1
00:00:00,160 --> 00:00:03,200
Speaker 1: I remember just hearing about bitcoin so many years ago,

2
00:00:03,240 --> 00:00:09,280
Speaker 1: and no one paid attention to me. It's the big

3
00:00:09,320 --> 00:00:11,959
Speaker 1: take from Bloomberg News and I heart radio. I'm West

4
00:00:12,000 --> 00:00:18,040
Speaker 1: Cosova today. Crypto Is it a failed experiment or still

5
00:00:18,160 --> 00:00:26,400
Speaker 1: the way of the future. If you found yourself crypto

6
00:00:26,520 --> 00:00:29,400
Speaker 1: curious lately, maybe because of all the news around the

7
00:00:29,440 --> 00:00:33,240
Speaker 1: spectacular fall of Sam Bankman freed in is ft X Exchange,

8
00:00:33,760 --> 00:00:36,440
Speaker 1: We're with you. Even though bitcoin has now been around

9
00:00:36,440 --> 00:00:39,640
Speaker 1: since two thousand nine, I admit I still struggle to

10
00:00:39,760 --> 00:00:43,640
Speaker 1: get my head around how it works. Our producers asked

11
00:00:43,640 --> 00:00:45,720
Speaker 1: people in the streets in a few cities what they

12
00:00:45,720 --> 00:00:48,360
Speaker 1: want to know about crypto, and one question kept coming

13
00:00:48,440 --> 00:00:53,120
Speaker 1: up again and again, only one question, What is crypto?

14
00:00:53,800 --> 00:00:56,800
Speaker 1: What is crypto? What is it? Because I have no

15
00:00:56,880 --> 00:01:01,520
Speaker 1: idea what that actually is, we don't put the money,

16
00:01:01,920 --> 00:01:05,319
Speaker 1: so we asked Bloomberg opinion columnist Matt Levine to help

17
00:01:05,400 --> 00:01:09,959
Speaker 1: us out. So at its core, it's a sort of

18
00:01:10,200 --> 00:01:13,320
Speaker 1: centralized permission in form of money. How do we send

19
00:01:13,319 --> 00:01:16,000
Speaker 1: money to people without relying on banks, without relying on

20
00:01:16,120 --> 00:01:19,920
Speaker 1: the central intermediary mass day job is making sense of

21
00:01:19,920 --> 00:01:22,840
Speaker 1: the world of finance. So he's no stranger to weird

22
00:01:22,920 --> 00:01:26,480
Speaker 1: things people do. Recently, though, he turned his attention to

23
00:01:26,560 --> 00:01:29,600
Speaker 1: crypto in a forty thousand word opus that took over

24
00:01:29,640 --> 00:01:33,120
Speaker 1: an entire issue of Bloomberg Business Week. Read it. It

25
00:01:33,280 --> 00:01:36,600
Speaker 1: is very worth your time. But before we get started,

26
00:01:37,000 --> 00:01:39,800
Speaker 1: let's take a moment to explain a few common crypto

27
00:01:40,000 --> 00:01:42,560
Speaker 1: terms you heard Matt mentioned just now, because you're gonna

28
00:01:42,560 --> 00:01:48,840
Speaker 1: hear them in this episode. Unlike traditional currencies that are

29
00:01:48,880 --> 00:01:51,800
Speaker 1: controlled by the government I think the Federal Reserve or

30
00:01:51,840 --> 00:01:57,960
Speaker 1: Treasury Department, Bitcoin and other cryptocurrencies are decentralized and distributed.

31
00:01:58,320 --> 00:02:01,840
Speaker 1: That means transactions are made and kept track of across

32
00:02:01,920 --> 00:02:05,840
Speaker 1: a network of computers anyone can join by downloading the

33
00:02:05,880 --> 00:02:09,160
Speaker 1: open source software. There can be millions of computers on

34
00:02:09,200 --> 00:02:13,639
Speaker 1: a network sharing the same data. Another important thing crypto

35
00:02:13,800 --> 00:02:16,280
Speaker 1: is permissionless. If I want to sell you a crypto

36
00:02:16,320 --> 00:02:19,200
Speaker 1: token and you want to buy it, the transaction can

37
00:02:19,280 --> 00:02:21,640
Speaker 1: happen between us without having to go through a third

38
00:02:21,680 --> 00:02:24,360
Speaker 1: party like a bank or a regulator of any kind.

39
00:02:25,000 --> 00:02:29,040
Speaker 1: And crypto is designed to be secure and anonymous. Your

40
00:02:29,080 --> 00:02:32,440
Speaker 1: identity on a given currencies network is an encrypted string

41
00:02:32,480 --> 00:02:35,480
Speaker 1: of numbers and letters. At the heart of it. All

42
00:02:35,639 --> 00:02:39,680
Speaker 1: is what's called the blockchain. You'll hear that term a lot. Essentially,

43
00:02:39,720 --> 00:02:42,560
Speaker 1: a blockchain is an encrypted, up to date ledger of

44
00:02:42,760 --> 00:02:46,000
Speaker 1: every crypto transaction. Anyone on the network can see it

45
00:02:46,320 --> 00:02:49,560
Speaker 1: and check it on their own computer. Every ten minutes

46
00:02:49,680 --> 00:02:52,639
Speaker 1: or so, the latest transactions are added to the ledger.

47
00:02:53,120 --> 00:02:56,600
Speaker 1: That segment of crypto history is called a block, and

48
00:02:56,680 --> 00:02:59,800
Speaker 1: that block is then added to the long chain of

49
00:03:00,000 --> 00:03:03,960
Speaker 1: bocks that came before it, Thus black chain. The blockchain

50
00:03:04,080 --> 00:03:07,800
Speaker 1: lets you see transactions stretching back in time, informs a

51
00:03:07,880 --> 00:03:12,480
Speaker 1: permanent record that can't be changed. That's the idea anyway.

52
00:03:12,760 --> 00:03:16,079
Speaker 1: So how's all this working out in real life? Matt

53
00:03:16,160 --> 00:03:21,720
Speaker 1: Levine joins me now with some answers. Matt Levin, thanks

54
00:03:21,760 --> 00:03:25,240
Speaker 1: for being here, Thanks for having met. When the first cryptocurrency,

55
00:03:25,320 --> 00:03:28,839
Speaker 1: Bitcoin was released, what was the problem it's creators were

56
00:03:28,880 --> 00:03:31,720
Speaker 1: trying to solve. Bitcoin is a clever bit of like

57
00:03:32,360 --> 00:03:36,480
Speaker 1: cryptographic design to allow people to send money to each

58
00:03:36,520 --> 00:03:39,200
Speaker 1: other in a way that that doesn't rely on a bank.

59
00:03:39,240 --> 00:03:41,200
Speaker 1: It sort of relies on the sort of contribution of

60
00:03:41,200 --> 00:03:43,200
Speaker 1: the entire community to make sure that the ledger of

61
00:03:43,240 --> 00:03:45,840
Speaker 1: money is correct. So that's kind of the basic idea,

62
00:03:46,040 --> 00:03:48,120
Speaker 1: and then since then it's branched off into a lot

63
00:03:48,160 --> 00:03:50,840
Speaker 1: of directions. One is there different kinds of ways to

64
00:03:50,880 --> 00:03:54,400
Speaker 1: send digital money with different features. But another is that people,

65
00:03:54,720 --> 00:03:56,920
Speaker 1: you know, build on that basic idea to say, well,

66
00:03:56,960 --> 00:03:59,120
Speaker 1: what if we had, you know, our entire financial system

67
00:03:59,160 --> 00:04:02,560
Speaker 1: that had the same sort of decentralized permission list properties.

68
00:04:03,000 --> 00:04:06,440
Speaker 1: So what made you want to write for words digging

69
00:04:06,440 --> 00:04:08,720
Speaker 1: into those questions. The way I think about it is

70
00:04:08,760 --> 00:04:11,080
Speaker 1: there's a lot of technology and crypto that is like,

71
00:04:11,800 --> 00:04:14,160
Speaker 1: like the pipes are exposed, you kind of see the

72
00:04:14,200 --> 00:04:17,120
Speaker 1: workings of it. Like if you have money at a bank,

73
00:04:17,839 --> 00:04:20,680
Speaker 1: I know some stuff about how bank payments work, and

74
00:04:20,720 --> 00:04:23,160
Speaker 1: also about how like your money at a bank, it's

75
00:04:23,200 --> 00:04:25,280
Speaker 1: just like the liability of the bank, and like how

76
00:04:25,320 --> 00:04:27,000
Speaker 1: the sort of accounting for that works, and what the

77
00:04:27,040 --> 00:04:29,320
Speaker 1: sort of backstop of that is and why you can

78
00:04:29,360 --> 00:04:31,280
Speaker 1: trust that the money is there. But for most people

79
00:04:31,320 --> 00:04:32,880
Speaker 1: you don't need to know that. You can just like

80
00:04:32,960 --> 00:04:34,400
Speaker 1: you have money at the bank, and it's just sort

81
00:04:34,400 --> 00:04:38,320
Speaker 1: of like this accepted, trusted, like normal thing in crypto.

82
00:04:38,440 --> 00:04:41,640
Speaker 1: I think there's a lot of emphasis on people want

83
00:04:41,680 --> 00:04:43,640
Speaker 1: to tell you a lot about how the blockchain works.

84
00:04:43,839 --> 00:04:46,440
Speaker 1: And like exactly how the cryptography works. That you have

85
00:04:46,560 --> 00:04:49,080
Speaker 1: the money the victoins in the ledger, right, you're expected

86
00:04:49,120 --> 00:04:51,840
Speaker 1: to know more about the pipes to make any use

87
00:04:51,880 --> 00:04:53,479
Speaker 1: of it. And so I think that turns a lot

88
00:04:53,520 --> 00:04:57,159
Speaker 1: of people off, like completely, rightly, right, like completely it

89
00:04:57,240 --> 00:04:59,160
Speaker 1: is completely sensible to say I don't want to know

90
00:04:59,240 --> 00:05:01,960
Speaker 1: all that much, like my bank account has worked. So,

91
00:05:02,040 --> 00:05:03,480
Speaker 1: I mean, one reason I wrote the story is to

92
00:05:03,720 --> 00:05:05,440
Speaker 1: is to try to explain all of that piping in

93
00:05:05,440 --> 00:05:07,320
Speaker 1: one place and in a way that's not like a

94
00:05:07,320 --> 00:05:09,800
Speaker 1: wild eyed person grabbing you by the shoulders and shaking

95
00:05:09,800 --> 00:05:11,279
Speaker 1: you and saying you need to know about the blockchain.

96
00:05:11,320 --> 00:05:12,920
Speaker 1: But just like if you want to know the blockchain,

97
00:05:12,920 --> 00:05:15,039
Speaker 1: here it is, and like try to um, you know

98
00:05:15,680 --> 00:05:17,640
Speaker 1: abs straight away from it. So if you don't want

99
00:05:17,640 --> 00:05:19,960
Speaker 1: to know about the blockchain, you don't have to know

100
00:05:20,040 --> 00:05:23,159
Speaker 1: that much read it. The barriers to entry to learning

101
00:05:23,160 --> 00:05:26,279
Speaker 1: about crypto seemed very high. You're learning about like the

102
00:05:26,360 --> 00:05:28,599
Speaker 1: database architecture of how they keep the ledger, and like

103
00:05:28,640 --> 00:05:30,440
Speaker 1: you don't have to do that with a bank. The

104
00:05:30,480 --> 00:05:33,080
Speaker 1: other thing that is very much an important presence in

105
00:05:33,120 --> 00:05:36,200
Speaker 1: crypto is that the price of bitcoin went up from

106
00:05:36,320 --> 00:05:38,960
Speaker 1: zero to tens of thousands of dollars over the course

107
00:05:38,960 --> 00:05:40,720
Speaker 1: of like the first you know, ten or so years

108
00:05:40,720 --> 00:05:44,599
Speaker 1: of the existence of crypto, and that gets people thinking

109
00:05:44,600 --> 00:05:47,000
Speaker 1: other thoughts like I should buy a bitcoin, you know,

110
00:05:47,200 --> 00:05:49,080
Speaker 1: or I should buy some other crypto that will also

111
00:05:49,120 --> 00:05:53,000
Speaker 1: go out that much. And so it is in practical terms,

112
00:05:53,040 --> 00:05:55,159
Speaker 1: just like the the idea of crypto is really inseparable

113
00:05:55,200 --> 00:05:58,279
Speaker 1: from just financial speculation, and if you're in it for

114
00:05:58,360 --> 00:06:01,040
Speaker 1: financial speculation, you make care less about some of this

115
00:06:01,120 --> 00:06:05,800
Speaker 1: philosophical decentralization stuff. And I guess it's one question about

116
00:06:05,800 --> 00:06:10,239
Speaker 1: crypto that differentiates it from traditional currency, the dollar, where

117
00:06:10,320 --> 00:06:13,120
Speaker 1: there's speculation about the dollar and it can move up

118
00:06:13,160 --> 00:06:16,200
Speaker 1: and down to value, but it's not primarily there to

119
00:06:16,839 --> 00:06:19,680
Speaker 1: use as an investment that you hope will appreciate. So

120
00:06:20,320 --> 00:06:25,960
Speaker 1: is cryptocurrency a currency or is it an investment? Yeah,

121
00:06:26,000 --> 00:06:27,760
Speaker 1: I mean I think it's it's almost not at all

122
00:06:27,839 --> 00:06:31,200
Speaker 1: a currency at least like the big ones like bitcoin

123
00:06:31,279 --> 00:06:34,080
Speaker 1: and ethereum are really kind of have the property of

124
00:06:34,200 --> 00:06:38,919
Speaker 1: being almost like stock in some sort of decentralized company,

125
00:06:39,080 --> 00:06:42,200
Speaker 1: some project that you're betting will do well, and if

126
00:06:42,240 --> 00:06:44,920
Speaker 1: the project does well, then the tokens will be worth

127
00:06:44,960 --> 00:06:47,480
Speaker 1: a lot of money and you get like a sort

128
00:06:47,520 --> 00:06:49,880
Speaker 1: of equity like return. And in fact, these tokens often

129
00:06:49,880 --> 00:06:51,840
Speaker 1: turn out to be kind of correlated with um with

130
00:06:51,920 --> 00:06:54,039
Speaker 1: tex stocks, because like it turns out there kind of

131
00:06:54,040 --> 00:06:56,480
Speaker 1: our tex stocks. Bitcoin is a little bit like that.

132
00:06:56,520 --> 00:06:59,240
Speaker 1: It's a little bit it has other functions that sort

133
00:06:59,240 --> 00:07:02,640
Speaker 1: of people talk about digital gold, where bitcoin is this

134
00:07:02,760 --> 00:07:05,440
Speaker 1: like store of value where some number of people are

135
00:07:05,440 --> 00:07:08,160
Speaker 1: buying bitcoin as a hedge to inflation or just like

136
00:07:08,240 --> 00:07:10,400
Speaker 1: a you know, a thing that they think is a separate,

137
00:07:10,440 --> 00:07:12,960
Speaker 1: like safe place to store value. And so it's like

138
00:07:12,960 --> 00:07:15,920
Speaker 1: a little bit of currency like properties. But what it

139
00:07:16,040 --> 00:07:19,640
Speaker 1: isn't is a way to send cash digitally. It's like

140
00:07:20,080 --> 00:07:22,600
Speaker 1: not I say this, and then bitcoin people get mad

141
00:07:22,640 --> 00:07:24,480
Speaker 1: at me, But it's like not really an ideal way

142
00:07:24,680 --> 00:07:26,880
Speaker 1: to buy a sandwich, right, you can do it, you know.

143
00:07:26,920 --> 00:07:29,040
Speaker 1: I've been to like barber shops that take bitcoin, and

144
00:07:29,080 --> 00:07:32,040
Speaker 1: like online there are more places that take bitcoin um

145
00:07:32,080 --> 00:07:35,840
Speaker 1: although it's still not you know, universal, But because bitcoin

146
00:07:35,880 --> 00:07:37,640
Speaker 1: fluctuates so much in value, is you said, it's not

147
00:07:37,680 --> 00:07:40,400
Speaker 1: like the best you know, not the best currency right

148
00:07:40,400 --> 00:07:42,560
Speaker 1: for for much of its existence and mostly went up

149
00:07:42,560 --> 00:07:44,720
Speaker 1: in value and so if you had bitcoin because you

150
00:07:44,720 --> 00:07:46,640
Speaker 1: thought bitcoin would go up in value, it would be

151
00:07:46,680 --> 00:07:48,560
Speaker 1: kind of silly to spend it on a sandwich. So

152
00:07:48,600 --> 00:07:52,400
Speaker 1: it doesn't really have like a supercurrency like function. That's

153
00:07:52,600 --> 00:07:54,640
Speaker 1: one thing I wanted to ask you about, which was

154
00:07:55,000 --> 00:07:58,679
Speaker 1: the idea of the inherent value of crypto or really

155
00:07:58,960 --> 00:08:02,080
Speaker 1: of any money. When you think about a dollar, Uh,

156
00:08:02,160 --> 00:08:05,680
Speaker 1: it has value because I suppose it's tied to the

157
00:08:05,680 --> 00:08:07,760
Speaker 1: state of the United States, and it's been a pretty

158
00:08:07,760 --> 00:08:11,160
Speaker 1: good bet. What is in the case of say bitcoin,

159
00:08:11,840 --> 00:08:15,600
Speaker 1: the thing that you reference it to to say that

160
00:08:15,720 --> 00:08:18,880
Speaker 1: it has value. Yeah, I mean it's the same. There's

161
00:08:18,920 --> 00:08:22,880
Speaker 1: some sort of like social collective project and some social

162
00:08:22,960 --> 00:08:26,240
Speaker 1: collective acceptance that like, this is the currency of that project. Right,

163
00:08:26,240 --> 00:08:28,920
Speaker 1: And in the US, the project is you know, big

164
00:08:28,960 --> 00:08:31,400
Speaker 1: and has an army and a two hundred years old

165
00:08:31,440 --> 00:08:33,920
Speaker 1: or whatever. Like the project that the US dollar is

166
00:08:33,960 --> 00:08:36,200
Speaker 1: linked to is pretty well understood, and you know, there's

167
00:08:36,200 --> 00:08:38,240
Speaker 1: a central bank that tries to maintain the value of

168
00:08:38,240 --> 00:08:41,680
Speaker 1: the dollar. In bitcoin, it's like this kind of new

169
00:08:41,840 --> 00:08:44,680
Speaker 1: utopian crypto project, right. But it's a lot of people, right,

170
00:08:44,720 --> 00:08:47,080
Speaker 1: it's a lot of people online who believe in this

171
00:08:47,120 --> 00:08:51,160
Speaker 1: project and believe, like in the value of bitcoin a

172
00:08:51,200 --> 00:08:54,280
Speaker 1: cool piece of technology, or as a way to fight censorship,

173
00:08:54,360 --> 00:08:57,000
Speaker 1: or as an actual way to transfer money easily. Like,

174
00:08:57,240 --> 00:08:59,040
Speaker 1: there are a lot of different sets of beliefs about it,

175
00:08:59,040 --> 00:09:01,200
Speaker 1: but it's you know, fundamental. The value comes from like

176
00:09:01,280 --> 00:09:04,280
Speaker 1: a bunch of people in a market working out how

177
00:09:04,320 --> 00:09:06,680
Speaker 1: much they think it's worth twelve years in. It's like,

178
00:09:06,880 --> 00:09:09,280
Speaker 1: it seems plausible that like a lot of people believe

179
00:09:09,320 --> 00:09:12,000
Speaker 1: it's worth something in a fairly robust way. You know.

180
00:09:12,080 --> 00:09:14,400
Speaker 1: One thing I would say about stocks is that there

181
00:09:14,480 --> 00:09:18,320
Speaker 1: is some kind of floor under the value of a

182
00:09:18,360 --> 00:09:20,800
Speaker 1: regular stock at its cash flows, right, like any more

183
00:09:20,920 --> 00:09:22,880
Speaker 1: or less. Right, Like, if you have a stock trade

184
00:09:23,080 --> 00:09:24,760
Speaker 1: like a penny, you can buy all of it and

185
00:09:24,800 --> 00:09:26,360
Speaker 1: then you own the company and then you can like

186
00:09:26,600 --> 00:09:29,400
Speaker 1: you know, use its factories or solids factories or whatever.

187
00:09:29,720 --> 00:09:31,360
Speaker 1: But there's no cap on the price of a stock,

188
00:09:31,440 --> 00:09:34,040
Speaker 1: right If people really really like the stock, then it

189
00:09:34,120 --> 00:09:37,079
Speaker 1: can go to, you know, whatever price you want. And

190
00:09:37,400 --> 00:09:39,800
Speaker 1: the fact that it's cash flows don't support that price

191
00:09:39,880 --> 00:09:42,080
Speaker 1: is like, you know, sort of an interesting academic point,

192
00:09:42,080 --> 00:09:44,880
Speaker 1: but it doesn't necessarily affect the market price, at least

193
00:09:44,920 --> 00:09:47,080
Speaker 1: in the short term, and so yeah, I mean that's

194
00:09:47,080 --> 00:09:49,040
Speaker 1: true a bitcoin, but it's also true of like you know,

195
00:09:49,440 --> 00:09:51,960
Speaker 1: like loosely speaking, it's true of gold as well, right,

196
00:09:52,000 --> 00:09:53,600
Speaker 1: I mean, like this is like a thing that exists

197
00:09:53,600 --> 00:09:56,040
Speaker 1: in the financial world where like things have value because

198
00:09:56,040 --> 00:09:57,760
Speaker 1: there is a community of people who accept that they

199
00:09:57,760 --> 00:10:01,160
Speaker 1: have value, and it's useful for people to have this

200
00:10:01,240 --> 00:10:04,840
Speaker 1: sort of accepted thing that carries value. And you know,

201
00:10:04,920 --> 00:10:07,560
Speaker 1: like the first day of bitcoin, it sounds insane to

202
00:10:07,600 --> 00:10:09,199
Speaker 1: be like, this is going to be a new thing

203
00:10:09,360 --> 00:10:11,960
Speaker 1: that will be widely accepted to have value. But you know,

204
00:10:12,040 --> 00:10:13,920
Speaker 1: years and years in like this turned out to be

205
00:10:13,920 --> 00:10:17,960
Speaker 1: true that people widely accepted at that value. But I

206
00:10:17,960 --> 00:10:21,320
Speaker 1: suppose if we had a purely barter economy where you

207
00:10:21,440 --> 00:10:23,760
Speaker 1: come and fix my sink and I give you a

208
00:10:23,760 --> 00:10:27,120
Speaker 1: sandwich and we agree that that's the transaction, and then

209
00:10:27,160 --> 00:10:28,319
Speaker 1: one day I said you, well, I'm not going to

210
00:10:28,360 --> 00:10:29,840
Speaker 1: give you a sandwich. I'm gonna give you this piece

211
00:10:29,840 --> 00:10:31,920
Speaker 1: of paper which represents what I think is the value

212
00:10:31,920 --> 00:10:34,000
Speaker 1: of the sandwich. You would say, well, that's crazy, And

213
00:10:34,080 --> 00:10:36,240
Speaker 1: yet that's kind of what we do now because everyone

214
00:10:36,280 --> 00:10:39,240
Speaker 1: agrees in it. So is it that much different with bitcoin?

215
00:10:40,320 --> 00:10:42,240
Speaker 1: There's like a sort of deep answer to that question,

216
00:10:42,280 --> 00:10:44,400
Speaker 1: which is that like dollar sort of represented debt, right,

217
00:10:44,440 --> 00:10:47,160
Speaker 1: like a dollar represents I think in the first instance,

218
00:10:47,240 --> 00:10:49,640
Speaker 1: it's it's you know, the dollar in my beap accunting

219
00:10:49,720 --> 00:10:52,920
Speaker 1: is like a dollar the bank owes me. And in theory,

220
00:10:52,960 --> 00:10:55,120
Speaker 1: like every dollar kind of works that way. Every dollar

221
00:10:55,240 --> 00:10:59,559
Speaker 1: is a is a debt obligation, and you know, broadly

222
00:10:59,640 --> 00:11:03,360
Speaker 1: speak king philosophically speaking, a dollar sort of represents the

223
00:11:03,440 --> 00:11:06,160
Speaker 1: obligation of somebody else in society to do one dollars

224
00:11:06,160 --> 00:11:08,240
Speaker 1: worth of work for you. Bitcoin is like a little

225
00:11:08,240 --> 00:11:10,600
Speaker 1: different because it's because no bitcoins are debts, right, Like

226
00:11:10,600 --> 00:11:12,920
Speaker 1: bitcoins exist on their own. They're not like a leisure

227
00:11:13,400 --> 00:11:15,160
Speaker 1: entry at a bank where the bank has to give

228
00:11:15,200 --> 00:11:17,880
Speaker 1: you a bitcoin. It's just its own thing. But like, yeah,

229
00:11:17,960 --> 00:11:20,600
Speaker 1: like in theory, a bitcoin is the same sort of

230
00:11:20,640 --> 00:11:23,240
Speaker 1: thing where it's like a claim on you know, on

231
00:11:23,360 --> 00:11:25,840
Speaker 1: resources and someone doing something for you in the future,

232
00:11:26,080 --> 00:11:28,120
Speaker 1: where like if I give you a bitcoin, you'll do

233
00:11:28,200 --> 00:11:31,280
Speaker 1: you know, seventeen thousand dollars worth of you know, journalism

234
00:11:31,320 --> 00:11:34,640
Speaker 1: for me or whatever. Right, and uh not everyone accepts that, right,

235
00:11:34,679 --> 00:11:35,960
Speaker 1: Like a lot of people don't want to be hidden

236
00:11:35,960 --> 00:11:38,760
Speaker 1: bitcoin for you know, often for good reasons, but like

237
00:11:38,840 --> 00:11:41,000
Speaker 1: there's still enough of a sort of exchange mechanism where like,

238
00:11:41,240 --> 00:11:43,360
Speaker 1: if I have a bitcoin, I can sort of count

239
00:11:43,400 --> 00:11:46,480
Speaker 1: on getting you know, seventeen thousand dollars worth of sandwiches

240
00:11:46,520 --> 00:11:49,440
Speaker 1: for it at some point in the future. My conversation

241
00:11:49,520 --> 00:12:05,640
Speaker 1: with Matt Living continues after the break, I thought that

242
00:12:05,720 --> 00:12:11,840
Speaker 1: it's one currency that they can really not duplicate. I

243
00:12:11,880 --> 00:12:13,920
Speaker 1: set up a coin based account and then decided that

244
00:12:13,960 --> 00:12:16,800
Speaker 1: I couldn't be asked to get my ID documents because

245
00:12:16,800 --> 00:12:19,960
Speaker 1: I thought the whole point of crypto is it's anonymous. Well,

246
00:12:20,000 --> 00:12:24,679
Speaker 1: it's supposed to be unhappable, uh and out of the

247
00:12:24,800 --> 00:12:28,520
Speaker 1: hands of centralized authorities, and that's one of the selling points.

248
00:12:30,559 --> 00:12:34,240
Speaker 1: These cryptocurrencies uprate and are able to operate because people

249
00:12:34,520 --> 00:12:38,080
Speaker 1: trust the system is valid and they believe that it

250
00:12:38,160 --> 00:12:41,880
Speaker 1: will continue to be valid, that the system works. And

251
00:12:41,960 --> 00:12:45,080
Speaker 1: yet it's under attack a lot, like people lose bitcoin,

252
00:12:45,200 --> 00:12:48,480
Speaker 1: people hack it, uh, and and it fails quite a bit.

253
00:12:49,400 --> 00:12:51,920
Speaker 1: I would dry a distinction there. So there are like

254
00:12:52,040 --> 00:12:55,000
Speaker 1: crypto protocols of which you know, Bitcoin is the most famous,

255
00:12:55,080 --> 00:12:59,800
Speaker 1: and I don't think that a real bitcoin booster would

256
00:12:59,800 --> 00:13:03,360
Speaker 1: say that you need to trust in the protocol, right,

257
00:13:03,520 --> 00:13:05,400
Speaker 1: and the idea of it kind of that the protocol

258
00:13:05,480 --> 00:13:07,600
Speaker 1: is all open source software, you can see how it runs.

259
00:13:07,800 --> 00:13:10,199
Speaker 1: The ledger is all you know, open and transparent. It's

260
00:13:10,200 --> 00:13:12,559
Speaker 1: all cryptographically encoded in a way that you can prove

261
00:13:12,880 --> 00:13:15,560
Speaker 1: that you own a bitcoin essentially, and so you sort

262
00:13:15,559 --> 00:13:18,000
Speaker 1: of have to trust that the system will continue operating well.

263
00:13:18,200 --> 00:13:20,280
Speaker 1: And like the reason you would trust that is because

264
00:13:20,280 --> 00:13:23,440
Speaker 1: of essentially like economic incentives that are built into the

265
00:13:23,440 --> 00:13:26,680
Speaker 1: open protocol. But compared to anything else in your life,

266
00:13:26,679 --> 00:13:29,160
Speaker 1: it is a relatively low trust thing. It's a it's

267
00:13:29,160 --> 00:13:31,160
Speaker 1: a system where you don't really have to take things

268
00:13:31,200 --> 00:13:33,080
Speaker 1: on faith, where you can kind of like read the

269
00:13:33,120 --> 00:13:35,840
Speaker 1: code yourself, read the blockchain yourself, and be really really

270
00:13:35,880 --> 00:13:38,240
Speaker 1: satisfy yourself to a pretty high to greet of certainty

271
00:13:38,240 --> 00:13:40,480
Speaker 1: that everything is working as that's supposed to. And so,

272
00:13:40,559 --> 00:13:43,120
Speaker 1: like you know, people in the cryptor world often are

273
00:13:43,480 --> 00:13:45,640
Speaker 1: sort of philosophically opposed to trust. They say, we don't

274
00:13:45,640 --> 00:13:47,280
Speaker 1: want to trust banks, We don't wanta have to trust anyone.

275
00:13:47,320 --> 00:13:48,640
Speaker 1: You want to be able to trust our own eyes,

276
00:13:48,800 --> 00:13:51,200
Speaker 1: objective evidence on like the code, you know, and like

277
00:13:51,320 --> 00:13:54,360
Speaker 1: that kind of works like more or less like with

278
00:13:54,400 --> 00:13:56,760
Speaker 1: a lot of exceptions, but like Bitcoin has not been hacked, right,

279
00:13:56,760 --> 00:13:59,360
Speaker 1: Like the one has ever hacked the bitcoin blockchain. Some

280
00:13:59,400 --> 00:14:02,520
Speaker 1: of the protocols have been like smart counting. There's like

281
00:14:02,559 --> 00:14:06,080
Speaker 1: they're hacking kind of thing. Blockchain is basically it's court.

282
00:14:06,080 --> 00:14:07,960
Speaker 1: It's like a list of transactions, and it's a list

283
00:14:08,000 --> 00:14:11,040
Speaker 1: of transactions that's maintained in a way where everyone in

284
00:14:11,040 --> 00:14:13,520
Speaker 1: the bitcoin community kind of agrees on the list, and

285
00:14:13,559 --> 00:14:17,200
Speaker 1: there is a timestamp, like cryptographically timestamp, so you know

286
00:14:17,280 --> 00:14:20,880
Speaker 1: which transactions happened when, and it's all you know, the

287
00:14:20,880 --> 00:14:22,880
Speaker 1: word that they use is immutable, right, It's like no

288
00:14:22,920 --> 00:14:25,040
Speaker 1: one can mess with the list. But the thing that

289
00:14:25,120 --> 00:14:27,120
Speaker 1: is more sellient right now is that it turns out

290
00:14:27,160 --> 00:14:29,640
Speaker 1: that a lot of people in crypto don't actually really

291
00:14:29,680 --> 00:14:32,240
Speaker 1: follow all these like all these prescriptions that you shouldn't

292
00:14:32,280 --> 00:14:34,040
Speaker 1: trust anyone, right, Like a lot of people in crypto

293
00:14:34,120 --> 00:14:36,840
Speaker 1: are like, Okay, bitcoin goes up, I'd like to buy bitcoin.

294
00:14:36,920 --> 00:14:38,360
Speaker 1: It's the easiest way to buy a bitcoin. And the

295
00:14:38,360 --> 00:14:41,160
Speaker 1: easiest way to buy bitcoin is like there's some website

296
00:14:41,160 --> 00:14:42,640
Speaker 1: where you go and you put in your credit card

297
00:14:42,640 --> 00:14:44,560
Speaker 1: and they'll give you some bitcoin, and when they do that,

298
00:14:44,600 --> 00:14:46,720
Speaker 1: like you're not like, that's not the blockchain, that's not

299
00:14:46,800 --> 00:14:48,400
Speaker 1: you know, you're not like reading the code, like they're

300
00:14:48,440 --> 00:14:50,080
Speaker 1: just holding the bitcoin for you, and they've got like

301
00:14:50,120 --> 00:14:53,160
Speaker 1: a little spreadsheet that says we owe you one bitcoin. Right,

302
00:14:53,200 --> 00:14:55,800
Speaker 1: it's just like a bank, except that it's totally unregulated

303
00:14:55,960 --> 00:14:59,440
Speaker 1: and often much more poorly run than than an actual bank.

304
00:15:02,360 --> 00:15:06,400
Speaker 1: And so most of the scandals and not all, and

305
00:15:06,440 --> 00:15:09,560
Speaker 1: there are some that are like more in the decentralized space,

306
00:15:09,600 --> 00:15:12,240
Speaker 1: but most of the scandals are in what crypto people

307
00:15:12,320 --> 00:15:15,280
Speaker 1: call centralized finance, where instead of like buying a bitcoin

308
00:15:15,360 --> 00:15:18,560
Speaker 1: on the blockchain and checking the coode, you like essentially

309
00:15:18,960 --> 00:15:21,200
Speaker 1: have some company with a website where they owe you

310
00:15:21,240 --> 00:15:24,160
Speaker 1: a bitcoin, and when that happens, the odds of them

311
00:15:24,160 --> 00:15:26,880
Speaker 1: stealing or losing your bitcround are like shockingly high. Right

312
00:15:27,480 --> 00:15:29,240
Speaker 1: exchanges like the sort of term of art that people

313
00:15:29,320 --> 00:15:31,040
Speaker 1: use for these companies that will sell you a bit crnd,

314
00:15:31,080 --> 00:15:33,320
Speaker 1: they're like they sort of work like stock exchanges, but

315
00:15:33,360 --> 00:15:35,920
Speaker 1: not they're not exactly the same as real stock exchanges.

316
00:15:36,320 --> 00:15:38,880
Speaker 1: Over and over again we see crypto exchanges get hacked

317
00:15:39,160 --> 00:15:42,560
Speaker 1: or lose the money in in sort of dumb ways

318
00:15:42,840 --> 00:15:46,880
Speaker 1: or um steal the money. Well, speaking of stealing the money,

319
00:15:47,160 --> 00:15:50,120
Speaker 1: not long after you wrote your big piece on crypto,

320
00:15:50,480 --> 00:15:53,640
Speaker 1: we saw a very big event having to do with

321
00:15:53,640 --> 00:15:56,360
Speaker 1: one of the biggest players in the crypto space. Can

322
00:15:56,400 --> 00:15:59,800
Speaker 1: you talk about exactly what happened in what effect that

323
00:16:00,120 --> 00:16:01,800
Speaker 1: his head? And of course I'm just talking about Sam

324
00:16:01,840 --> 00:16:05,560
Speaker 1: Bankman Free, I should say I don't know exactly what happened.

325
00:16:05,600 --> 00:16:07,400
Speaker 1: I can. I can give you like a fair amount

326
00:16:07,400 --> 00:16:10,040
Speaker 1: of detail that I'm pretty confident in, but but we're

327
00:16:10,040 --> 00:16:12,440
Speaker 1: still like not quite all the way there I knowing

328
00:16:12,480 --> 00:16:14,840
Speaker 1: exactly what happened. But the basic story is that Sam

329
00:16:14,840 --> 00:16:19,200
Speaker 1: Bankman Freed is this sort of charismatic young crypto billionaire

330
00:16:19,280 --> 00:16:22,240
Speaker 1: who ran an exchange, one of these companies that you know,

331
00:16:22,280 --> 00:16:23,880
Speaker 1: takes your credit card and gives you a bitcoin, an

332
00:16:23,880 --> 00:16:27,480
Speaker 1: exchange called ft X. And he also, like he started

333
00:16:27,480 --> 00:16:30,320
Speaker 1: that exchange, he would previously run this trading firm called Alameda,

334
00:16:30,400 --> 00:16:33,160
Speaker 1: like a hedgeho on. Basically that traded crypto. I made

335
00:16:33,160 --> 00:16:35,320
Speaker 1: a lot of money. And the origin story of f

336
00:16:35,400 --> 00:16:37,480
Speaker 1: TX is like they were like, we are good at

337
00:16:37,480 --> 00:16:39,440
Speaker 1: trading bitcoin and making a lot of money, but we

338
00:16:39,440 --> 00:16:42,080
Speaker 1: we would rather trade on a better exchange. We need

339
00:16:42,120 --> 00:16:44,040
Speaker 1: like a better user interface on the exchange. We need

340
00:16:44,080 --> 00:16:45,720
Speaker 1: to trust the exchange more. So they started their own

341
00:16:45,720 --> 00:16:49,440
Speaker 1: exchange and it became one of the biggest crypto exchanges.

342
00:16:49,440 --> 00:16:51,480
Speaker 1: It was based on the Palmers. It was sort of

343
00:16:51,520 --> 00:16:54,640
Speaker 1: known for being you know, a good like good user interface,

344
00:16:54,720 --> 00:16:58,040
Speaker 1: high tech exchange. Sam Bankman Freed or SPF as everyone

345
00:16:58,080 --> 00:17:00,680
Speaker 1: calls him, sort of became a media figure and like

346
00:17:00,840 --> 00:17:02,720
Speaker 1: was and and a and a figure of he like

347
00:17:02,720 --> 00:17:04,840
Speaker 1: he testified before Congress and he was very involved in

348
00:17:04,920 --> 00:17:08,399
Speaker 1: lobbying for crypto regulation, and so ftix definitely created this

349
00:17:08,480 --> 00:17:12,359
Speaker 1: impression that it was a well regulated where like regulatory friendly,

350
00:17:12,440 --> 00:17:15,360
Speaker 1: sort of upstanding exchange. And then it came out one

351
00:17:15,400 --> 00:17:17,880
Speaker 1: day that they had just taken all the customer money

352
00:17:17,880 --> 00:17:20,000
Speaker 1: and that was the end of fd X. Like they

353
00:17:20,040 --> 00:17:22,600
Speaker 1: sort of, you know, the CEO of a rival exchange

354
00:17:22,640 --> 00:17:25,800
Speaker 1: tweeted something mean about the customers started with throwing money,

355
00:17:25,880 --> 00:17:28,520
Speaker 1: and SPF took to Twitter and it was like, everything's fine,

356
00:17:28,560 --> 00:17:30,160
Speaker 1: we have plenty of money. And then like the next

357
00:17:30,240 --> 00:17:32,040
Speaker 1: day they halted withdrawals and then like two days later

358
00:17:32,040 --> 00:17:34,800
Speaker 1: they filed for bankruptcy. And it turns out that there

359
00:17:34,880 --> 00:17:37,320
Speaker 1: is something like an eight billion dollar hole in their

360
00:17:37,359 --> 00:17:41,320
Speaker 1: balance sheet where they took money from customers and forgot

361
00:17:41,359 --> 00:17:44,840
Speaker 1: about it, allegedly and gave it to Alameda, the trading firm,

362
00:17:44,880 --> 00:17:47,720
Speaker 1: which then allegedly lost it or spent it on like

363
00:17:48,040 --> 00:17:52,480
Speaker 1: effective altruism projects and venture capital investments and bar tabs

364
00:17:52,520 --> 00:17:55,600
Speaker 1: at the Margaritaville resort in the Bahamas. So it's a

365
00:17:55,640 --> 00:17:58,480
Speaker 1: really bad story. You know, in broad strokes, that similar

366
00:17:58,480 --> 00:18:01,440
Speaker 1: to running like a stock brokerage or uh financial brokerage

367
00:18:01,440 --> 00:18:04,160
Speaker 1: firm and just taking all the customer money and using

368
00:18:04,160 --> 00:18:06,639
Speaker 1: it for yourself, except that instead of stocks and bombs,

369
00:18:06,680 --> 00:18:10,879
Speaker 1: they're trading cryptocurrencies. Back in April, you actually put that

370
00:18:10,960 --> 00:18:13,760
Speaker 1: question to Sam Bankman Freed himself on an episode of

371
00:18:13,800 --> 00:18:18,680
Speaker 1: Bloomberg's Odd Lots podcast, like you're just like, well, I'm

372
00:18:18,760 --> 00:18:21,879
Speaker 1: in the ponzi business and it's pretty good. So on

373
00:18:21,920 --> 00:18:24,480
Speaker 1: the one hand, I think that's a pretty reasonable response.

374
00:18:24,560 --> 00:18:27,080
Speaker 1: But let me play around with this a little bit, right,

375
00:18:27,119 --> 00:18:30,200
Speaker 1: because that's one framing of this, and I think there's

376
00:18:30,280 --> 00:18:33,639
Speaker 1: like a sort of depressing amount of ablidity. I should

377
00:18:33,640 --> 00:18:36,880
Speaker 1: say here that on Tuesday, Sam Bankman Freed pleaded not

378
00:18:37,000 --> 00:18:42,160
Speaker 1: guilty to charges that he cheated his investors. There's nothing

379
00:18:42,760 --> 00:18:45,879
Speaker 1: you know, block chaining about it. There's nothing decentralized about it.

380
00:18:45,920 --> 00:18:48,360
Speaker 1: For the most part, As I said, like a lot

381
00:18:48,359 --> 00:18:53,560
Speaker 1: of people are not in crypto because they are extremely

382
00:18:53,600 --> 00:18:57,480
Speaker 1: adept technologists who are reading the source code and like

383
00:18:57,680 --> 00:19:01,200
Speaker 1: reviewing the cryptography of the blockchain and and are making

384
00:19:01,240 --> 00:19:03,280
Speaker 1: themselves confident that everything is upstanding, right. A lot of

385
00:19:03,280 --> 00:19:05,800
Speaker 1: people in crypto because they think it'll go up, or

386
00:19:05,800 --> 00:19:08,640
Speaker 1: because they have some sort of like basic philosophical commitment

387
00:19:08,640 --> 00:19:10,160
Speaker 1: to it where they think it's like a cool thing

388
00:19:10,240 --> 00:19:14,680
Speaker 1: to decentralized finance or like you know, unregulated remittances or whatever.

389
00:19:15,119 --> 00:19:17,280
Speaker 1: But in practice they just want to put their money

390
00:19:17,320 --> 00:19:20,359
Speaker 1: at a company they trust. And f t X was

391
00:19:20,440 --> 00:19:23,280
Speaker 1: like really high on the list of companies people trusted.

392
00:19:23,480 --> 00:19:26,359
Speaker 1: It was a really big exchange. It set itself up

393
00:19:26,400 --> 00:19:28,960
Speaker 1: as being like one of the more regulatory friendly, trying

394
00:19:29,000 --> 00:19:32,800
Speaker 1: to make crypto, you know, more mainstream and normal and regulated.

395
00:19:33,040 --> 00:19:35,879
Speaker 1: It Also, like this summer, a lot of other crypto

396
00:19:35,920 --> 00:19:38,399
Speaker 1: projects ran into a lot of trouble and f t

397
00:19:38,680 --> 00:19:40,560
Speaker 1: X or Sam bankman Fried was kind of there to

398
00:19:40,600 --> 00:19:43,320
Speaker 1: bail them all out, you know, people called him Jpeg Morgan.

399
00:19:43,400 --> 00:19:47,320
Speaker 1: He was like the the the Jp Morgan of crypto finance,

400
00:19:47,359 --> 00:19:50,800
Speaker 1: like rescuing all of the worst projects. And so when

401
00:19:51,240 --> 00:19:54,199
Speaker 1: f t X imploded through what seems to be a

402
00:19:54,200 --> 00:19:55,840
Speaker 1: lot of fraud and also a lot of like really

403
00:19:55,840 --> 00:19:59,440
Speaker 1: inept management and like bad accounting and bad risk management

404
00:20:00,080 --> 00:20:03,000
Speaker 1: that happened, it really shook a lot of people's trust,

405
00:20:03,600 --> 00:20:06,639
Speaker 1: not in like crypto as like a concept, but in

406
00:20:06,680 --> 00:20:10,400
Speaker 1: the actual existing, you know, crypto system. Right now, you're like, yeah,

407
00:20:10,440 --> 00:20:13,320
Speaker 1: everything is really, you know, kind of kind of sketchy,

408
00:20:13,440 --> 00:20:17,480
Speaker 1: and that doesn't like undermine the technological case for decentralized finance,

409
00:20:17,520 --> 00:20:21,040
Speaker 1: but it does undermine like the chances that black Rock

410
00:20:21,119 --> 00:20:23,200
Speaker 1: and Vanguard are going to invest a lot of client

411
00:20:23,240 --> 00:20:26,719
Speaker 1: money into crypto because just like the whole space just

412
00:20:26,720 --> 00:20:29,000
Speaker 1: looks a little bit sketchier, right, Like whether whether or

413
00:20:29,040 --> 00:20:32,679
Speaker 1: not any particular like custodian or blockchain has anything to

414
00:20:32,720 --> 00:20:34,800
Speaker 1: do with any of this. If your priors were like

415
00:20:35,160 --> 00:20:37,600
Speaker 1: crypto is kind of sketchy, but getting more mainstream, like

416
00:20:37,720 --> 00:20:40,040
Speaker 1: that's taken a step back now it's like crypto like

417
00:20:40,119 --> 00:20:42,320
Speaker 1: it's still pretty sketchy, you know, Like in my crypto story,

418
00:20:42,320 --> 00:20:45,000
Speaker 1: I wrote that it used to be that the fate

419
00:20:45,000 --> 00:20:47,320
Speaker 1: of every crypto exchange was the stale customers money, because

420
00:20:47,359 --> 00:20:49,280
Speaker 1: for years and years and years and years, if there

421
00:20:49,320 --> 00:20:52,879
Speaker 1: was like the biggest crypto exchange, it eventually vanished in

422
00:20:52,920 --> 00:20:57,240
Speaker 1: a scandal. And then, you know, as I was doing

423
00:20:57,240 --> 00:20:59,560
Speaker 1: this crypto pieces like that's kind of stopped happening, Like

424
00:20:59,600 --> 00:21:02,159
Speaker 1: that's that's not really true anymore, because there's a lot

425
00:21:02,200 --> 00:21:05,040
Speaker 1: of money in crypto exchanges, and you know, like you

426
00:21:05,080 --> 00:21:07,560
Speaker 1: should run it legitimately because you can be a billionaire,

427
00:21:07,720 --> 00:21:09,320
Speaker 1: Like there's so much money, you don't need to steal it.

428
00:21:09,720 --> 00:21:12,720
Speaker 1: Since fd X employed a number of the biggest, highest

429
00:21:12,760 --> 00:21:14,879
Speaker 1: profile we're gonna move to the black chain projects have

430
00:21:15,000 --> 00:21:16,320
Speaker 1: just been like, okay, we're done. We're not doing it.

431
00:21:16,359 --> 00:21:18,359
Speaker 1: Like the Australian Stock Exchange, it was like we're gonna

432
00:21:18,359 --> 00:21:20,640
Speaker 1: move to the black chain there again, never mind, we're

433
00:21:20,640 --> 00:21:23,639
Speaker 1: not doing that. So just like the whole mainstreaming of

434
00:21:23,680 --> 00:21:27,040
Speaker 1: crypto has taken a step back because of this like

435
00:21:27,160 --> 00:21:30,200
Speaker 1: very mainstream looking crypto exchange turning out to be a fraud.

436
00:21:31,400 --> 00:21:34,080
Speaker 1: So I'm on the fence as to whether he's like

437
00:21:34,359 --> 00:21:38,440
Speaker 1: a body or whether ah, he is just kind of

438
00:21:38,600 --> 00:21:41,240
Speaker 1: some clef guy. He's got a bit caught up in

439
00:21:41,280 --> 00:21:43,840
Speaker 1: his own success. I think it was a fiasco, but

440
00:21:44,000 --> 00:21:47,880
Speaker 1: I think that crypto and the blockchain system is fair

441
00:21:47,960 --> 00:21:52,080
Speaker 1: to stay. I know that not the crypto itself, but

442
00:21:52,200 --> 00:21:55,119
Speaker 1: the technology behind it, which is blockchain, is the future

443
00:21:55,160 --> 00:21:59,080
Speaker 1: of the of the world. When we come back the

444
00:21:59,320 --> 00:22:09,959
Speaker 1: government unders a crypto crackdown. Do you think that Western

445
00:22:10,000 --> 00:22:13,399
Speaker 1: regulates is now trying to finally kill it or do

446
00:22:13,440 --> 00:22:16,720
Speaker 1: you see a future in it where governments except it's

447
00:22:16,720 --> 00:22:19,080
Speaker 1: here for the long run. What's going to happen with

448
00:22:19,160 --> 00:22:23,040
Speaker 1: crypto in the future. Given the current downturn in the market,

449
00:22:24,520 --> 00:22:27,440
Speaker 1: Matt In the aftermath of the ft X collapse, we've

450
00:22:27,480 --> 00:22:31,359
Speaker 1: seen increased interest in crypto from the US government, which

451
00:22:31,440 --> 00:22:36,040
Speaker 1: has struggled over how to regulate it. The CFTC, the

452
00:22:36,080 --> 00:22:41,359
Speaker 1: Commodity Futures Trading Commission, thinks it should oversee crypto. The SEC,

453
00:22:41,560 --> 00:22:44,600
Speaker 1: the Security Exchange Commission, which regulates the stock market, says

454
00:22:44,680 --> 00:22:46,560
Speaker 1: no, no no, no no, Crypto should be treated more like a

455
00:22:46,640 --> 00:22:50,040
Speaker 1: stock and the SEC especially is taking this very hard line.

456
00:22:50,040 --> 00:22:53,399
Speaker 1: The chairman, Gary Ginstler is called crypto wild West. And

457
00:22:53,440 --> 00:22:56,280
Speaker 1: then of course there's Congress. Do you think what's happening

458
00:22:56,480 --> 00:23:00,800
Speaker 1: now gives the government more leverage to clamp down on

459
00:23:00,880 --> 00:23:03,080
Speaker 1: crypto in the way they have been before, and do

460
00:23:03,160 --> 00:23:06,040
Speaker 1: they really want to do that? I think it's really

461
00:23:06,080 --> 00:23:07,639
Speaker 1: hard because I think that a lot of people at

462
00:23:07,720 --> 00:23:11,640
Speaker 1: U S regulators and outside of US regulators would say

463
00:23:11,680 --> 00:23:15,960
Speaker 1: that this is proof that crypto is bad and regulating

464
00:23:15,960 --> 00:23:18,080
Speaker 1: crypto is bad. In other words, like there are a

465
00:23:18,080 --> 00:23:20,720
Speaker 1: lot of places that regulate crypto, and when those places

466
00:23:20,760 --> 00:23:23,479
Speaker 1: regulate crypto, they tend to write regulations that are influenced

467
00:23:23,520 --> 00:23:25,560
Speaker 1: by crypto lobbying, right, And they tend to want to

468
00:23:25,560 --> 00:23:28,199
Speaker 1: attract crypto businesses, and they say, we're going to balance

469
00:23:28,240 --> 00:23:32,280
Speaker 1: consumer protection versus the desire to like foster this this

470
00:23:32,320 --> 00:23:35,120
Speaker 1: crypto ecosystem and have a lot of crypto hedge funds

471
00:23:35,119 --> 00:23:38,159
Speaker 1: and exchanges located in our jurisdiction. Right. The Bahamas is

472
00:23:38,280 --> 00:23:42,160
Speaker 1: kind of like that, and the US has a lot

473
00:23:42,200 --> 00:23:44,680
Speaker 1: of people who think like that. A lot of Congress

474
00:23:44,720 --> 00:23:48,360
Speaker 1: people think that the CFTC has seemed curious about that.

475
00:23:48,600 --> 00:23:51,280
Speaker 1: The SEC has had a different view, which is that

476
00:23:51,359 --> 00:23:54,720
Speaker 1: crypto is entirely crime, and rather than write new regulations

477
00:23:54,760 --> 00:23:58,720
Speaker 1: that would balance you know, fostering crypto or consumer protection.

478
00:23:58,960 --> 00:24:00,919
Speaker 1: They will just crack down on upto whenever they see it.

479
00:24:01,280 --> 00:24:03,880
Speaker 1: And I don't know, like, I'm not sure that view

480
00:24:03,920 --> 00:24:06,480
Speaker 1: is correct or that it's been vindicated by the claps

481
00:24:06,520 --> 00:24:08,800
Speaker 1: of f t X, but it seems vindicated by the

482
00:24:08,840 --> 00:24:11,119
Speaker 1: claps of ft X, right because f t X was

483
00:24:11,520 --> 00:24:13,960
Speaker 1: going to the CFTC at having meetings and saying this

484
00:24:14,000 --> 00:24:16,480
Speaker 1: is how we should regulate crypto, and the CFTC is like, yes,

485
00:24:16,520 --> 00:24:18,919
Speaker 1: you're right, you have interesting ideas here. And then you know,

486
00:24:19,000 --> 00:24:20,960
Speaker 1: Sam Bankmantry was going to Congress and saying this is

487
00:24:21,000 --> 00:24:23,040
Speaker 1: how we should regulate crypto, and people were like, oh,

488
00:24:23,040 --> 00:24:25,040
Speaker 1: thanks for the campaign donation and like, you have really

489
00:24:25,040 --> 00:24:27,040
Speaker 1: good ideas here, and then they would go to SEC

490
00:24:27,160 --> 00:24:29,680
Speaker 1: and the like you should all be in jail. And

491
00:24:30,000 --> 00:24:32,399
Speaker 1: I think there's definitely an argument that that was wrong

492
00:24:32,480 --> 00:24:36,120
Speaker 1: and that if the SEC had been or if let's

493
00:24:36,119 --> 00:24:38,679
Speaker 1: a U S regulation generally have been more thoughtful about

494
00:24:39,000 --> 00:24:41,320
Speaker 1: regulating crypto, you could have like a sort of clear

495
00:24:41,359 --> 00:24:44,440
Speaker 1: regulatory structure for running crypto exchanges in the US, then

496
00:24:44,600 --> 00:24:46,640
Speaker 1: more crypto trading would happen in the U S under

497
00:24:46,680 --> 00:24:50,320
Speaker 1: that clear regulatory structure. And it wouldn't just go poof

498
00:24:50,320 --> 00:24:52,640
Speaker 1: in a in a ceo of fraud, right because like

499
00:24:52,640 --> 00:24:55,200
Speaker 1: like US public companies that are regulated and like examined

500
00:24:55,240 --> 00:24:59,840
Speaker 1: by regulators. But I think that all in all, the

501
00:25:00,080 --> 00:25:03,240
Speaker 1: view that is winning out here is that crypto is

502
00:25:03,280 --> 00:25:06,800
Speaker 1: not really ready for prime time, and that it has

503
00:25:06,840 --> 00:25:10,919
Speaker 1: been good for the world, that it is still relatively

504
00:25:11,000 --> 00:25:15,640
Speaker 1: small and relatively isolated from the mainstream financial system and

505
00:25:16,280 --> 00:25:20,159
Speaker 1: you know, not where grandmothers put their life savings. And

506
00:25:20,200 --> 00:25:22,760
Speaker 1: I think that the worry about crypto regulation is like

507
00:25:22,760 --> 00:25:25,000
Speaker 1: the SEC puts out rule saying here's how you can

508
00:25:25,080 --> 00:25:28,040
Speaker 1: run a crypto exchange. Then like black Rock and Fidelity

509
00:25:28,119 --> 00:25:30,359
Speaker 1: do put like ten percent of customer asselets enter crypto,

510
00:25:30,440 --> 00:25:33,199
Speaker 1: and like banks start borrowing against crypto, and then the

511
00:25:33,240 --> 00:25:36,200
Speaker 1: next time a crypto exchange explodes, like it takes down

512
00:25:36,200 --> 00:25:38,520
Speaker 1: the banking system with it. This has not led to

513
00:25:38,640 --> 00:25:41,680
Speaker 1: calls for more regulation of crypto, like quite the opposite.

514
00:25:41,680 --> 00:25:43,639
Speaker 1: It's led to op ed saying we should not regulate

515
00:25:43,680 --> 00:25:45,919
Speaker 1: crypto and just let it burn, because I think that

516
00:25:46,000 --> 00:25:49,680
Speaker 1: regulating crypto is a part of mainstreaming and like that's

517
00:25:49,680 --> 00:25:52,639
Speaker 1: clearly what SPF wanted, right, Like that's why FTX was

518
00:25:52,680 --> 00:25:55,480
Speaker 1: lobbying for more regulation, because if you get it regulated,

519
00:25:55,480 --> 00:25:58,040
Speaker 1: it becomes more mainstream and more people will use it

520
00:25:58,040 --> 00:26:00,760
Speaker 1: and becomes more integrated with the regular financial system. And

521
00:26:00,800 --> 00:26:04,159
Speaker 1: then ultimately you could have a situation where, you know,

522
00:26:04,520 --> 00:26:07,240
Speaker 1: if a crypto exchange goes bankrupt, it will bring down

523
00:26:07,240 --> 00:26:09,720
Speaker 1: the banking system, and you go to the FED and

524
00:26:09,800 --> 00:26:12,640
Speaker 1: you say, we need you to prop up this token

525
00:26:12,880 --> 00:26:15,560
Speaker 1: because otherwise there will be a recession in the banks

526
00:26:15,560 --> 00:26:18,160
Speaker 1: will collapse. Like I'm not sure that was like exactly

527
00:26:18,160 --> 00:26:20,159
Speaker 1: what what Sam bankmun Food was thinking, but it's a

528
00:26:20,280 --> 00:26:23,000
Speaker 1: kind of like the worry about regulation of crypto. And

529
00:26:23,080 --> 00:26:25,160
Speaker 1: so the other reason is that there's not been calls

530
00:26:25,160 --> 00:26:27,439
Speaker 1: for a clear regulation of crypto is like, you know,

531
00:26:27,800 --> 00:26:31,479
Speaker 1: everyone who was writing those regulations is incredibly tainted by

532
00:26:31,480 --> 00:26:33,840
Speaker 1: the ft X claps. Like all of the thought about

533
00:26:34,080 --> 00:26:36,520
Speaker 1: crypto regulation has been like to some extent, driven by

534
00:26:36,520 --> 00:26:38,840
Speaker 1: crypto frames because they want that regulation. And so if

535
00:26:38,840 --> 00:26:41,040
Speaker 1: you're a congress person who was sponsoring a bill that

536
00:26:41,119 --> 00:26:43,879
Speaker 1: like was you know, advised by ft X, you're not

537
00:26:43,960 --> 00:26:47,760
Speaker 1: talking about that anymore. And what kind of regulation was

538
00:26:47,960 --> 00:26:51,960
Speaker 1: Sam Bang been freeing? Other people who were lobbying for regulation,

539
00:26:52,040 --> 00:26:54,880
Speaker 1: What did they want that regulation to look like. The

540
00:26:54,960 --> 00:26:58,280
Speaker 1: main thing is that people had a preference that crypto

541
00:26:58,320 --> 00:27:01,600
Speaker 1: would be regulated by the FTC. They wanted crypto to

542
00:27:01,640 --> 00:27:03,880
Speaker 1: be treated as a commodity rather than a security, because

543
00:27:03,920 --> 00:27:06,200
Speaker 1: it's easier to do disclosure about that, it's easier to

544
00:27:06,240 --> 00:27:08,280
Speaker 1: start an exchange, and there's just the view that the

545
00:27:08,280 --> 00:27:11,760
Speaker 1: CFTC is more crypto friendly Sam Bankman Freed in particular,

546
00:27:11,800 --> 00:27:14,320
Speaker 1: had a lot of ideas about the mechanics of how

547
00:27:14,359 --> 00:27:17,560
Speaker 1: to run a futurist trading platform and how to like

548
00:27:17,560 --> 00:27:21,040
Speaker 1: do margin calls that seemed sort of technical when he

549
00:27:21,080 --> 00:27:24,040
Speaker 1: proposed them, and like you know, talked about them in public,

550
00:27:24,320 --> 00:27:26,600
Speaker 1: and then they actually dovetailed very nicely with how his

551
00:27:26,640 --> 00:27:29,359
Speaker 1: exchange collapsed. Basically, he had all these ideas about like

552
00:27:29,480 --> 00:27:31,960
Speaker 1: automated risk management in a way that would make it

553
00:27:32,000 --> 00:27:34,119
Speaker 1: impossible for an exchange of the collapse, and then he

554
00:27:34,160 --> 00:27:36,359
Speaker 1: wasn't doing those things at all. So there's a lot

555
00:27:36,440 --> 00:27:38,840
Speaker 1: about like sort of technical arguation details of regulation. But

556
00:27:38,880 --> 00:27:42,040
Speaker 1: it's just like if the CFTC passes some technical regulations

557
00:27:42,240 --> 00:27:44,520
Speaker 1: about how to run a crypto exchange, it doesn't matter

558
00:27:44,560 --> 00:27:46,760
Speaker 1: what the details are. What matters that the CFTC is

559
00:27:46,800 --> 00:27:48,280
Speaker 1: that you can run a crypto exchange, right, even a

560
00:27:48,400 --> 00:27:51,040
Speaker 1: crypto future ex change. There are crypto exchanges in the US,

561
00:27:51,119 --> 00:27:53,520
Speaker 1: but they offer a relatively narrow suite of products compared

562
00:27:53,560 --> 00:27:57,399
Speaker 1: to what ft actually offering. And even so they are

563
00:27:57,440 --> 00:27:59,919
Speaker 1: you know, coin Base is the main one, like the

564
00:28:00,080 --> 00:28:03,560
Speaker 1: big US. You know, it's a public company. It also

565
00:28:03,640 --> 00:28:06,560
Speaker 1: tries to be you know, good, a good citizen, but

566
00:28:07,080 --> 00:28:09,240
Speaker 1: it offers trading and a lot of cryptocurrencies and the

567
00:28:09,320 --> 00:28:11,959
Speaker 1: sec things that a lot of them are securities and

568
00:28:11,960 --> 00:28:14,240
Speaker 1: that it's illegal to offer that trading with that registering,

569
00:28:14,400 --> 00:28:17,600
Speaker 1: the securities exchangion, so stuff like that about clarity around

570
00:28:17,640 --> 00:28:21,440
Speaker 1: what's the security and who regulates it and if cryptocurrencies

571
00:28:21,480 --> 00:28:23,960
Speaker 1: are securities, like what you need to disclose in order

572
00:28:24,040 --> 00:28:26,120
Speaker 1: to trade them. Those are the sort of main things

573
00:28:26,160 --> 00:28:30,240
Speaker 1: that people want. But it's it's really you know, it's

574
00:28:30,280 --> 00:28:32,720
Speaker 1: like it almost doesn't matter. What matters is like the

575
00:28:32,760 --> 00:28:35,320
Speaker 1: regulations exist so that you know, it's kind of like

576
00:28:35,600 --> 00:28:37,800
Speaker 1: once the regulations exists, you can work with anything. But

577
00:28:37,880 --> 00:28:40,640
Speaker 1: like you need a regulation that says somehow you can

578
00:28:40,680 --> 00:28:43,360
Speaker 1: buy crypto, right, and then how you buy it doesn't

579
00:28:43,400 --> 00:28:46,680
Speaker 1: it almost doesn't matter. You see a lot of people

580
00:28:46,760 --> 00:28:49,600
Speaker 1: describing what's happening right now as a crypto winter, where

581
00:28:49,640 --> 00:28:52,040
Speaker 1: things are looking pretty cold and bleak when you look

582
00:28:52,120 --> 00:28:54,400
Speaker 1: down the road. I don't know, a couple of years

583
00:28:54,440 --> 00:28:57,000
Speaker 1: from now, five years, even ten years from no, what

584
00:28:57,040 --> 00:29:00,240
Speaker 1: does crypto look like. Does it survive and thrive, does

585
00:29:00,280 --> 00:29:04,080
Speaker 1: it become something different? I don't know. It's really hard

586
00:29:04,080 --> 00:29:07,480
Speaker 1: because I think the two sort of avenues for for

587
00:29:07,520 --> 00:29:10,560
Speaker 1: it to work are one is like the more like

588
00:29:10,600 --> 00:29:14,760
Speaker 1: the commitment to more decentralized, you know, less trusting world

589
00:29:14,840 --> 00:29:17,920
Speaker 1: where it's like no, no, seriously, guys, this time we

590
00:29:18,000 --> 00:29:21,400
Speaker 1: need to make use of the innovations that crypto has

591
00:29:21,480 --> 00:29:24,280
Speaker 1: offered to stop getting hacked all the time, to stop

592
00:29:24,280 --> 00:29:25,920
Speaker 1: having people steal our money all the time, right, Like,

593
00:29:26,520 --> 00:29:29,360
Speaker 1: crypto is a way to have your money in a

594
00:29:29,400 --> 00:29:31,880
Speaker 1: way that you're not trusting any central intermediaries and it

595
00:29:31,920 --> 00:29:35,080
Speaker 1: can't be stolen from you. And you know, in practice,

596
00:29:35,080 --> 00:29:37,560
Speaker 1: crypto justst is about getting your money stolen over and

597
00:29:37,600 --> 00:29:40,080
Speaker 1: over again. So I think that like it is certainly

598
00:29:40,120 --> 00:29:42,560
Speaker 1: the case that like overall this year, a lot of

599
00:29:42,560 --> 00:29:46,800
Speaker 1: centralized intermediaries have all imploded in a way that makes

600
00:29:46,840 --> 00:29:49,200
Speaker 1: you think you shouldn't trust the people who around them

601
00:29:49,280 --> 00:29:53,000
Speaker 1: that like defy. The decentralized finance ecosystem has like held

602
00:29:53,040 --> 00:29:55,880
Speaker 1: up pretty well, so when people think, like, instead of

603
00:29:55,920 --> 00:29:57,840
Speaker 1: going to an exchange that is like a company with

604
00:29:57,880 --> 00:30:00,640
Speaker 1: a website that will take your money, we should use

605
00:30:00,760 --> 00:30:04,360
Speaker 1: like the blockchain technology to build exchanges that kind of

606
00:30:04,440 --> 00:30:08,640
Speaker 1: run on their own and are transparent. That pitch attracted

607
00:30:08,680 --> 00:30:10,840
Speaker 1: a lot of people in crypto a year ago because

608
00:30:11,120 --> 00:30:13,920
Speaker 1: people in crypto are philosophically disposed to think that's good.

609
00:30:14,200 --> 00:30:17,320
Speaker 1: But it's much more attractive relatively speaking now because again

610
00:30:17,360 --> 00:30:20,239
Speaker 1: it turns out you can't trust the centralized exchanges. So

611
00:30:20,280 --> 00:30:24,160
Speaker 1: that's one avenue is like the decentralization of crypto really

612
00:30:24,200 --> 00:30:29,560
Speaker 1: becomes more important, and people build like usable interfaces for

613
00:30:29,680 --> 00:30:31,560
Speaker 1: that so that you don't have to be a computer

614
00:30:31,600 --> 00:30:35,720
Speaker 1: scientist to kind of use a lot of decentralized crypto applications.

615
00:30:36,000 --> 00:30:39,880
Speaker 1: The other one is regulation. Right enough, people say you

616
00:30:39,920 --> 00:30:44,520
Speaker 1: know there is something worth saving here, we're gonna make

617
00:30:44,560 --> 00:30:48,320
Speaker 1: it so that, like US regulated exchanges are very trustworthy,

618
00:30:48,600 --> 00:30:50,200
Speaker 1: and then we're gonna have audits and we're going to

619
00:30:50,280 --> 00:30:53,920
Speaker 1: have some sort of like prudential supervisory authority checking you

620
00:30:54,000 --> 00:30:56,000
Speaker 1: out and making sure that you're not just stealing your

621
00:30:56,040 --> 00:30:58,680
Speaker 1: customers money, and that that felt very likely to me

622
00:30:58,800 --> 00:31:01,320
Speaker 1: six months ago. The less push for that now, but

623
00:31:01,480 --> 00:31:03,600
Speaker 1: I'm not I don't think it's impossible that that will

624
00:31:03,640 --> 00:31:05,720
Speaker 1: come back, and then that will be the sort of

625
00:31:05,760 --> 00:31:09,000
Speaker 1: solution here, Matt Lavin, thanks for talking to me today.

626
00:31:09,160 --> 00:31:13,760
Speaker 1: Thank you. You can read Matt Levine's brilliant crypto story

627
00:31:13,760 --> 00:31:18,480
Speaker 1: for Business Week at Bloomberg dot com. Thanks for listening

628
00:31:18,520 --> 00:31:20,840
Speaker 1: to us here at The Big Take, the daily podcast

629
00:31:20,840 --> 00:31:23,680
Speaker 1: from Bloomberg and I Heart Radio. For more shows from

630
00:31:23,680 --> 00:31:26,960
Speaker 1: my heart Radio, visit the heart Radio app, Apple Podcasts,

631
00:31:27,040 --> 00:31:30,200
Speaker 1: or wherever you listen. Read today's story and subscribe to

632
00:31:30,240 --> 00:31:33,280
Speaker 1: our daily newsletter at Bloomberg dot com slash Big Take,

633
00:31:33,640 --> 00:31:36,120
Speaker 1: and we'd love to hear from you. Email us with

634
00:31:36,200 --> 00:31:39,120
Speaker 1: questions or comments to Big Take at Bloomberg dot net.

635
00:31:39,600 --> 00:31:42,920
Speaker 1: The supervising producer of The Big Take is Vicky Bergelina.

636
00:31:43,440 --> 00:31:49,520
Speaker 1: Our senior producer is Katherine Think. Our producer is Rebecca An.

637
00:31:49,560 --> 00:31:55,320
Speaker 1: Associate producer is Sam Debauer. Additional production support from Michael Falero.

638
00:31:56,120 --> 00:32:01,080
Speaker 1: Rafael I'm Seeley is our engineer. Original music, Leo Sidrin

639
00:32:01,800 --> 00:32:05,000
Speaker 1: I'm West Casova. We'll be back tomorrow with another big take.

640
00:32:14,720 --> 00:32:14,760
Speaker 1: H