1 00:00:01,280 --> 00:00:04,800 Speaker 1: This is Bloomberg Crypto Daily, Bloomberg Ihad Podcast, and I'm 2 00:00:04,840 --> 00:00:08,680 Speaker 1: Philip lagger Transfer, senior editor for Bloomberg News, standing in 3 00:00:08,800 --> 00:00:26,440 Speaker 1: for Stacy Marie Eshmaal. It is Friday, February, the third well. 4 00:00:27,000 --> 00:00:30,240 Speaker 1: January in the Northern Hemisphere can often feel like the 5 00:00:30,320 --> 00:00:34,559 Speaker 1: longest month, but it's finally over. Surprising to some, it 6 00:00:34,640 --> 00:00:37,280 Speaker 1: turned out to be a pretty good month for crypto. 7 00:00:37,720 --> 00:00:42,800 Speaker 1: Bitcoin rose almost and a lot of smaller coins actually 8 00:00:42,840 --> 00:00:45,839 Speaker 1: did a lot better than that. Even and speaking of 9 00:00:45,920 --> 00:00:50,440 Speaker 1: risk taking, Wall Street is still keen on crypto despite 10 00:00:50,520 --> 00:00:54,920 Speaker 1: all of last year's calamities, and a failed crypto lender 11 00:00:55,000 --> 00:00:59,040 Speaker 1: known for its risk appetite, Celsius, just got some pretty 12 00:00:59,080 --> 00:01:02,760 Speaker 1: harsh words from its bankruptcy examiner. Here to help me 13 00:01:02,800 --> 00:01:06,120 Speaker 1: break down the news, it's Bloomberg Senior editor Anna Airera. 14 00:01:06,520 --> 00:01:09,640 Speaker 1: These firms have very long horizons and it takes them very, 15 00:01:09,720 --> 00:01:11,959 Speaker 1: very long to do things. So you know, they might 16 00:01:11,959 --> 00:01:14,520 Speaker 1: have made announcements a couple of months ago during the rally, 17 00:01:14,560 --> 00:01:17,319 Speaker 1: but they probably started working on things a few years ago. 18 00:01:17,680 --> 00:01:21,160 Speaker 1: And Bloomberg reporter Emmilin Nicole, we don't even know if 19 00:01:21,200 --> 00:01:24,160 Speaker 1: there may be more collapses to come, but FTX was 20 00:01:24,240 --> 00:01:26,720 Speaker 1: one of the biggest tests I think that Crypto could 21 00:01:26,720 --> 00:01:36,400 Speaker 1: have faced on that front. And so this week we 22 00:01:36,560 --> 00:01:43,119 Speaker 1: had the Celsius bankruptcy examiner's report and it was pretty scathing. 23 00:01:43,280 --> 00:01:46,000 Speaker 1: I guess we can say, Emily, you covered that story, 24 00:01:46,800 --> 00:01:50,160 Speaker 1: what was the gist of it? So this was the 25 00:01:50,280 --> 00:01:53,640 Speaker 1: final report that the court pointed examiner was doing into 26 00:01:53,760 --> 00:01:58,800 Speaker 1: Celsius throughout its bankruptcy case, and unlike probably even some 27 00:01:58,840 --> 00:02:01,280 Speaker 1: of the things that we've seen come from other bankruptcy 28 00:02:01,280 --> 00:02:04,120 Speaker 1: cases so far, this one was pretty damning. I guess 29 00:02:04,160 --> 00:02:07,520 Speaker 1: you could say. What the examiner found was that a 30 00:02:07,600 --> 00:02:10,800 Speaker 1: lot of what Celsis was doing to track its assets 31 00:02:10,800 --> 00:02:15,880 Speaker 1: and my abilities was insufficient. It made misrepresentations to customers 32 00:02:15,960 --> 00:02:19,160 Speaker 1: quite regularly about its financial health and then tried to 33 00:02:19,200 --> 00:02:22,280 Speaker 1: cover up the tracks after it lied about it. Um 34 00:02:22,320 --> 00:02:25,680 Speaker 1: There was also a pretty evident picture of how for 35 00:02:25,840 --> 00:02:28,320 Speaker 1: most of the time that Celtis was operasing from about 36 00:02:28,320 --> 00:02:32,080 Speaker 1: twenty one onwards, it was essentially insolvent because most of 37 00:02:32,120 --> 00:02:34,760 Speaker 1: how it was propping itself up was through its own token, 38 00:02:34,919 --> 00:02:38,240 Speaker 1: cel Cell, and even with Cell, some of its top 39 00:02:38,360 --> 00:02:42,079 Speaker 1: executives like Alex Muszynski, the former CEO, had been selling 40 00:02:42,120 --> 00:02:44,840 Speaker 1: off really large amounts of self for their own personal gain, 41 00:02:45,080 --> 00:02:48,560 Speaker 1: which was similarly then hitting the customers and balance sheet 42 00:02:48,560 --> 00:02:51,040 Speaker 1: at the same time. And this was even as they 43 00:02:51,040 --> 00:02:53,799 Speaker 1: spent I think it was north of five hundred million 44 00:02:53,800 --> 00:02:57,560 Speaker 1: dollars on buying the cell token from the company account. 45 00:02:57,720 --> 00:03:02,160 Speaker 1: The examiner report found that at least five million dollars 46 00:03:02,240 --> 00:03:05,440 Speaker 1: was spent buying its token, and Sealsis was covering up 47 00:03:05,440 --> 00:03:07,800 Speaker 1: from customers that much, like you know, how much it 48 00:03:07,840 --> 00:03:11,320 Speaker 1: was spending on that and even out of that figure. 49 00:03:11,880 --> 00:03:14,519 Speaker 1: While that was happening between twenty and the time that 50 00:03:14,560 --> 00:03:17,880 Speaker 1: sells his father bankruptcy. Last year, mission Ski made about 51 00:03:17,960 --> 00:03:21,679 Speaker 1: sixty eight million on selling this token for himself, while 52 00:03:21,680 --> 00:03:24,720 Speaker 1: another count co founder made at least almost ten million. 53 00:03:25,240 --> 00:03:26,840 Speaker 1: So there was a lot to be made. There a 54 00:03:26,880 --> 00:03:30,680 Speaker 1: lot of stuff going on. Is there anything in this 55 00:03:30,840 --> 00:03:35,000 Speaker 1: report that you either you Emily or Anna c as 56 00:03:35,040 --> 00:03:38,760 Speaker 1: you know, speaking to the actual business model? Um? Is it? 57 00:03:38,800 --> 00:03:43,080 Speaker 1: Is it another testament that the business model of crypto 58 00:03:43,280 --> 00:03:46,640 Speaker 1: lending and the investing or that the sort of risk 59 00:03:46,680 --> 00:03:49,120 Speaker 1: taking that underpinned crypto lending as we knew it at 60 00:03:49,200 --> 00:03:53,720 Speaker 1: least until two two was out of whack. What's interesting here? 61 00:03:53,720 --> 00:03:57,080 Speaker 1: And I'm not sure how new this this is, but obviously, 62 00:03:57,120 --> 00:03:58,960 Speaker 1: and it's quite common for the lenders, was that they 63 00:03:58,960 --> 00:04:03,000 Speaker 1: were attracting the part it's by offering very high yields um. 64 00:04:03,120 --> 00:04:05,040 Speaker 1: But what's interesting is that they were saying that the 65 00:04:05,120 --> 00:04:08,720 Speaker 1: investments they were making or the loans, were not high risk. 66 00:04:09,200 --> 00:04:11,400 Speaker 1: And obviously, if you have any experience investing, you know 67 00:04:11,440 --> 00:04:14,080 Speaker 1: that generally you get high yields when there risk is higher. 68 00:04:14,440 --> 00:04:17,320 Speaker 1: And so the examiner noted that obviously that wasn't the case, 69 00:04:17,440 --> 00:04:19,400 Speaker 1: and that as they were trying to attract more deposits 70 00:04:19,440 --> 00:04:23,120 Speaker 1: the investors, the investments got riskier and riskier. And Emily 71 00:04:23,160 --> 00:04:25,960 Speaker 1: noted in her story how for a certain period in 72 00:04:25,960 --> 00:04:30,320 Speaker 1: time the loans were completely uncollateralized. And just to take 73 00:04:30,360 --> 00:04:33,480 Speaker 1: a step back, basically, if if anyone who's listening is unfamiliar, 74 00:04:33,520 --> 00:04:35,960 Speaker 1: what happens is, you know, you deposit like just like 75 00:04:36,000 --> 00:04:38,960 Speaker 1: a bank, you would deposit your tokens with a with 76 00:04:39,000 --> 00:04:41,760 Speaker 1: a crypto lender, and they would give you yield by 77 00:04:42,000 --> 00:04:44,760 Speaker 1: lending it out to someone else. Um. And what happened 78 00:04:44,760 --> 00:04:47,039 Speaker 1: in crypto was that it's not wasn't actually a bank. 79 00:04:47,240 --> 00:04:50,200 Speaker 1: Your deposits were insured and in many cases, they didn't 80 00:04:50,200 --> 00:04:52,400 Speaker 1: have any risk management to make sure that they weren't 81 00:04:52,440 --> 00:04:54,600 Speaker 1: just handing off your tokens to someone who would make 82 00:04:54,760 --> 00:04:58,440 Speaker 1: very questionable bets on not great tokens. UM and the 83 00:04:58,480 --> 00:05:01,240 Speaker 1: report also noted this lack of risk management. I think 84 00:05:01,440 --> 00:05:05,400 Speaker 1: they said until they did not have anyone in risk management, 85 00:05:05,480 --> 00:05:08,640 Speaker 1: no written risk management procedures, and then they hired four 86 00:05:08,680 --> 00:05:12,000 Speaker 1: people who had some stop gap measures. I think UM 87 00:05:12,240 --> 00:05:14,640 Speaker 1: were meant to cover holes until they would come up 88 00:05:14,680 --> 00:05:18,279 Speaker 1: with more serious risk management procedures. Then they hired some 89 00:05:18,520 --> 00:05:21,320 Speaker 1: more people. One person came up with some policies, but 90 00:05:21,360 --> 00:05:24,960 Speaker 1: they were never implemented. I don't know the business model itself, 91 00:05:25,000 --> 00:05:27,560 Speaker 1: but just in general sort of how it was being 92 00:05:27,600 --> 00:05:30,840 Speaker 1: portrayed clients that it was that was supposedly safe and 93 00:05:30,880 --> 00:05:33,600 Speaker 1: that you were depositing your money and something that was 94 00:05:33,680 --> 00:05:35,560 Speaker 1: like a bank, and that it was going to be there, 95 00:05:35,920 --> 00:05:38,119 Speaker 1: when in fact it was being lent out to people 96 00:05:38,120 --> 00:05:41,400 Speaker 1: who took risky bets. UM didn't have to post any collateral, 97 00:05:41,480 --> 00:05:44,960 Speaker 1: so that when when those risky bests started backfiring, lenders 98 00:05:44,960 --> 00:05:47,320 Speaker 1: like Celsius lost a lot of money and it wasn't 99 00:05:47,360 --> 00:05:52,039 Speaker 1: their own money, it was their client's money. And I 100 00:05:52,160 --> 00:05:54,440 Speaker 1: noticed that you spoke about the kind of risk reward 101 00:05:54,480 --> 00:05:58,719 Speaker 1: of equation and the concept of that there isn't really 102 00:05:58,720 --> 00:06:02,200 Speaker 1: any free free lunch. I yes, um in finance. And 103 00:06:03,120 --> 00:06:06,080 Speaker 1: you know, it's a segue over to a sector that 104 00:06:06,160 --> 00:06:10,520 Speaker 1: actually does, probably at least most of the time, understand 105 00:06:10,600 --> 00:06:14,400 Speaker 1: risk reward, and that's Wall Street. And you did a 106 00:06:14,440 --> 00:06:18,240 Speaker 1: story together with some of our colleagues about Wall Streets 107 00:06:18,360 --> 00:06:22,680 Speaker 1: sort of crypto ambitions as they stand now. And what 108 00:06:22,800 --> 00:06:26,360 Speaker 1: did you guys find out. So anyone who's listening would 109 00:06:26,400 --> 00:06:28,840 Speaker 1: imagine that with everything that's gone down in crypto, Wall 110 00:06:28,880 --> 00:06:30,640 Speaker 1: Street would want to take a rain check or say 111 00:06:30,720 --> 00:06:32,320 Speaker 1: we don't want to have anything to do with it. 112 00:06:32,360 --> 00:06:34,320 Speaker 1: In reality, some of the firms that had stepped in 113 00:06:34,400 --> 00:06:37,400 Speaker 1: during the sort of crypto rally by saying they would 114 00:06:37,440 --> 00:06:41,320 Speaker 1: start launching crypto custody or start offering crypto to some 115 00:06:41,360 --> 00:06:43,880 Speaker 1: of their clients have said that they're they'll continue with 116 00:06:43,920 --> 00:06:46,599 Speaker 1: these plans. Uh. And in many cases, some of these 117 00:06:46,600 --> 00:06:49,840 Speaker 1: banks see crypto not just as crypto in itself, as 118 00:06:49,880 --> 00:06:52,080 Speaker 1: what we see now. So so you know, Bitcoin and 119 00:06:52,160 --> 00:06:54,120 Speaker 1: ether and these assets that are existing, but as an 120 00:06:54,160 --> 00:06:57,800 Speaker 1: opportunity to tokenize existing assets, so stuff that they already trade, 121 00:06:57,839 --> 00:07:01,120 Speaker 1: like bonds, are other forms of securities. So it's a 122 00:07:01,160 --> 00:07:04,359 Speaker 1: mix of firms trying to get into into actual you 123 00:07:04,400 --> 00:07:08,040 Speaker 1: know cryptos, so bitcoin, and also to lay the foundation 124 00:07:08,120 --> 00:07:10,280 Speaker 1: for a future which they believe will have you know, 125 00:07:10,400 --> 00:07:13,960 Speaker 1: normal asset tokenized UM. And I think what's really interesting 126 00:07:13,960 --> 00:07:16,240 Speaker 1: here is that you know, many of them flagged. How 127 00:07:16,280 --> 00:07:19,800 Speaker 1: actually what's gone on in crypto gives them an opportunity 128 00:07:19,840 --> 00:07:23,600 Speaker 1: to step in because with cases like FTX or you know, 129 00:07:23,680 --> 00:07:26,840 Speaker 1: other other instances in which customer assets were mixed with 130 00:07:27,000 --> 00:07:29,800 Speaker 1: assets of the firm and you know sort of there 131 00:07:29,840 --> 00:07:32,440 Speaker 1: was no risk management and customer assets are now gone. 132 00:07:32,760 --> 00:07:36,280 Speaker 1: It just shows that for investors it's sort of probably 133 00:07:36,360 --> 00:07:38,920 Speaker 1: better to work with a regulated firm who has to 134 00:07:38,920 --> 00:07:41,680 Speaker 1: follow certain rules, and one of which, which is very basic, 135 00:07:41,840 --> 00:07:46,320 Speaker 1: is not mixing assets and keeping assets safe and custody 136 00:07:46,320 --> 00:07:48,960 Speaker 1: by a third party. There's a lot going on, and 137 00:07:49,000 --> 00:07:50,760 Speaker 1: I guess, you know, another thing to point out is 138 00:07:50,800 --> 00:07:53,720 Speaker 1: that these firms have very long horizons and it takes 139 00:07:53,720 --> 00:07:55,960 Speaker 1: them very very long to do things. So you know, 140 00:07:56,120 --> 00:07:58,240 Speaker 1: they might have made announcements a couple of months ago 141 00:07:58,360 --> 00:08:00,840 Speaker 1: during the rally, but they probably are working on things 142 00:08:00,960 --> 00:08:03,160 Speaker 1: a few years ago, and so in some cases they 143 00:08:03,240 --> 00:08:05,800 Speaker 1: might not really be swayed by the crypto prices now 144 00:08:06,280 --> 00:08:08,920 Speaker 1: and they might be actually generally looking at doing things 145 00:08:08,920 --> 00:08:11,000 Speaker 1: in the long term so that if another rally comes, 146 00:08:11,040 --> 00:08:13,640 Speaker 1: they might actually make some money and fees from from 147 00:08:13,680 --> 00:08:16,840 Speaker 1: the trading. And what happens that being said, a big 148 00:08:16,880 --> 00:08:18,880 Speaker 1: caveat is you know a lot of these firms say 149 00:08:18,920 --> 00:08:21,480 Speaker 1: they do things because of client demand and that's what's 150 00:08:21,520 --> 00:08:24,800 Speaker 1: driving them to launch new products. And now with crypto 151 00:08:24,920 --> 00:08:28,240 Speaker 1: prices down like and so many investors haven't been hurt, 152 00:08:28,440 --> 00:08:32,360 Speaker 1: you have to wonder is this demand still there at 153 00:08:32,400 --> 00:08:34,880 Speaker 1: the same time. I mean, if you look at the banks, 154 00:08:35,000 --> 00:08:37,760 Speaker 1: at least to a certain extent, they're at least being 155 00:08:37,800 --> 00:08:41,120 Speaker 1: held back by the regulations on them right now. I mean, 156 00:08:41,160 --> 00:08:44,240 Speaker 1: for instance, they cannot hold crypto directly on their balance sheet. 157 00:08:44,559 --> 00:08:47,640 Speaker 1: How do you think that is playing into the time 158 00:08:47,679 --> 00:08:52,160 Speaker 1: horizons here and what impact wall Stree you can actually 159 00:08:52,160 --> 00:08:55,600 Speaker 1: have on crypto. That's definitely a big role. A lot 160 00:08:55,640 --> 00:08:58,120 Speaker 1: of them have been wary because there weren't clear enough 161 00:08:58,160 --> 00:09:01,200 Speaker 1: regulations and as you mentioned, the balance issue, it's it's 162 00:09:01,240 --> 00:09:04,360 Speaker 1: sort of a risk issue. So you know, post crisis 163 00:09:04,400 --> 00:09:07,920 Speaker 1: rules have made banks a lot safer. They've imposed that 164 00:09:08,000 --> 00:09:11,240 Speaker 1: banks hold a lot more collateral for risky assets, and 165 00:09:11,320 --> 00:09:14,640 Speaker 1: in many cases banks believe or in many countries that 166 00:09:15,000 --> 00:09:18,000 Speaker 1: assets that crypto would be classified as the riskiest assets, 167 00:09:18,000 --> 00:09:19,840 Speaker 1: and so they'd have to hold a lot of collateral 168 00:09:19,880 --> 00:09:22,200 Speaker 1: to hold bitcoin on their balance sheet, which would make 169 00:09:22,240 --> 00:09:24,400 Speaker 1: it sort of not really worth it, which is the 170 00:09:24,440 --> 00:09:27,360 Speaker 1: reason why they've held back. So, you know, now we've 171 00:09:27,400 --> 00:09:30,520 Speaker 1: we're seeing a big regulatory push globally from regulators in 172 00:09:30,559 --> 00:09:34,200 Speaker 1: all major jurisdictions to regulate crypto more. That would bring 173 00:09:34,200 --> 00:09:37,320 Speaker 1: more clarity and we can maybe I think that it 174 00:09:37,400 --> 00:09:40,240 Speaker 1: would help banks step in, but at the same time, 175 00:09:40,280 --> 00:09:43,079 Speaker 1: you know, they might just think it's not really worth 176 00:09:43,559 --> 00:09:47,600 Speaker 1: the headache at the moment. We'll be right back with 177 00:09:47,720 --> 00:09:51,320 Speaker 1: more of the week's top crypto stories with Anna and Emily. 178 00:10:01,880 --> 00:10:05,080 Speaker 1: And Emily, you've sort of come at this from a 179 00:10:05,280 --> 00:10:08,960 Speaker 1: slightly more I guess crypto side, do you. Is it 180 00:10:09,040 --> 00:10:14,240 Speaker 1: your impression that firms that are crypto native are in 181 00:10:14,320 --> 00:10:18,800 Speaker 1: any way, shape or form concerned about you know, the 182 00:10:19,400 --> 00:10:21,640 Speaker 1: trad fire as they call them, moving in on their 183 00:10:21,640 --> 00:10:23,600 Speaker 1: turf right now, or is it's sort of like, no, 184 00:10:24,280 --> 00:10:27,599 Speaker 1: they're too big, they're too slow, they're too hampered by regulation. 185 00:10:27,679 --> 00:10:30,000 Speaker 1: How would you read the mood on that. I mean, 186 00:10:30,040 --> 00:10:34,360 Speaker 1: there's always the idea that more competition is better for innovation, 187 00:10:34,400 --> 00:10:36,120 Speaker 1: but also it means that you have to work harder 188 00:10:36,160 --> 00:10:39,040 Speaker 1: as a company to draw in users. I think probably 189 00:10:39,080 --> 00:10:41,920 Speaker 1: at the minute though, volumes are so low in crypto 190 00:10:42,160 --> 00:10:45,040 Speaker 1: that it's difficult for any one to get users trad 191 00:10:45,080 --> 00:10:48,720 Speaker 1: fire crypto native. It doesn't matter who you are. Um. 192 00:10:48,760 --> 00:10:51,920 Speaker 1: There's obviously the elements that were mentioned about how if 193 00:10:51,920 --> 00:10:54,480 Speaker 1: you're in the crypto companies don't have the best reputation 194 00:10:54,559 --> 00:10:57,080 Speaker 1: right now, and so maybe Wall Street has an edge there. 195 00:10:57,440 --> 00:11:00,560 Speaker 1: But Wall Street also can't offer what crypto offers. I mean, 196 00:11:00,600 --> 00:11:04,160 Speaker 1: if we look at Fidelity as a as a case example, 197 00:11:04,400 --> 00:11:07,079 Speaker 1: they can only really offer bitcoin ethereum at the minute, 198 00:11:07,320 --> 00:11:09,120 Speaker 1: and they're not able to even offer you know, the 199 00:11:09,840 --> 00:11:12,760 Speaker 1: top old coins in the sector like Toolana or Cardano, 200 00:11:12,880 --> 00:11:16,080 Speaker 1: because those aren't things that we really have regulatory cliracy on. 201 00:11:16,440 --> 00:11:18,559 Speaker 1: We're still not sure, for example, in the US, whether 202 00:11:19,160 --> 00:11:22,200 Speaker 1: um something is a security or a commodity, and that 203 00:11:22,240 --> 00:11:25,720 Speaker 1: makes things very difficult for Wall Street firms to really 204 00:11:25,720 --> 00:11:28,920 Speaker 1: think about, so crypto natives can can continue to keep 205 00:11:28,960 --> 00:11:32,040 Speaker 1: that edge and when volumes are this though, it's really 206 00:11:32,040 --> 00:11:35,160 Speaker 1: in those smaller tokens actually where there's there's potentially money 207 00:11:35,200 --> 00:11:37,080 Speaker 1: to be made for traders. It's where they can get 208 00:11:37,120 --> 00:11:40,680 Speaker 1: probably the best arbitrage opportunities, and that's not something that 209 00:11:40,840 --> 00:11:43,320 Speaker 1: big banks or Wall Street are anywhere close to offering 210 00:11:43,320 --> 00:11:46,880 Speaker 1: at the minute. Okay, let's pivot to regulation then, because 211 00:11:46,920 --> 00:11:50,079 Speaker 1: the UK just came out with a proposal. I guess 212 00:11:50,080 --> 00:11:53,200 Speaker 1: you can say, from a regulatory standpoint, at least bring 213 00:11:53,600 --> 00:11:57,480 Speaker 1: crypto and tried fy sort of under the same roof, 214 00:11:58,160 --> 00:12:00,400 Speaker 1: and when you did that story, what can tell us 215 00:12:00,440 --> 00:12:03,920 Speaker 1: about that and how significant does it look at this point? 216 00:12:04,600 --> 00:12:08,400 Speaker 1: So the UK announced a consultation this week that will 217 00:12:08,520 --> 00:12:11,280 Speaker 1: basically form the cornerstone of what will be the country's 218 00:12:11,320 --> 00:12:14,800 Speaker 1: broadest set of crypto regulations. It's announced a couple of 219 00:12:14,800 --> 00:12:18,640 Speaker 1: proposals last year and too, like specific areas like stable 220 00:12:18,720 --> 00:12:23,120 Speaker 1: coins or how we can promote crypto assets in general advertising. 221 00:12:23,640 --> 00:12:26,199 Speaker 1: But this is this is the big one um and 222 00:12:26,440 --> 00:12:30,000 Speaker 1: most of what it goes through things like how crypto 223 00:12:30,080 --> 00:12:33,880 Speaker 1: exchanges should be regulated, transitioning away from a bit of 224 00:12:34,160 --> 00:12:36,560 Speaker 1: a registration regime that the UK has a minute that 225 00:12:36,640 --> 00:12:39,560 Speaker 1: just looks at anti money laundering standards and how crypto 226 00:12:39,600 --> 00:12:42,400 Speaker 1: companies on masks can just be treated like regular financial 227 00:12:42,440 --> 00:12:45,959 Speaker 1: services companies. Um. There's some bits in there about how 228 00:12:46,440 --> 00:12:50,280 Speaker 1: crypto exchanges should put in place requirements for tokens issuers 229 00:12:50,280 --> 00:12:53,280 Speaker 1: when they want to listen a new token. UM. There's 230 00:12:53,320 --> 00:12:57,480 Speaker 1: also things like there should be stricter rules on custody, 231 00:12:57,679 --> 00:13:02,040 Speaker 1: on crypto lenders, on into ned areas. Basically everything that 232 00:13:02,080 --> 00:13:03,880 Speaker 1: you could think of as an issue that's been thrown 233 00:13:03,920 --> 00:13:07,040 Speaker 1: up in two with all the bankruptcies and collapses and 234 00:13:07,120 --> 00:13:10,000 Speaker 1: scandals we've had, the UK has tried to address in 235 00:13:10,040 --> 00:13:13,000 Speaker 1: this one document. It's interesting that you mentioned that, Emily, 236 00:13:13,080 --> 00:13:16,480 Speaker 1: because as I read this story, it's sort of like 237 00:13:16,600 --> 00:13:19,560 Speaker 1: it was kind of check check, check point by point, 238 00:13:19,720 --> 00:13:24,720 Speaker 1: kummingling things like the stuff that came up again and 239 00:13:24,760 --> 00:13:30,040 Speaker 1: again and again over two It almost reads like either 240 00:13:30,080 --> 00:13:34,120 Speaker 1: they anticipated this or they have been working very hard 241 00:13:34,120 --> 00:13:36,240 Speaker 1: in the last couple of weeks and months to get 242 00:13:36,240 --> 00:13:39,959 Speaker 1: this ready. Hum. I mean, it's it's definitely the latter, right. 243 00:13:40,040 --> 00:13:43,280 Speaker 1: So they started announcing these kinds of things back in 244 00:13:44,200 --> 00:13:46,960 Speaker 1: between January and April two, and it was all in 245 00:13:47,000 --> 00:13:50,520 Speaker 1: the kind of slight aftermath of coming off of bitcoin's peak, 246 00:13:50,559 --> 00:13:53,280 Speaker 1: but crypto was still almost in its ballmarket to bear 247 00:13:53,360 --> 00:13:56,719 Speaker 1: market transition mode. We hadn't yet had terror collapse or 248 00:13:56,720 --> 00:13:59,160 Speaker 1: anything like that, and the UK wanted to be a 249 00:13:59,200 --> 00:14:02,199 Speaker 1: global crypto hub. So these were all the kinds of 250 00:14:02,240 --> 00:14:04,840 Speaker 1: like stepping stones paving the way for a big crypto 251 00:14:04,920 --> 00:14:07,800 Speaker 1: framework that would make the UK this like haven for 252 00:14:07,840 --> 00:14:12,800 Speaker 1: crypto companies. Um then terror happened, and also the UK 253 00:14:12,920 --> 00:14:15,600 Speaker 1: had its own kind of government chaos with multiple prime 254 00:14:15,600 --> 00:14:19,040 Speaker 1: ministers and and all the rest we won't name. But 255 00:14:19,120 --> 00:14:20,920 Speaker 1: what that did is it gave the country time to 256 00:14:20,960 --> 00:14:24,400 Speaker 1: kind of step back, watch all this chaos unfold and 257 00:14:24,520 --> 00:14:28,080 Speaker 1: really know how to get that framework in place properly 258 00:14:28,120 --> 00:14:31,600 Speaker 1: so that it did address all those concerns. They obviously 259 00:14:31,640 --> 00:14:33,680 Speaker 1: picked now is the time to come out with that, 260 00:14:33,760 --> 00:14:35,760 Speaker 1: and we don't even know if there may be more 261 00:14:35,800 --> 00:14:38,920 Speaker 1: collapses to come. But FTX was one of the biggest 262 00:14:39,000 --> 00:14:41,640 Speaker 1: tests I think that crypto could have faced on that front, 263 00:14:41,640 --> 00:14:44,320 Speaker 1: and so making sure that exchanges is in here was 264 00:14:44,360 --> 00:14:48,520 Speaker 1: a really big thing. Well, it certainly feels like two 265 00:14:48,560 --> 00:14:53,040 Speaker 1: served as a kind of blueprint for exactly how different 266 00:14:53,080 --> 00:14:55,320 Speaker 1: things can go wrong in an industry. I mean, there 267 00:14:55,360 --> 00:14:57,640 Speaker 1: might be more to come in a way, but part 268 00:14:57,640 --> 00:15:01,000 Speaker 1: of me feels like we've seen so many things go 269 00:15:01,120 --> 00:15:03,760 Speaker 1: wrong in so many different ways that, as you said, Emily, 270 00:15:04,040 --> 00:15:07,040 Speaker 1: it would be somewhat surprising if regulators hadn't picked up 271 00:15:07,160 --> 00:15:12,120 Speaker 1: on some of those. I want to finish today's episode 272 00:15:12,440 --> 00:15:15,720 Speaker 1: with a little bit more of a sort of crypto 273 00:15:15,880 --> 00:15:22,520 Speaker 1: only and maybe more lighthearted topic, and that's n f 274 00:15:22,560 --> 00:15:26,280 Speaker 1: T s are coming to the Bitcoin blockchain, which is 275 00:15:26,480 --> 00:15:30,760 Speaker 1: not being received and equivocally happily. I guess you could say, 276 00:15:30,800 --> 00:15:35,720 Speaker 1: Emily looked into that. What's happening there? Yes, so, my 277 00:15:35,920 --> 00:15:39,200 Speaker 1: lovely colleague David pan He wrote out the story on Monday. 278 00:15:39,280 --> 00:15:42,560 Speaker 1: What we're looking at here is potentially a very big 279 00:15:42,560 --> 00:15:46,880 Speaker 1: deal for bitcoin because Ethereum as a blockchain has been 280 00:15:47,640 --> 00:15:51,400 Speaker 1: much faster and much more adaptable than it's older counterpart 281 00:15:51,880 --> 00:15:55,120 Speaker 1: um Bitcoin. For for all it's good and worth while 282 00:15:55,160 --> 00:15:57,600 Speaker 1: still being one of the more valuable tokens, the blockchain 283 00:15:57,640 --> 00:16:00,560 Speaker 1: itself hasn't been that useful. And if they're and meanwhile 284 00:16:00,600 --> 00:16:03,120 Speaker 1: has had n f T s and smart contracts and 285 00:16:03,160 --> 00:16:05,880 Speaker 1: all the old coins you could dream of. And so 286 00:16:06,320 --> 00:16:08,960 Speaker 1: in the more recent years, Bitcoin has been undergoing some 287 00:16:09,040 --> 00:16:11,080 Speaker 1: changes to try and make it so that the blockchain 288 00:16:11,120 --> 00:16:13,680 Speaker 1: itself can be a little bit more adaptable in similar ways, 289 00:16:14,160 --> 00:16:16,880 Speaker 1: and one big upgrade called tap root did actually make 290 00:16:16,920 --> 00:16:20,440 Speaker 1: it possible so that you could store images directly on 291 00:16:20,560 --> 00:16:23,600 Speaker 1: the network itself. That's something that even ethereum can't do 292 00:16:23,800 --> 00:16:26,440 Speaker 1: at the minute. An n f T on Ethereum, let's 293 00:16:26,480 --> 00:16:28,120 Speaker 1: you put in a link that will then point you 294 00:16:28,200 --> 00:16:30,400 Speaker 1: to a web page where your images, but the actual 295 00:16:30,520 --> 00:16:33,800 Speaker 1: picture itself isn't on the chain. And with this change, 296 00:16:34,480 --> 00:16:36,840 Speaker 1: a company called Ordinals said that they could put the 297 00:16:36,880 --> 00:16:39,360 Speaker 1: actual picture on the blob chain. The reason why people 298 00:16:39,360 --> 00:16:41,480 Speaker 1: aren't happy about that though, is that it takes up 299 00:16:41,520 --> 00:16:44,520 Speaker 1: a lot of space, and that's something that Bitcoin really 300 00:16:44,560 --> 00:16:46,640 Speaker 1: can't afford at the minute, given how slow it is 301 00:16:46,680 --> 00:16:48,840 Speaker 1: already compared to the rest. And if you're adding in 302 00:16:48,960 --> 00:16:51,520 Speaker 1: massive transactions for n f t s where you're storing 303 00:16:51,560 --> 00:16:53,280 Speaker 1: the whole picture on there and it takes up a 304 00:16:53,280 --> 00:16:57,160 Speaker 1: ton of block space, that's just a massive, massive turn off, 305 00:16:57,640 --> 00:17:01,800 Speaker 1: and it created a bit of a debate. Let's say, problems, problems, problems, 306 00:17:02,200 --> 00:17:05,720 Speaker 1: all right, thank you, Anna and Emily. This was Bloomberg 307 00:17:05,800 --> 00:17:10,439 Speaker 1: Senior editor for Crypto Anna Arera and Bloomberg reporter Emily Nicole. 308 00:17:10,880 --> 00:17:13,879 Speaker 1: You can find more of their reporting on the Bloomberg Terminal, 309 00:17:14,000 --> 00:17:17,560 Speaker 1: on Bloomberg dot com and on Twitter. For more, be 310 00:17:17,720 --> 00:17:21,800 Speaker 1: sure to check out our twice weekly newsletter, Bloomberg Crypto. 311 00:17:27,480 --> 00:17:30,600 Speaker 1: This is Bloomberg Crypto, a daily podcast from Bloomberg and 312 00:17:30,680 --> 00:17:33,639 Speaker 1: I Heeart Radio. For more shows from I Heeart Radio, 313 00:17:33,840 --> 00:17:36,959 Speaker 1: visit the I Heart Radio app, Apple Podcasts, or wherever 314 00:17:37,040 --> 00:17:40,560 Speaker 1: you get your podcasts. Send us your comments, questions, or 315 00:17:40,600 --> 00:17:43,600 Speaker 1: suggestions for the show to Crypto at Bloomberg dot net. 316 00:17:46,800 --> 00:17:50,520 Speaker 1: The supervising producer of Bloomberg Crypto is Vicky Vergolina. Our 317 00:17:50,560 --> 00:17:54,359 Speaker 1: senior producer is Janet Babin. Our producers are Mohammed Farup 318 00:17:54,440 --> 00:17:57,840 Speaker 1: and Sharon Burriro. Our associate producers are Ty Butler and 319 00:17:57,880 --> 00:18:02,200 Speaker 1: Moses on Them. Desta wonder At is our engineer. Original 320 00:18:02,280 --> 00:18:06,800 Speaker 1: music by Leo Sidron. I'm Stacy, Marie Ishmael. Have a 321 00:18:06,800 --> 00:18:07,399 Speaker 1: great weekend.