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Speaker 1: David Weston joins us, as he does every day around

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Speaker 1: this time, and David, there's one thing everybody's been talking

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Speaker 1: about for the last few hours, and that's the approval

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Speaker 1: of the spot bitcoin ets.

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Speaker 2: The game is a foot I think Sherlock Holmes would say, right, yeah, yeah,

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Speaker 2: So we thought we'd actually go through exactly what happened,

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Speaker 2: what the consequences are with Tim Massett, he's Kennedy's school

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Speaker 2: fellow and former chair of the CFCC. Tim, thanks so

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Speaker 2: much for being back with us. We've talked about this

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Speaker 2: as the as was spending and what I was just

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Speaker 2: saying to Romayne actually is of all the approvals I've

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Speaker 2: seen on a government, this is about the most reluctant

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Speaker 2: one I've ever seen coming out the SEC. There's a

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Speaker 2: three to two vote and boy, we had the chair

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Speaker 2: saying they're not so sure about it. At the same time,

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Speaker 2: the traders are going and we're it's one o'clock. We

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Speaker 2: were over three billion dollars in trades. Why is this

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Speaker 2: SEC so reluctant?

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Speaker 3: Well, I think you know, Chairgenstler never wanted to do this,

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Speaker 3: but I don't think he really had another path forward. Right,

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Speaker 3: They lost the court case with great scale, and so

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Speaker 3: I think he realized better to approve them than to

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Speaker 3: try to deny them and basically get forced by a

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Speaker 3: court to do this. So you know, he sided with

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Speaker 3: the Republican Commissioners to approve them, and then of course

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Speaker 3: you had the Democrats the two other Democrats voting no.

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Speaker 3: You know, I think the concerns of Chair Gensler and

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Speaker 3: the Democrats are the same that the level of investor

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Speaker 3: protection in the underlying spot market is still very low.

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Speaker 3: It's not a regulated market, and you know, this might

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Speaker 3: help improve the standards. There are ways you can make

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Speaker 3: that argument, but not directly. So. On the other hand,

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Speaker 3: I think this is going to bring in a lot

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Speaker 3: of new investors into the market, particularly because I think

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Speaker 3: traditional investment advisors are going to feel more comfortable now

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Speaker 3: recommending bitcoin ETPs, which is really technically what they are

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Speaker 3: exchange traded products, to their clients who want bitcoin exposure.

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Speaker 2: So the spot market maybe not be regular itself, but

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Speaker 2: one of the things the SEC relied upon was the

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Speaker 2: CME and their regulation of the futures market, and saying

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Speaker 2: that they actually operate in parallel. Does that give you

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Speaker 2: a little more solace?

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Speaker 3: Well, not a whole lot. I mean, not that I

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Speaker 3: don't respect CME, but CME does not really have any

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Speaker 3: supervisory authority over the spot market. So where they ended

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Speaker 3: up in the approval was to say, well, look, if

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Speaker 3: you know you're trying to manipulate the bitcoin spot market,

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Speaker 3: that's likely to show up in the bitcoin futures market

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Speaker 3: and therefore we'll see it. But then the question is, yeah,

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Speaker 3: but what are you going to do about it? At

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Speaker 3: the same time, you know, I would say that, look,

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Speaker 3: the fact that big institutions like black Rock, like Fidelity

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Speaker 3: now have an interest in that helps, and so I'm

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Speaker 3: hoping that at least over the long term they can

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Speaker 3: be forces for bringing better regulation to this market. So

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Speaker 3: that's my hope in terms of the silver lining here.

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Speaker 1: What does that process look like? Tim, And I really

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Speaker 1: mean that from the lens of the investor, who, at

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Speaker 1: least to a certain extent, it's kind of exposed for

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Speaker 1: right now. And if you really sort of read in

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Speaker 1: between the lines of the language of that statement that

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Speaker 1: Gary Ginstler put out, he kind of made it clear

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Speaker 1: you're on your own.

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Speaker 3: Yes, that's right, Romayne. I mean, look again, the underlying

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Speaker 3: spot market isn't subject to regulation, and there have been

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Speaker 3: arguments that there's a much higher risk of fraud and

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Speaker 3: manipulation of wash trading, and all you have to do

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Speaker 3: is read Commissioner Crenshaw's descent on this to see some

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Speaker 3: of those facts. Now again, the basis for approving it

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Speaker 3: is that, well, if there is manipulation in that spot market,

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Speaker 3: we'll see it in the futures market, and seeing me

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Speaker 3: will be aware of that, but not clear what they

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Speaker 3: can do. At the same time, you know, these are

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Speaker 3: now registered products under the thirty three and thirty four Acts,

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Speaker 3: so you know that's a good thing.

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Speaker 1: That's a good thing, I mean registered ETPs. We should

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Speaker 1: point out, just to be very clear about this, but

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Speaker 1: it's already opened the door to a lot of other

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Speaker 1: areas of the cryptosphere, if you will. They are now

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Speaker 1: seeking to sort of find their own place in this

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Speaker 1: market and maybe even more clarity on regulation. We had

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Speaker 1: a filing, a confidential filing to the SEC from a

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Speaker 1: company called Circle Internet, which goes runs a stable coin,

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Speaker 1: and it's been made very clear that this isn't just

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Speaker 1: about them coming public to the market, but it's also

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Speaker 1: kind of forcing the SEC's hands in terms of how

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Speaker 1: or if they should be regulating stable coins as well.

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Speaker 3: Well. I'm of the view that they should not be

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Speaker 3: regulating stable coins. Now. They did recently win the case

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Speaker 3: against terraform or Labs. But the issue there and that

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Speaker 3: was with respect to Luna and Terra. But the issue

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Speaker 3: there was they said the judge said that, look, it

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Speaker 3: was the coupling of Terra the stable coin with this

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Speaker 3: anchor protocol where people could deposit their stable coin and

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Speaker 3: get a twenty percent return, that made it an investment contract.

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Speaker 3: I think if you're still talking about a stable coin

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Speaker 3: that does not pay interest, that is not something that

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Speaker 3: should be under the SEC. I still think of that

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Speaker 3: as a bank product, bank like product. That is, it's

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Speaker 3: a payment mechanism, and I'd still very much like to

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Speaker 3: see us create a regulatory framework for that. It's not

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Speaker 3: clear that they can have a huge application in payments,

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Speaker 3: but we should. We should find out.

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Speaker 1: So does that mean that this may might fall under

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Speaker 1: the umbrella of the FED. Should we actually get to that.

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Speaker 3: Point, Well, probably not the FED. I don't think they

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Speaker 3: want to touch it. I would say more likely the

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Speaker 3: occ the Office of the Controller of the Currency, and

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Speaker 3: there is legislation as you know pending in Congress. The

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Speaker 3: House Financial Services Committee passed a bill. Not likely that

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Speaker 3: we're going to see that make it out of Congress

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Speaker 3: to Biden's desk before the election, but who knows what

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Speaker 3: might happen after the election. But I think we do

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Speaker 3: need to create that framework. Other countries, you know, a

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Speaker 3: number of other countries are creating that framework. I think

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Speaker 3: it's good both to address the risks of stable coins

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Speaker 3: because we don't have a framework today that really regulates

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Speaker 3: them except under state laws, and it also potentially allows

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Speaker 3: us to realize the opportunities that stable coins may pose.

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Speaker 3: But you've got you know, Japan, Europe, Singapore, the UK,

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Speaker 3: the UAE all moving forward to create these frameworks for

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Speaker 3: stable coins.

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Speaker 2: So, Tim, I think you're making a terribly important point.

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Speaker 2: Of course, not just a question of what the regulation is,

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Speaker 2: but who gets to decide. I mean, you say how

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Speaker 2: you think it should work. You're a smart man, you

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Speaker 2: know this better than I do. I'm willing to defer

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Speaker 2: to you, but you don't have the authority to do that.

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Speaker 2: Is it a bit of an embarrassment that we basically

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Speaker 2: have the CFTC, we got the SEC, We've got a

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Speaker 2: banking regulation. When is Congress actually to step in and

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Speaker 2: do this?

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Speaker 3: Well, that's the sixty one thousand dollars question, David. I mean,

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Speaker 3: I've been talking about this for almost ten years now.

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Speaker 3: I hope they would, hope they would step in by now,

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Speaker 3: you know, there's some greater momentum. But frankly still, we've

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Speaker 3: got a lot of diversity and viewpoints in Congress. You've

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Speaker 3: got some people who are just very very skeptical of

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Speaker 3: this whole sector, and they feel that any legislation that

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Speaker 3: addresses the regulatory framework may just legitimize it more, and

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Speaker 3: so they don't want to do that. And then of

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Speaker 3: course you've got other people who think there's great innovative potential.

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Speaker 3: They want to make sure we don't overregulate. So you know,

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Speaker 3: you've got to find a middle ground there. Again, I

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Speaker 3: don't think we're going to see legislation prior to the

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Speaker 3: election pass, but maybe after that.

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Speaker 2: Okay, Tim, it's always great to have you with us

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Speaker 2: on these subjects. It's sim Massa. He's the former GIFTC

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Speaker 2: chair