the impression Lydia that going forward they will continue to 0:05:45.600 --> 0:05:49.080 sort of double team the space, that there won't be 0:05:49.279 --> 0:05:53.040 you know, one more aggressive than the other. Well. Ali 0:05:53.200 --> 0:05:55.839 touched on the letter, the letter from Senator around to 0:05:56.080 --> 0:05:58.520 the Treasury Department asking for a hole of government approach 0:05:58.560 --> 0:06:00.760 to regulate the space. And so I think that the 0:06:00.800 --> 0:06:03.719 regulators at least publicly are coalescing behind that notion that like, 0:06:03.760 --> 0:06:06.320 we can all play a role here. But I think 0:06:06.360 --> 0:06:10.520 that the SEC ultimately because they're trying to claim so 0:06:10.640 --> 0:06:13.560 much jurisdiction, and I think with ft X really falling apart, 0:06:14.120 --> 0:06:16.839 there are some jurisdictional issues on the Hill where some 0:06:16.960 --> 0:06:20.200 of the banking committees want to be sure that they 0:06:20.480 --> 0:06:22.960 have kind of direct oversight of the regulator that itself 0:06:23.000 --> 0:06:25.320 would have oversight of the community. And so there's still 0:06:25.320 --> 0:06:29.200 some jurisdictional battles to play out. And you know, it's 0:06:29.240 --> 0:06:31.560 not just ft X these days. We've obviously had this 0:06:31.680 --> 0:06:37.920 fallout with these crypto high savings program offered by Gemini. 0:06:38.560 --> 0:06:42.560 In turn, Gemini turned over customer assets to Genesis to 0:06:42.680 --> 0:06:46.120 invest Ali has that created a new focus at all 0:06:46.160 --> 0:06:48.920 for regulators? Do you think these sort of high yield 0:06:48.960 --> 0:06:51.520 savings and loan programs that go on in crypto. Is 0:06:51.520 --> 0:06:54.080 is that a priority now? Do you believe? So? You 0:06:54.080 --> 0:06:57.080 know what's interesting is that's actually been a priority for 0:06:57.680 --> 0:07:00.160 probably at least a year now. Um. You know, we 0:07:00.200 --> 0:07:03.840 had a Bloomberg story actually last January that talked about 0:07:04.279 --> 0:07:06.919 you know, some of these what you call crypto lenders 0:07:06.960 --> 0:07:10.560 being under scrutiny at the SEC, and so it's been 0:07:10.600 --> 0:07:12.600 sort of a long time priority. You know, you're now 0:07:12.640 --> 0:07:14.880 seeing a lot of those cases come out. You mentioned 0:07:15.240 --> 0:07:18.680 Gemini Genesis. We also recently had an enforcement action against 0:07:18.680 --> 0:07:22.480 Nexo block By. There was an enforcement action earlier last year, 0:07:23.200 --> 0:07:25.640 and so it's definitely a focus. I think one of 0:07:25.680 --> 0:07:28.440 the criticisms you see now from a lot of folks is, 0:07:29.040 --> 0:07:31.240 you know, why did it take so long for these 0:07:31.800 --> 0:07:34.680 you know, enforcement actions to come um, and why did 0:07:34.680 --> 0:07:38.760 it take potentially hundreds of millions of dollars two billions 0:07:38.760 --> 0:07:43.080 of dollars of investor losses before we saw any action? 0:07:43.800 --> 0:07:45.880 And so I think that's going to be kind of 0:07:45.920 --> 0:07:49.240 an interesting thread to watch going forward. Um. You know, 0:07:49.280 --> 0:07:53.000 I am expecting the SEC to bring more cases this year. 0:07:53.040 --> 0:07:55.160 You know, all the indications that I think both Lydia 0:07:55.240 --> 0:07:57.080 and I are getting or that it's going to be 0:07:57.120 --> 0:08:00.240 a pretty active year on enforcement, So you know, we'll 0:08:00.240 --> 0:08:01.600 have to see how that plays out. But yes, I 0:08:01.680 --> 0:08:05.800 think that definitely has been a priority. But it also 0:08:05.840 --> 0:08:08.520 brings up the question. You know, some of these outfits 0:08:08.640 --> 0:08:13.720 are taking deposits, paying out interest on them, and making loans. 0:08:14.280 --> 0:08:17.640 They sound an awful lot like crypto banks. Is there 0:08:17.880 --> 0:08:20.240 a role for banking regulators here too, or are they 0:08:20.280 --> 0:08:23.440 getting in on the action here among regulators? You know, 0:08:23.480 --> 0:08:26.000 it's interesting because I I had talked to people, uh 0:08:26.240 --> 0:08:28.280 kind of making that same point. You know, why why 0:08:28.320 --> 0:08:31.120 isn't this more of a banking product? And it seems like, 0:08:31.560 --> 0:08:33.600 you know, the SEC has really sort of staked its 0:08:33.600 --> 0:08:36.520 claim saying these are actually securities products. I'm not getting, 0:08:37.000 --> 0:08:39.600 you know, any real sense that the banking regulators are 0:08:39.640 --> 0:08:45.040 are necessarily interested in that particular offering. So I think 0:08:45.080 --> 0:08:48.280 we'll continue to see the SEC sort of coming down 0:08:48.280 --> 0:08:50.920 on those. But I will say, I mean, there's not 0:08:50.960 --> 0:08:54.480 really there aren't really many left at this point. Block 0:08:54.520 --> 0:08:58.440 fives and bankruptcy Voyager Celsius. You know, they were victim 0:08:58.520 --> 0:09:02.400 to the crypto turmoil last year. Uh, nexto has has 0:09:02.400 --> 0:09:05.199 said it's not you know, it's exiting. It's us business. 0:09:05.840 --> 0:09:08.080 The coin base at one point wanted to offer these 0:09:08.160 --> 0:09:11.000 kinds of products and you know, the SEC basically told 0:09:11.040 --> 0:09:13.720 them not to and so you know, they never really 0:09:13.760 --> 0:09:18.120 got into that business. So it's uh not, but there's 0:09:18.360 --> 0:09:21.560 there's not there's not much left and I would be 0:09:21.679 --> 0:09:25.120 sort of surprised to see companies starting to get back 0:09:25.120 --> 0:09:27.120 into that as kind of like a new product that 0:09:27.160 --> 0:09:29.680 they want to offer. Yeah, and moving it back from 0:09:29.720 --> 0:09:32.080 crypto lending to just talk about the industry more broadly. 0:09:32.120 --> 0:09:35.480 I think the banking regulators have almost I don't want 0:09:35.480 --> 0:09:37.480 to say, patting themselves on the back, but they've been 0:09:37.840 --> 0:09:43.280 quite pleased. I guess that they haven't discovered, at least 0:09:43.280 --> 0:09:46.679 so far, they haven't discovered really much exposure in the 0:09:46.720 --> 0:09:49.840 main banking system, the traditional banking system to crypto and 0:09:49.880 --> 0:09:53.360 that's kind of been walled off Ali and several other colleagues. 0:09:53.360 --> 0:09:57.120 So it has a really interesting story out recently though, Um, 0:09:57.160 --> 0:09:59.920 if you want to talk about the federal home loan yeah, 0:10:00.080 --> 0:10:01.960 so that you know, this was something that's recently come 0:10:02.000 --> 0:10:06.080 to sort of the spotlight where the federal homelan banks 0:10:06.120 --> 0:10:08.880 which were originally set up to boost sort of mortgage 0:10:08.960 --> 0:10:12.040 lending under President Herbert Hoover. Purpose has sort of shifted 0:10:12.040 --> 0:10:15.679 over the years and now essentially, if you are a 0:10:15.720 --> 0:10:18.960 bank that has the appropriate type of collateral um which 0:10:19.000 --> 0:10:22.920 includes mortgage backed securities, government backed securities, things that you 0:10:22.920 --> 0:10:25.199 can buy in the market, then you're able to put 0:10:25.200 --> 0:10:27.280 that up as collateral and essentially you can get one 0:10:27.360 --> 0:10:31.079 of these loans. And so there were a lot of 0:10:31.320 --> 0:10:33.800 banks that were associated with crypto kind of seen as 0:10:33.840 --> 0:10:38.520 crypto friendly, uh silver Gate for instance, Signature Bank, and 0:10:39.040 --> 0:10:41.440 you know, what recently came came to the flour was 0:10:41.480 --> 0:10:45.000 that they were receiving loans from these federal homelan banks 0:10:45.160 --> 0:10:48.320 and it's raised a lot of new questions about, you know, 0:10:48.400 --> 0:10:51.800 what is really the role of these types of loans. 0:10:51.840 --> 0:10:55.200 Should there be you know, more restrictions in place. Is 0:10:55.200 --> 0:10:58.120 this diverging too much for sort of the initial purpose 0:10:58.840 --> 0:11:00.960 And so that's definitely been and you know, one of 0:11:00.960 --> 0:11:03.400 the things that's come up and kind of shown that 0:11:03.520 --> 0:11:06.559 crypto has seemed a little bit more into the banking 0:11:06.600 --> 0:11:11.720 sector than you know, maybe we originally thought up. Next 0:11:11.880 --> 0:11:15.640 more with Bloomberg reputters Ali Verspiel and Lydia Bayud on 0:11:15.720 --> 0:11:19.199 how the f t X collapse shifted the debate on regulation. 0:11:19.400 --> 0:11:31.480 We'll be right back. One thing I find very interesting 0:11:31.520 --> 0:11:35.920 about this whole topic is that prior to the collapse 0:11:35.960 --> 0:11:39.560 of f t X, UH Sam Bankman Freed himself was 0:11:40.040 --> 0:11:44.240 sort of this very influential character in Washington when it 0:11:44.280 --> 0:11:48.960 came to ideas for crypto regulation. He testified before Congress 0:11:49.040 --> 0:11:53.559 for hours explaining what he thought needed to be regulated. 0:11:53.640 --> 0:11:57.120 And how Lydia, are they just ignoring all that advice 0:11:57.760 --> 0:12:01.360 that that uh SPF is awaiting trial, I mean, or 0:12:01.360 --> 0:12:04.040 were there good ideas there? Do you think that that actually, 0:12:04.160 --> 0:12:08.680 despite what happened, maybe he was right about SPF definitely 0:12:08.880 --> 0:12:11.720 had an influence, but he was just one voice among many. 0:12:11.840 --> 0:12:16.080 And it's interesting because they work, they put themselves out 0:12:16.120 --> 0:12:17.959 there as you know, we're going to do crypto the 0:12:18.080 --> 0:12:20.319 right way, we embrace regulation. It was interesting to see 0:12:20.400 --> 0:12:23.760 some of his remarks UH in the immediate aftermath of 0:12:23.800 --> 0:12:27.560 bankruptcy where he was casting some down on his rosy 0:12:27.679 --> 0:12:30.520 view of regulation. But folks at the CFTC and on 0:12:30.520 --> 0:12:33.319 the Hill have testified, and also I think the SEC, 0:12:33.440 --> 0:12:35.320 but certainly at the CFTC like he was all over 0:12:35.360 --> 0:12:38.280 that agency and they really tried to bend Congress in 0:12:38.840 --> 0:12:41.560 the Hill to sort of their perspective of how to 0:12:41.600 --> 0:12:43.440 regulate the space. But there was also a lot of 0:12:43.520 --> 0:12:45.440 a lot of pushback on it that was also I 0:12:45.480 --> 0:12:51.160 think lawmaker's staff and the regulators were taking that into account. 0:12:51.200 --> 0:12:53.560 I think Ali could probably speak to that somewhat as 0:12:53.600 --> 0:12:56.800 well in terms of, you know, some of the exchanges 0:12:56.840 --> 0:12:59.480 that aren't centralized and what their view was and their 0:12:59.520 --> 0:13:01.440 pushback as well. As you know, there was some pretty 0:13:01.840 --> 0:13:06.520 blockbuster congressional hearings with Terry Duffy taking very negative view 0:13:06.760 --> 0:13:09.040 of what Sam wanted to do in sort of a 0:13:09.080 --> 0:13:14.280 disintermediated derivatives treading for crypto. Well, what do you think, Allie? 0:13:14.280 --> 0:13:17.480 I mean, SPF is such a sort of radioactive name 0:13:17.600 --> 0:13:21.040 right now. Any idea he had back then now considered 0:13:21.160 --> 0:13:24.400 off limits, do you think? So, you know, it's really interesting. 0:13:24.440 --> 0:13:27.000 I mean one of the legislative efforts that he was 0:13:27.000 --> 0:13:30.600 the most vocal supporter of was this bill from the 0:13:30.640 --> 0:13:34.800 Senate ad Committee leaders Debbie Stabina and John Boseman, and 0:13:34.920 --> 0:13:38.400 essentially that was the bill to give the CFTC oversight 0:13:38.480 --> 0:13:41.760 of certain types of tokens that could be considered commodities. 0:13:42.200 --> 0:13:46.240 You know, they specifically named bitcoin and ether, and so 0:13:47.160 --> 0:13:51.520 it's interesting because it's not necessarily just a SAM idea. 0:13:51.720 --> 0:13:55.120 Even the Financial Stability Oversight Council has come out with 0:13:55.120 --> 0:13:59.400 a report saying there's a lack of regulation of tokens 0:13:59.440 --> 0:14:03.400 that are security so bitcoin. It didn't specifically name the 0:14:03.400 --> 0:14:05.800 CFTC as as being the regulator, but you can kind 0:14:05.800 --> 0:14:08.720 of put two and two together because basically right now 0:14:08.800 --> 0:14:11.640 there's no federal overseer of those. It's all regulated at 0:14:11.640 --> 0:14:15.120 the state level. And so that idea, I think there 0:14:15.280 --> 0:14:18.599 is some backing that some sort of gap needs to 0:14:18.640 --> 0:14:22.960 be filled there. But I do think for any legislation 0:14:23.040 --> 0:14:26.600 that SAM was closely involved in or a big supporter of, 0:14:27.200 --> 0:14:28.760 you know, lawmakers are going to have to take a 0:14:28.800 --> 0:14:31.640 second look, make sure that it's as strong as they 0:14:31.720 --> 0:14:33.800 might want it to be, make sure there aren't any 0:14:34.000 --> 0:14:36.640 you know, holes. So I think it's definitely tainted the 0:14:36.640 --> 0:14:40.600 efforts where they stand, But I wouldn't necessarily be surprised 0:14:40.640 --> 0:14:43.640 if we saw policymakers reworking some of that and then 0:14:43.680 --> 0:14:45.320 putting it out, you know, putting it out in sort 0:14:45.320 --> 0:14:51.160 of a slightly different form. Walk us through where they 0:14:51.160 --> 0:14:54.640 do draw that line between what type of crypto is 0:14:54.640 --> 0:14:58.720 considered a security and what's considered a commodity. Yet now, 0:14:58.720 --> 0:15:00.920 I know it's not a hard and fast rule right now, 0:15:00.920 --> 0:15:03.720 but where do they seem to be drawing that distinction. 0:15:03.800 --> 0:15:06.400 Is it as simple as if coin pays a yield 0:15:06.920 --> 0:15:09.560 they considered a security. Is it more complex than that? 0:15:10.080 --> 0:15:12.320 So it's a little more complex. I mean, the distinction 0:15:12.400 --> 0:15:15.720 lies in this Supreme Court ruling, you know, the how 0:15:15.760 --> 0:15:18.080 we test if you will, and it kind of has 0:15:18.120 --> 0:15:20.440 four prongs. You know, there has to be an investment 0:15:20.480 --> 0:15:23.680 of money in a common enterprise with the expectation of 0:15:23.720 --> 0:15:27.760 profiting from the efforts of an organization's leadership. And so 0:15:27.880 --> 0:15:31.480 the SEC will say we think most digital assets fit 0:15:31.560 --> 0:15:36.080 into this this category, whereas crypto firms to often say, well, 0:15:36.080 --> 0:15:39.840 we think our tokens are you know, decentralized where there 0:15:39.960 --> 0:15:44.440 is no kind of central leadership making decisions. And you know, 0:15:44.520 --> 0:15:46.560 that's been one of the big issues at the center 0:15:46.760 --> 0:15:50.240 of the SEC's case against Ripple over its XRP token. 0:15:50.840 --> 0:15:54.080 It's not very clear. So that will be something that 0:15:54.200 --> 0:15:56.840 would be interesting to see if lawmakers decide to weigh 0:15:56.880 --> 0:16:01.480 in on it. It's that securities versus commodity definition is 0:16:01.560 --> 0:16:04.120 kind of like the toughest nut to crack for all 0:16:04.160 --> 0:16:07.400 the policymakers here to kind of move this issue forward 0:16:07.440 --> 0:16:09.840 and sort of designating who gets to regulate what. But 0:16:10.200 --> 0:16:12.200 you know, when we move to the legal venue, I think, 0:16:12.320 --> 0:16:14.520 as far as I can recall um Ali mentioned the 0:16:14.600 --> 0:16:16.920 Ripple case, but so far only bitcoin has like a 0:16:16.960 --> 0:16:20.440 court ruling behind it saying this one's a commodity. Everything 0:16:20.440 --> 0:16:22.960 else still seems kind of up in the air, at 0:16:23.000 --> 0:16:24.880 least in terms of, you know, here is a court 0:16:25.000 --> 0:16:28.160 order making a decision. What is interesting and something to 0:16:28.160 --> 0:16:30.840 watch though, is the SEC brought this case that Ali 0:16:30.880 --> 0:16:34.360 and I covered last year against a an executive at 0:16:34.400 --> 0:16:37.360 coin base who was allegedly sending insider trading tips to 0:16:38.480 --> 0:16:42.120 a friend and a family member. And in that complaint 0:16:42.200 --> 0:16:45.480 the SEC made these declarations. I think it was nine 0:16:45.520 --> 0:16:48.120 tokens that were listed on coin base they claimed that 0:16:48.160 --> 0:16:50.960 they were securities. And you can imagine that this coin 0:16:50.960 --> 0:16:55.200 base wasn't super thrilled about this designation in this court filing. 0:16:55.320 --> 0:16:58.120 And you know, if if eventually because there's also a 0:16:58.120 --> 0:17:00.640 criminal component, which is going to move first through court, 0:17:00.680 --> 0:17:03.880 but eventually if the civil part from the SEC, you know, 0:17:04.200 --> 0:17:07.400 gets decided by a judge, that could also bring certainly 0:17:07.400 --> 0:17:12.360 for those tokens, more clarity to the space. What are 0:17:12.440 --> 0:17:15.720 the leaders of the industry, like coin base, what's their 0:17:15.800 --> 0:17:18.480 perspective on all of this? You know, I think definitely 0:17:18.640 --> 0:17:22.119 the vast majority would rather be have their tokens be 0:17:22.200 --> 0:17:24.800 labeled commodities. You know, a lot will say though, like 0:17:24.840 --> 0:17:28.400 they that they wouldn't mind working with the SEC trying 0:17:28.400 --> 0:17:31.480 to register, but they would claim that, you know, the 0:17:31.600 --> 0:17:34.720 SEC is not working with them, that it's not you know, 0:17:34.760 --> 0:17:37.560 taking too too much of a hardline approach, and that 0:17:37.600 --> 0:17:40.679 they're having a tough time coming to agreement. Um, Whereas 0:17:40.720 --> 0:17:43.560 obviously the SEC will say, well, we think there's a 0:17:43.560 --> 0:17:47.240 lot of illegal activity happening in this space, and it's 0:17:47.240 --> 0:17:50.919 so it's hard to know what exactly is is the 0:17:50.920 --> 0:17:54.879 true narrative here. But I would say in terms of 0:17:54.880 --> 0:17:57.600 pushing legislation, a lot of the crypto industry was behind 0:17:57.640 --> 0:18:00.680 this bill to give the CFTC more authority, the one 0:18:00.720 --> 0:18:04.600 exception being the Decentralized Finance community, which you know, they 0:18:04.640 --> 0:18:07.919 felt that the bill was gave too much of an 0:18:07.840 --> 0:18:10.800 advantage to centralized exchanges like coin based like at the 0:18:10.840 --> 0:18:14.879 time FTX, they were in opposition to that legislation. Well, 0:18:15.200 --> 0:18:17.280 I think we'll leave it at that. I know, ladies, 0:18:17.440 --> 0:18:20.600 you're super busy and we really appreciate your time. Hopefully 0:18:20.600 --> 0:18:22.879 no news broke while we were sitting here talking. I 0:18:23.880 --> 0:18:29.080 don't want to drink. You never know in cryptot, no 0:18:29.280 --> 0:18:34.160 sleep on this speed. Ali Verspiel and Lydia Bayoud, thank 0:18:34.200 --> 0:18:36.720 you so much, Thank you. Thanks. You can find more 0:18:36.720 --> 0:18:40.360 of their reporting on the Bloomberg Terminal and Bloomberg dot com. 0:18:40.520 --> 0:18:43.120 For more, be sure to check out our twice weekly newsletter, 0:18:43.200 --> 0:18:53.479 Bloomberg Crypto. This is Bloomberg Crypto, a daily podcast from 0:18:53.480 --> 0:18:57.160 Bloomberg and I Heeart Radio. For more shows from iHeart Radio, 0:18:57.400 --> 0:19:00.679 visit the iHeart Radio app, Apple Podcasts, or wherever you 0:19:00.720 --> 0:19:04.719 get your podcasts. Send us your comments, questions or suggestions 0:19:04.760 --> 0:19:10.439 for the show to Crypto at Bloomberg dot net. The 0:19:10.440 --> 0:19:14.399 supervising producer of Bloomberg Crypto is Vicky Verglina. Our senior 0:19:14.440 --> 0:19:18.040 producer is Janet Babin. Our producers are Mohammed Faruk and 0:19:18.080 --> 0:19:21.800 Sharon Barriro Our associate producers are Ty Butler and Moses 0:19:21.800 --> 0:19:26.119 on Them. Desta wonder At is our engineer. Original music 0:19:26.240 --> 0:19:31.000 by Leo Sidron. I'm Stacy Marie Shmall. We'll be back tomorrow.