1 00:00:10,960 --> 00:00:15,200 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:15,240 --> 00:00:19,120 Speaker 1: I'm Joe Wisn't Thal and I'm Tracy Alloway. Tracy, you know, 3 00:00:19,200 --> 00:00:23,360 Speaker 1: one of the big There is a lot of ambiguity 4 00:00:23,440 --> 00:00:26,239 Speaker 1: and confusion right now, I would say about the state 5 00:00:26,280 --> 00:00:29,920 Speaker 1: of crypto regulation just a little bit, just a tiny bit, 6 00:00:30,480 --> 00:00:34,760 Speaker 1: like I mean, and it's understandable why because it's I guess, 7 00:00:34,840 --> 00:00:38,920 Speaker 1: a new type of asset class. They're not all the same. 8 00:00:39,320 --> 00:00:42,440 Speaker 1: It doesn't seem to quite fit into commodity buckets. Most 9 00:00:42,440 --> 00:00:45,520 Speaker 1: of them don't fit quite into say equity buckets there. 10 00:00:45,640 --> 00:00:47,879 Speaker 1: They call them cryptocurrencies in many cases, but they're not 11 00:00:47,880 --> 00:00:50,159 Speaker 1: really currencies. So you can sort of see why the 12 00:00:50,200 --> 00:00:53,479 Speaker 1: existing regulatory structure isn't quite up to the task, right. 13 00:00:53,520 --> 00:00:56,440 Speaker 1: And often the technology or the things being made are 14 00:00:56,520 --> 00:00:58,560 Speaker 1: changing all the time. So for instance, we used to 15 00:00:58,600 --> 00:01:00,640 Speaker 1: have you know, I c o s Now we have 16 00:01:00,720 --> 00:01:04,160 Speaker 1: tokens and things like that. But I think what you're 17 00:01:04,160 --> 00:01:07,920 Speaker 1: getting at is there has been this long running criticism 18 00:01:07,959 --> 00:01:11,200 Speaker 1: of the way crypto regulation is being done, which is 19 00:01:11,680 --> 00:01:14,679 Speaker 1: it's often just better to launch something and kind of 20 00:01:14,720 --> 00:01:18,240 Speaker 1: ask for permission later, right, like, just launch it, see 21 00:01:18,240 --> 00:01:21,960 Speaker 1: what happens. But if you're a big crypto organization, you know, 22 00:01:22,440 --> 00:01:25,920 Speaker 1: a crypto company with a team of lawyers, and you 23 00:01:25,959 --> 00:01:30,720 Speaker 1: actually go and ask the securities regulators about what you're doing, 24 00:01:31,080 --> 00:01:34,800 Speaker 1: often they just say no, outright, that's the trope, that's right. 25 00:01:34,840 --> 00:01:36,720 Speaker 1: So I've talked to lawyers and this is what they say. 26 00:01:36,760 --> 00:01:38,280 Speaker 1: They say, Look, if we try to be on the 27 00:01:38,360 --> 00:01:40,240 Speaker 1: right side of the law, if we say go to 28 00:01:40,240 --> 00:01:41,720 Speaker 1: the sec and this we want to do, then they 29 00:01:41,760 --> 00:01:44,600 Speaker 1: spend years trying to lawyers. Meanwhile, someone just launches a 30 00:01:44,680 --> 00:01:47,400 Speaker 1: token without doing any of that in the rebillionaire the 31 00:01:47,400 --> 00:01:49,680 Speaker 1: next day. That's going to be kind of frustrating, right, 32 00:01:49,760 --> 00:01:53,760 Speaker 1: It's not a great incentive structure if that's what's happening. Right, So, 33 00:01:54,000 --> 00:01:56,600 Speaker 1: you know, there's this problem. The regulatory agencies don't seem 34 00:01:56,600 --> 00:01:58,680 Speaker 1: to quite have their hands around it, and because of 35 00:01:58,720 --> 00:02:01,880 Speaker 1: how politics seems to be in d C. I don't 36 00:02:01,920 --> 00:02:04,160 Speaker 1: think anyone is really holding their breath for like some 37 00:02:04,280 --> 00:02:07,720 Speaker 1: really clear law to get past, like say the Telecom 38 00:02:07,720 --> 00:02:10,280 Speaker 1: Act in the nineties in which the Internet was coming 39 00:02:10,320 --> 00:02:12,880 Speaker 1: and they passed the law about certain things like maybe 40 00:02:12,960 --> 00:02:14,840 Speaker 1: that will happen, But I don't think it's like obvious 41 00:02:14,919 --> 00:02:16,600 Speaker 1: that like Congress is going to come to the rescue 42 00:02:16,600 --> 00:02:19,120 Speaker 1: with a clear solution here. But also now that crypto 43 00:02:19,240 --> 00:02:22,840 Speaker 1: is so big, it seems kind well, it seems inevitable 44 00:02:22,880 --> 00:02:24,520 Speaker 1: that more people are going to be looking at this 45 00:02:24,680 --> 00:02:27,480 Speaker 1: and discussing whether or not it needs to change. Should 46 00:02:27,480 --> 00:02:30,000 Speaker 1: you have this sort of ad hoc regulatory regime or 47 00:02:30,040 --> 00:02:32,720 Speaker 1: something else? All right, Well, we are have a great 48 00:02:32,720 --> 00:02:35,240 Speaker 1: guest today to talk about that, and a someone in 49 00:02:35,320 --> 00:02:38,200 Speaker 1: d C who has taken a real interest in crypto 50 00:02:38,320 --> 00:02:40,359 Speaker 1: who you're going to be speaking with, Senator pet too, 51 00:02:40,360 --> 00:02:44,160 Speaker 1: me of Pennsylvania and one of the more active elected 52 00:02:44,200 --> 00:02:47,680 Speaker 1: officials with an interest in crypto regulations. So, Senator, thank 53 00:02:47,720 --> 00:02:50,760 Speaker 1: you so much for joining us. Well, thanks very much 54 00:02:50,800 --> 00:02:54,000 Speaker 1: for having me. Senator. Who's to blame for this sort 55 00:02:54,040 --> 00:02:56,640 Speaker 1: of this confusion? I'm not sure you Maybe you disagree 56 00:02:56,680 --> 00:03:00,000 Speaker 1: with our characterization, but who's to blame for this confused 57 00:03:00,040 --> 00:03:02,799 Speaker 1: usian about crypto regulation, the lack of clarity and all 58 00:03:02,840 --> 00:03:06,080 Speaker 1: of the sort of perverse incentive that that creates. Well, 59 00:03:06,200 --> 00:03:09,680 Speaker 1: I think I agree with your discussion with Tracy about 60 00:03:09,760 --> 00:03:16,760 Speaker 1: the inherent difficulty of trying to shoehorn these crypto tokens 61 00:03:16,800 --> 00:03:22,960 Speaker 1: from these various projects into existing law. Uh. You know, 62 00:03:23,320 --> 00:03:27,679 Speaker 1: much of our securities law is based on ninety three 63 00:03:27,680 --> 00:03:32,840 Speaker 1: and ninety four legislation literally and court cases that followed 64 00:03:32,880 --> 00:03:37,080 Speaker 1: that often in the forties and fifties. Can you imagine 65 00:03:37,080 --> 00:03:40,160 Speaker 1: being more far removed from crypto? Right? I mean, so 66 00:03:40,280 --> 00:03:45,600 Speaker 1: it doesn't fit well. There are attributes of these protocols 67 00:03:45,640 --> 00:03:51,760 Speaker 1: and the corresponding tokens that are completely unlike any actual 68 00:03:52,080 --> 00:03:56,520 Speaker 1: security something that we all universally would agree as a security. 69 00:03:57,080 --> 00:04:04,760 Speaker 1: There are ways in which most crypto projects are fundamentally different. So, 70 00:04:04,760 --> 00:04:08,960 Speaker 1: so we have this new technology that came along, and 71 00:04:09,440 --> 00:04:12,080 Speaker 1: you know, I guess you could blame Congress for not 72 00:04:12,200 --> 00:04:17,720 Speaker 1: moving quickly to establish the legislative guidelines that would then 73 00:04:18,560 --> 00:04:22,839 Speaker 1: make it clear exactly what buckets these assets should be in, 74 00:04:22,839 --> 00:04:26,400 Speaker 1: including the possibility that it's an altogether new bucket, and 75 00:04:26,440 --> 00:04:30,479 Speaker 1: what the various regulators authorities ought to be. And in 76 00:04:30,520 --> 00:04:33,640 Speaker 1: the absence of Congress speaking, then you will have what 77 00:04:33,640 --> 00:04:36,279 Speaker 1: we are witnessing, which is regulators kind of trying to 78 00:04:36,320 --> 00:04:41,039 Speaker 1: grab authority here, whether or not they ought to. And 79 00:04:41,200 --> 00:04:45,039 Speaker 1: that's no way to create an environment for a really 80 00:04:45,080 --> 00:04:49,080 Speaker 1: important new technology to thrive. So that's why I'm so 81 00:04:49,240 --> 00:04:52,400 Speaker 1: determined to get something done in the legislative realm so 82 00:04:52,440 --> 00:04:56,400 Speaker 1: that we can provide some certainty and hopefully a rational 83 00:04:56,640 --> 00:05:01,000 Speaker 1: set of guard rails that will allow this innovation to continue. So, 84 00:05:01,279 --> 00:05:03,800 Speaker 1: just on that point, if I could ask a sort 85 00:05:03,800 --> 00:05:08,560 Speaker 1: of big picture question, you have taken an interest in crypto, 86 00:05:08,600 --> 00:05:13,839 Speaker 1: and you've been advocating better crypto regulation, and I'm just curious, like, 87 00:05:14,560 --> 00:05:19,039 Speaker 1: what is the benefit of crypto in your mind, because 88 00:05:19,080 --> 00:05:22,640 Speaker 1: often when I think about crypto's relationship with the government, 89 00:05:23,160 --> 00:05:25,560 Speaker 1: it's almost set up, or at least initially, it was 90 00:05:25,600 --> 00:05:29,160 Speaker 1: set up to be adversarial. Right, this was about censorship 91 00:05:29,320 --> 00:05:34,880 Speaker 1: resistant money and technology things that let you send funds 92 00:05:34,960 --> 00:05:38,800 Speaker 1: or do transactions without much oversight. So it seems to 93 00:05:38,960 --> 00:05:43,000 Speaker 1: me like governments maybe should approach it with some caution, 94 00:05:43,279 --> 00:05:46,479 Speaker 1: but clearly you see some value from the technology itself. 95 00:05:46,520 --> 00:05:49,520 Speaker 1: Can you just explain, like what your position is. Well, 96 00:05:49,560 --> 00:05:52,440 Speaker 1: first of all, I do think that we have a 97 00:05:52,520 --> 00:05:57,200 Speaker 1: privacy right to move value in the form of a 98 00:05:57,279 --> 00:06:01,360 Speaker 1: currency or some other asset without the government watching everything 99 00:06:01,360 --> 00:06:05,039 Speaker 1: we do. There's a reason why I think Congress would 100 00:06:05,120 --> 00:06:09,080 Speaker 1: overwhelmingly insist that we not abolish cash, right, I mean, 101 00:06:09,200 --> 00:06:11,680 Speaker 1: in China, I think they have, or they're they're close to. 102 00:06:11,800 --> 00:06:16,120 Speaker 1: As a practical matter, abolishing cash, it's very very convenient 103 00:06:16,160 --> 00:06:19,240 Speaker 1: for the government to be able to monitor everyone's every transaction, 104 00:06:19,320 --> 00:06:22,240 Speaker 1: to force everything into a digital space that in China 105 00:06:22,720 --> 00:06:27,440 Speaker 1: the government has eyes on. So that's one I do 106 00:06:27,480 --> 00:06:32,880 Speaker 1: think there's a legitimate interest in privacy. There's more practical 107 00:06:33,160 --> 00:06:37,600 Speaker 1: matters because I think a lot of people there'st think 108 00:06:37,600 --> 00:06:40,479 Speaker 1: of the volume of transactions that go on credit cards, 109 00:06:40,680 --> 00:06:44,400 Speaker 1: and obviously that information is not uniquely held by the consumer, 110 00:06:44,480 --> 00:06:48,760 Speaker 1: it's held by financial institutions. But I think the ease 111 00:06:48,800 --> 00:06:51,320 Speaker 1: of transactions, the ability to move money on a peer 112 00:06:51,360 --> 00:06:56,280 Speaker 1: to peer basis and leave out intermediaries that inevitably charge 113 00:06:56,360 --> 00:07:00,560 Speaker 1: a fee for the execution. In particular, that fee extremely 114 00:07:00,600 --> 00:07:05,200 Speaker 1: expensive when you move money internationally. I also think that 115 00:07:05,480 --> 00:07:09,560 Speaker 1: there's going to be very exciting innovations that we probably 116 00:07:09,560 --> 00:07:12,000 Speaker 1: can't imagine yet. You know, when when the Internet was 117 00:07:12,040 --> 00:07:15,560 Speaker 1: first being developed, I don't think too many people envisioned 118 00:07:15,720 --> 00:07:19,360 Speaker 1: Amazon and Uber and Netflix and you know, the things 119 00:07:19,400 --> 00:07:24,360 Speaker 1: that have totally transformed consumption and not not just consumption 120 00:07:24,440 --> 00:07:27,480 Speaker 1: of information, but even consumption of goods and services. Well, 121 00:07:27,520 --> 00:07:30,040 Speaker 1: I think that could happen here as well. I think 122 00:07:30,200 --> 00:07:35,360 Speaker 1: programmable money, for instance, is a very exciting technology. The 123 00:07:35,440 --> 00:07:40,120 Speaker 1: ability to have embedded in a unit of value, a 124 00:07:40,240 --> 00:07:44,120 Speaker 1: form of money, a transaction, a movement of that value 125 00:07:44,120 --> 00:07:48,680 Speaker 1: based on some exogenous but verifiable event. That's really interesting. 126 00:07:48,720 --> 00:07:53,160 Speaker 1: And I could imagine lots of applications validating ownership, um, 127 00:07:53,200 --> 00:07:57,200 Speaker 1: you know, in an immutable way. That's something that blockchain allows. 128 00:07:57,280 --> 00:08:00,320 Speaker 1: So so I think there's all kinds of application that 129 00:08:00,360 --> 00:08:05,600 Speaker 1: are likely to emerge, and we should not presume that 130 00:08:05,600 --> 00:08:08,239 Speaker 1: that can't happen or and we certainly shouldn't do anything 131 00:08:08,280 --> 00:08:27,480 Speaker 1: to preclude it. So you've been very critical of SEC 132 00:08:28,160 --> 00:08:30,520 Speaker 1: Chief Gensler, you know, and there's a lot of reasons 133 00:08:30,560 --> 00:08:32,520 Speaker 1: I think people are critical. There's been there are a 134 00:08:32,600 --> 00:08:36,040 Speaker 1: number of like you know, Central Seed, Sei Fi things 135 00:08:36,080 --> 00:08:38,440 Speaker 1: that went bust. People weren't protected them, like people think 136 00:08:38,480 --> 00:08:41,760 Speaker 1: about stuff like Celsius. And then, as you pointed out, 137 00:08:42,000 --> 00:08:45,080 Speaker 1: this idea of sort of like regulation by enforcement, where 138 00:08:45,080 --> 00:08:47,079 Speaker 1: no one knows the rules and then suddenly there's a 139 00:08:47,160 --> 00:08:50,280 Speaker 1: lawsuit against them. What do you think that right now, 140 00:08:50,800 --> 00:08:53,800 Speaker 1: with the existing laws of the land, that SEC Chairman 141 00:08:53,840 --> 00:08:57,520 Speaker 1: Gensler has the ability to regulate crypto in a more 142 00:08:57,559 --> 00:09:01,040 Speaker 1: meaningful manner, or does he really need you, and by you, 143 00:09:01,120 --> 00:09:06,560 Speaker 1: I mean Congress to grant the SEC better and clear authority. 144 00:09:07,120 --> 00:09:10,559 Speaker 1: That's a great question, and I think the answer is 145 00:09:11,000 --> 00:09:15,719 Speaker 1: there are probably some crypto projects, some protocols and associated 146 00:09:15,760 --> 00:09:21,320 Speaker 1: tokens that really are securities and therefore should could and 147 00:09:21,320 --> 00:09:25,040 Speaker 1: should be regulated by the SEC. But I think many 148 00:09:25,120 --> 00:09:30,200 Speaker 1: many are not. And that's my fundamental difference with Chairman Gensler. 149 00:09:30,360 --> 00:09:35,880 Speaker 1: He maintains that virtually all cryptocurrencies are securities. He will 150 00:09:35,880 --> 00:09:40,160 Speaker 1: acknowledge that bitcoin is not. I don't think you could 151 00:09:40,160 --> 00:09:43,360 Speaker 1: get him, well, I suggest you try. I have not 152 00:09:43,440 --> 00:09:46,840 Speaker 1: been able to get him to identify a single other 153 00:09:47,040 --> 00:09:51,240 Speaker 1: token that is not a security um and I think 154 00:09:51,440 --> 00:09:55,920 Speaker 1: his argument is tenuous. And part of the problem is 155 00:09:56,040 --> 00:09:58,960 Speaker 1: I think there has not been sufficient clarity as to 156 00:09:59,320 --> 00:10:04,040 Speaker 1: what does institute a crypto security and what does not. 157 00:10:04,320 --> 00:10:08,080 Speaker 1: By the way, you could use crypto tokens in a 158 00:10:08,120 --> 00:10:13,120 Speaker 1: transaction that definitely falls under the jurisdiction of the SEC. Right, 159 00:10:13,200 --> 00:10:17,600 Speaker 1: so Celsius and Voyager when they're taking crypto deposits, paying 160 00:10:17,600 --> 00:10:20,200 Speaker 1: an interest rate on it, using those deposits to then 161 00:10:21,160 --> 00:10:26,800 Speaker 1: lend to I suppose hedge funds and other institutions that 162 00:10:26,800 --> 00:10:33,040 Speaker 1: that definitely I think falls under the SECS brief And frankly, 163 00:10:33,080 --> 00:10:36,520 Speaker 1: I think there's questions about why after an enforcement action 164 00:10:36,559 --> 00:10:39,360 Speaker 1: against block Fire earlier in the year, nothing happened to 165 00:10:39,400 --> 00:10:42,319 Speaker 1: Celsius and Voyager until they blew up. But but that's 166 00:10:42,360 --> 00:10:45,960 Speaker 1: a little bit different from the question of why is 167 00:10:46,000 --> 00:10:50,960 Speaker 1: it that every crypto project other than bitcoin is a security. 168 00:10:51,120 --> 00:10:55,400 Speaker 1: I think legislative guidance that would make it clear what 169 00:10:55,600 --> 00:10:58,600 Speaker 1: is and what is not would be very very helpful 170 00:10:58,640 --> 00:11:00,840 Speaker 1: and and I would say to things if I could, 171 00:11:01,080 --> 00:11:06,199 Speaker 1: that ought to cast serious doubt on German Gunstler's argument. 172 00:11:06,320 --> 00:11:11,640 Speaker 1: One is there are many projects where there is no 173 00:11:11,840 --> 00:11:16,440 Speaker 1: centralized authority, right that that Bitcoin is an obvious case, 174 00:11:16,440 --> 00:11:18,440 Speaker 1: but it's not the only one. And if you have 175 00:11:18,520 --> 00:11:21,920 Speaker 1: a truly decentralized platform, you have you have code, you 176 00:11:21,960 --> 00:11:24,520 Speaker 1: have software, that's what it is, and the fact that 177 00:11:24,559 --> 00:11:27,960 Speaker 1: people are using it doesn't mean that there's a central authority, 178 00:11:28,160 --> 00:11:32,719 Speaker 1: And the idea of a central authority really traditionally an 179 00:11:32,760 --> 00:11:36,679 Speaker 1: issuer is at the heart of what makes something a security. 180 00:11:37,120 --> 00:11:39,320 Speaker 1: The other thing I would point out is that every 181 00:11:39,360 --> 00:11:43,840 Speaker 1: security that I can think of involves a claim on 182 00:11:43,880 --> 00:11:47,359 Speaker 1: an issuer. Right. If it's equity, it's a claim of ownership. 183 00:11:47,840 --> 00:11:51,480 Speaker 1: If it's a bond, it's a claim on the assets. Right, 184 00:11:51,480 --> 00:11:57,640 Speaker 1: there's a specific claim, and there's usually also a specified return. 185 00:11:57,920 --> 00:12:00,959 Speaker 1: Either it's an interest rate, or it's a dividend, or 186 00:12:01,000 --> 00:12:05,559 Speaker 1: it's a promise of some share of income. Well, crypto 187 00:12:05,720 --> 00:12:08,480 Speaker 1: doesn't typically have that. There may be some tokens that do, 188 00:12:08,600 --> 00:12:12,280 Speaker 1: and okay, I'll call them a security, but when there 189 00:12:12,360 --> 00:12:15,000 Speaker 1: is no claim on an issuer, when there is no 190 00:12:15,360 --> 00:12:19,720 Speaker 1: built in return, then I'm not sure it should even 191 00:12:19,720 --> 00:12:23,800 Speaker 1: pass the Howe test. So and at a minimum, I 192 00:12:23,800 --> 00:12:26,280 Speaker 1: think you have to acknowledge that it's very different from 193 00:12:26,280 --> 00:12:30,520 Speaker 1: all the securities that we have acknowledged over the years, 194 00:12:31,000 --> 00:12:33,280 Speaker 1: and so that's why I think really Congress should act 195 00:12:33,320 --> 00:12:38,040 Speaker 1: on this and specify how these projects ought to be regulated. So, 196 00:12:38,679 --> 00:12:43,440 Speaker 1: speaking of things being very different, one charitable interpretation of 197 00:12:43,440 --> 00:12:46,840 Speaker 1: the sec S sort of ad hoc enforcement approach is 198 00:12:46,920 --> 00:12:49,560 Speaker 1: that it has to do with the pace of innovation 199 00:12:49,559 --> 00:12:53,480 Speaker 1: and crypto just being different to anything we've really seen before. 200 00:12:53,600 --> 00:12:57,079 Speaker 1: So maybe it makes sense for the SEC to try 201 00:12:57,160 --> 00:13:01,440 Speaker 1: to maintain flexibility and kind of learn urn and develop 202 00:13:01,600 --> 00:13:05,199 Speaker 1: alongside the industry. I've also heard people talk about, well, 203 00:13:05,240 --> 00:13:08,520 Speaker 1: if they codified everything, made it really really clear what 204 00:13:08,559 --> 00:13:12,200 Speaker 1: the rules actually were, then inevitably there would be crypto 205 00:13:12,200 --> 00:13:15,520 Speaker 1: players who start poking around for loopholes and trying to 206 00:13:15,640 --> 00:13:19,280 Speaker 1: exploit those and that sort of thing. What do you 207 00:13:19,360 --> 00:13:25,000 Speaker 1: say to that interpretation of the SEC and Ginstler's approach. Yeah, 208 00:13:25,280 --> 00:13:27,760 Speaker 1: I don't think that's a strong argument, because it really 209 00:13:27,800 --> 00:13:31,440 Speaker 1: seems to be arguing for ambiguity and hiding the ball 210 00:13:31,480 --> 00:13:35,760 Speaker 1: and ensuring that the both consumers and developers just don't 211 00:13:35,800 --> 00:13:37,800 Speaker 1: have clarity on this. Look at it from the point 212 00:13:37,800 --> 00:13:41,120 Speaker 1: of view of a creative developer who has an idea 213 00:13:41,679 --> 00:13:46,200 Speaker 1: for an application of a smart contract. Maybe, but it's 214 00:13:46,200 --> 00:13:50,040 Speaker 1: got to run on a Layer two protocol, and is 215 00:13:50,440 --> 00:13:54,640 Speaker 1: concern is he really doesn't know. Is there a way 216 00:13:54,640 --> 00:13:56,920 Speaker 1: to design this so that it wouldn't be considered a 217 00:13:56,960 --> 00:13:58,880 Speaker 1: security or do I have to go to bed every 218 00:13:58,960 --> 00:14:01,160 Speaker 1: night wondering whether the SEC has going to come knocking 219 00:14:01,200 --> 00:14:03,720 Speaker 1: on my door in the morning and accuse me of 220 00:14:04,200 --> 00:14:09,000 Speaker 1: dealing with you know, I'm unregistered, therefore illegal security. That 221 00:14:09,200 --> 00:14:11,360 Speaker 1: that's where you end up, That's where we are now, 222 00:14:11,679 --> 00:14:13,720 Speaker 1: and that's where you end up when you don't provide 223 00:14:13,760 --> 00:14:17,800 Speaker 1: the clarity that both consumers and developers deserve. Okay, well 224 00:14:17,800 --> 00:14:21,720 Speaker 1: you're working on legislation. What is it going to say 225 00:14:21,840 --> 00:14:24,080 Speaker 1: or what would you like it to say to resolve 226 00:14:24,120 --> 00:14:27,680 Speaker 1: these ambiguities. Well, the first thing I'm working on is 227 00:14:27,680 --> 00:14:31,360 Speaker 1: actually I think of it, at least conceptually, as preceding 228 00:14:31,840 --> 00:14:33,880 Speaker 1: some of the things we've been discussing, and that would 229 00:14:33,880 --> 00:14:38,760 Speaker 1: be legislation that will provide guardrails for regulating stable coins. 230 00:14:39,480 --> 00:14:42,520 Speaker 1: As as you know, right, stable coins are the currency 231 00:14:42,560 --> 00:14:45,440 Speaker 1: that's used to go in and out of crypto generally. 232 00:14:46,160 --> 00:14:49,840 Speaker 1: It's also in some ways I think the easiest and 233 00:14:49,960 --> 00:14:54,880 Speaker 1: simplest challenge for Congress and for regulators to solve. So 234 00:14:55,000 --> 00:14:59,120 Speaker 1: I've I've introduced legislation or draft of a bill that 235 00:14:59,240 --> 00:15:02,680 Speaker 1: deals with the category of stable coins that I think 236 00:15:02,760 --> 00:15:07,280 Speaker 1: could plausibly be widely used as a method of payment, 237 00:15:07,840 --> 00:15:10,280 Speaker 1: and that that would be asset back stable coins. I 238 00:15:10,320 --> 00:15:13,520 Speaker 1: think algorithmic stable coins are in a different category. But 239 00:15:13,760 --> 00:15:16,680 Speaker 1: what what we define? What I define as payment stable 240 00:15:16,720 --> 00:15:21,320 Speaker 1: coins and are backed by assets, I think a regulatory 241 00:15:21,400 --> 00:15:24,440 Speaker 1: regime makes sense. It would it would require, for instance, 242 00:15:24,520 --> 00:15:26,960 Speaker 1: rules about disclosure, what is the nature of the assets. 243 00:15:26,960 --> 00:15:32,120 Speaker 1: It would require that you'd have to be licensed to 244 00:15:32,280 --> 00:15:34,360 Speaker 1: issue it, and then we go through you know, how 245 00:15:34,440 --> 00:15:37,440 Speaker 1: you could go about obtaining such a license, and if 246 00:15:37,440 --> 00:15:41,000 Speaker 1: you have them, then you'd have to have high quality assets, 247 00:15:41,120 --> 00:15:45,240 Speaker 1: liquid assets backing at cash and cash equivalence. We talked 248 00:15:45,280 --> 00:15:49,280 Speaker 1: about the capitalization that would be necessary for the issuing entity. Anyway, 249 00:15:49,280 --> 00:15:53,240 Speaker 1: the point is we lay out the criteria by which 250 00:15:53,800 --> 00:15:57,040 Speaker 1: this could be regulated, and I think it would make 251 00:15:57,040 --> 00:15:59,400 Speaker 1: a lot of sense to start there. I could imagine 252 00:15:59,440 --> 00:16:03,920 Speaker 1: you could start in other places, but that's that's my 253 00:16:03,920 --> 00:16:07,480 Speaker 1: my first ambition in this space. What's the best approach 254 00:16:07,560 --> 00:16:11,520 Speaker 1: in your opinion to protecting consumers when it comes to 255 00:16:11,640 --> 00:16:17,000 Speaker 1: crypto and tokens? So you know, my approach here is 256 00:16:17,040 --> 00:16:21,080 Speaker 1: the same as it is in most in most areas, 257 00:16:21,160 --> 00:16:24,760 Speaker 1: which is to have a lot of respect for consumers. Right. 258 00:16:25,400 --> 00:16:27,760 Speaker 1: I think sometimes some of my colleagues and some of 259 00:16:27,800 --> 00:16:32,400 Speaker 1: the regulators adopt the really paternalistic approach, and they want 260 00:16:32,400 --> 00:16:34,680 Speaker 1: to protect consumers from themselves, and they want to put 261 00:16:34,680 --> 00:16:36,800 Speaker 1: all kinds of regulations about who can do what and 262 00:16:36,880 --> 00:16:40,600 Speaker 1: under what circumstances. I don't I don't view the world 263 00:16:40,680 --> 00:16:42,600 Speaker 1: that way, the way I think we ought. What I 264 00:16:42,600 --> 00:16:45,400 Speaker 1: think we ought to do is make sure that consumers 265 00:16:45,520 --> 00:16:49,400 Speaker 1: have enough information to make a well informed decision about 266 00:16:49,800 --> 00:16:51,880 Speaker 1: what they want to do. So it's about for me, 267 00:16:51,920 --> 00:16:55,480 Speaker 1: it's mostly about disclosure. With the stable points, for instance, 268 00:16:55,520 --> 00:16:58,280 Speaker 1: the heart of the regime that that I'm advocating is 269 00:16:58,880 --> 00:17:04,920 Speaker 1: full disclosure, audited disclosure, attestation of continuity of the assets 270 00:17:04,920 --> 00:17:08,879 Speaker 1: backing the stable coin. That's the heart of it for me, 271 00:17:09,240 --> 00:17:12,840 Speaker 1: and I would take a similar approach to non stable 272 00:17:12,840 --> 00:17:15,600 Speaker 1: coins other other crypto projects. I just want to press 273 00:17:15,720 --> 00:17:18,359 Speaker 1: further on this because I feel like where people have 274 00:17:18,560 --> 00:17:20,760 Speaker 1: lost a lot of money, yes, people also gain money, 275 00:17:20,760 --> 00:17:23,600 Speaker 1: and I think I take seriously your point about respecting 276 00:17:23,760 --> 00:17:27,639 Speaker 1: the consumer or the investor, But where people have a 277 00:17:27,680 --> 00:17:30,520 Speaker 1: lot of risks are not stable coin as their projects 278 00:17:30,520 --> 00:17:33,119 Speaker 1: that have been you know, eye popping returns and big 279 00:17:33,160 --> 00:17:36,880 Speaker 1: ap wise and defy protocols where you can earn ten 280 00:17:36,960 --> 00:17:41,480 Speaker 1: thousand percent, etcetera. And there is no right now from 281 00:17:41,520 --> 00:17:44,560 Speaker 1: as far as I know, there's nothing remotely like the 282 00:17:44,600 --> 00:17:48,160 Speaker 1: equivalent of say like filing a ten queue for those projects. 283 00:17:48,160 --> 00:17:51,119 Speaker 1: So it's very hard to have like should you know, 284 00:17:51,280 --> 00:17:54,639 Speaker 1: should a defy project that someone launches, some sort of 285 00:17:54,720 --> 00:17:59,280 Speaker 1: lending protocol, have some sort of minimum disclosure that some 286 00:17:59,600 --> 00:18:04,240 Speaker 1: kind of resembles what a stock disclosure looks like. I 287 00:18:04,240 --> 00:18:08,720 Speaker 1: would say, if the if the nature of the arrangement 288 00:18:08,760 --> 00:18:10,960 Speaker 1: that you're describing is one in which there is a 289 00:18:11,000 --> 00:18:14,840 Speaker 1: return that is offered or promise, and yes, then it 290 00:18:14,880 --> 00:18:17,480 Speaker 1: starts to look a lot like a security or at 291 00:18:17,560 --> 00:18:20,920 Speaker 1: least the activity is the is the activity of a screen. 292 00:18:20,920 --> 00:18:23,880 Speaker 1: You know, if if you said, give me a bushel 293 00:18:23,920 --> 00:18:27,240 Speaker 1: of apples and I will give you an apple a day, 294 00:18:27,320 --> 00:18:28,800 Speaker 1: and at the end of a month, I'll give you 295 00:18:28,840 --> 00:18:32,080 Speaker 1: the bushel back, I would say that actually looks all 296 00:18:32,080 --> 00:18:35,359 Speaker 1: out like a security arrangement because of the return that 297 00:18:35,400 --> 00:18:39,640 Speaker 1: you're offering, and it probably actually meets the Howie test. 298 00:18:39,960 --> 00:18:44,080 Speaker 1: But it doesn't make the apple a security, right. The 299 00:18:44,359 --> 00:18:47,639 Speaker 1: apple still just an apple it but the activity is 300 00:18:47,680 --> 00:18:51,080 Speaker 1: something that that is appropriately regulated. So if you have 301 00:18:51,119 --> 00:18:54,960 Speaker 1: a crypto project where someone decides, hey, I'm going to 302 00:18:55,040 --> 00:18:59,119 Speaker 1: offer this return to an investor because I'm going to 303 00:18:59,480 --> 00:19:01,679 Speaker 1: you know, I've got this clever way to cover you know, 304 00:19:01,720 --> 00:19:05,520 Speaker 1: on eye popping interest rate it describe it, then yeah, 305 00:19:05,560 --> 00:19:25,639 Speaker 1: that probably requires regulation and certainly disclosure. What's your take 306 00:19:25,800 --> 00:19:28,840 Speaker 1: on the treasury sanctioning of a piece of software, and 307 00:19:29,400 --> 00:19:33,119 Speaker 1: of course talking about Tornado cash. Is it legitimate for 308 00:19:33,160 --> 00:19:36,879 Speaker 1: the Treasury to sanction a literal piece of software? And 309 00:19:36,920 --> 00:19:39,600 Speaker 1: if not, how should we think about I mean, you 310 00:19:39,640 --> 00:19:42,200 Speaker 1: mentioned the importance of privacy and the importance of cash, 311 00:19:42,240 --> 00:19:43,800 Speaker 1: but there are issues you can only you know, it's 312 00:19:43,840 --> 00:19:47,240 Speaker 1: hard to transfer a high volume of cash, and that's 313 00:19:47,280 --> 00:19:50,760 Speaker 1: sort of the protection against money laundering, which is that 314 00:19:50,920 --> 00:19:54,639 Speaker 1: you could theoretically do it, but it becomes cumbersome. Do 315 00:19:54,680 --> 00:19:57,960 Speaker 1: you think there is legitimate for the Treasury, as part 316 00:19:58,000 --> 00:20:01,360 Speaker 1: of either anti terrorism or anti money laundering or going 317 00:20:01,400 --> 00:20:05,439 Speaker 1: after North Korea to sanction a piece of software? And 318 00:20:05,800 --> 00:20:08,800 Speaker 1: is that a worthwhile pursuit in some manner? So there's 319 00:20:08,800 --> 00:20:12,439 Speaker 1: a lot to try to impact there, and part of it, 320 00:20:12,800 --> 00:20:15,240 Speaker 1: you know, in all candor, is this is this is 321 00:20:15,280 --> 00:20:18,440 Speaker 1: new and I am still really trying to make sure 322 00:20:18,440 --> 00:20:20,879 Speaker 1: I understand the implication of this. My first reactions, I 323 00:20:20,920 --> 00:20:26,359 Speaker 1: get very concerned about sanctioning code. That does worry me. 324 00:20:26,520 --> 00:20:30,160 Speaker 1: That concerns me. I think there's significant First Amendment issues. 325 00:20:30,800 --> 00:20:34,040 Speaker 1: I think that is problematic. Having said that, I do 326 00:20:34,160 --> 00:20:37,720 Speaker 1: acknowledge that there is an illicit activity that we want 327 00:20:37,800 --> 00:20:41,439 Speaker 1: to be able to identify, and if we can't prevent it, 328 00:20:41,520 --> 00:20:43,719 Speaker 1: at least go after the bad guys when they engage 329 00:20:43,720 --> 00:20:46,480 Speaker 1: in it. What I would suggest is the wrong way 330 00:20:46,480 --> 00:20:48,919 Speaker 1: to do that is to take this archaic system that 331 00:20:49,000 --> 00:20:53,600 Speaker 1: we now impose on banks and other financial institutions and 332 00:20:54,520 --> 00:20:57,480 Speaker 1: apply it now to this whole new technology you know 333 00:20:57,520 --> 00:21:01,960 Speaker 1: I'm referring to, like the the reporting rules. Every transaction 334 00:21:02,400 --> 00:21:06,280 Speaker 1: over ten thousand dollars has to be reported. So what 335 00:21:06,320 --> 00:21:10,359 Speaker 1: we know for sure is that some percent of these 336 00:21:10,359 --> 00:21:13,679 Speaker 1: reports are are false positives. Right, there's nothing wrong with 337 00:21:13,720 --> 00:21:16,720 Speaker 1: these transactions, but we haven't even raised the dollar threshold 338 00:21:16,760 --> 00:21:20,520 Speaker 1: since the nine seventies, not even to reflect inflation, and 339 00:21:20,560 --> 00:21:24,200 Speaker 1: so we just have this massive reporting requirement. It's quite 340 00:21:24,480 --> 00:21:27,720 Speaker 1: onerous to comply with, and it swamps the Treasury with 341 00:21:27,760 --> 00:21:30,560 Speaker 1: all kinds of this information. What I think we ought 342 00:21:30,600 --> 00:21:32,560 Speaker 1: to do, and I'm not an expert in this area, 343 00:21:32,600 --> 00:21:36,639 Speaker 1: but I've spoken at some length with people who are is, 344 00:21:37,720 --> 00:21:43,360 Speaker 1: use artificial intelligence on an open source blockchain and use 345 00:21:43,440 --> 00:21:48,000 Speaker 1: that technology to discern suspicious transactions. Don't just assume that 346 00:21:48,040 --> 00:21:51,040 Speaker 1: everything is suspicious because it's more than ten tho dollars. 347 00:21:51,240 --> 00:21:55,040 Speaker 1: Don't just import this, you know, completely really in many 348 00:21:55,040 --> 00:21:59,760 Speaker 1: ways obsolete technology and impose it on crypto, but use 349 00:22:00,240 --> 00:22:02,959 Speaker 1: the tools that we have now, and and there are 350 00:22:02,960 --> 00:22:05,640 Speaker 1: private companies that do this already. Right then, we've had 351 00:22:05,720 --> 00:22:09,919 Speaker 1: these great stories of recovering stolen crypto, even because this 352 00:22:10,040 --> 00:22:14,240 Speaker 1: is totally traceable. Now with Tornado, I understand part of 353 00:22:14,240 --> 00:22:17,320 Speaker 1: the purpose is to make it much more difficult to 354 00:22:17,480 --> 00:22:22,000 Speaker 1: trace that. So it does raise some additional challenges, but 355 00:22:22,119 --> 00:22:24,800 Speaker 1: I'm not convinced that the right answer is to apply 356 00:22:24,920 --> 00:22:28,600 Speaker 1: the current bank reging monitor. So just when it comes 357 00:22:28,640 --> 00:22:31,560 Speaker 1: to Congress and crypto, there's been a lot of discussion 358 00:22:31,560 --> 00:22:36,080 Speaker 1: about the possibility of Congress actually, you know, maybe passing 359 00:22:36,119 --> 00:22:40,800 Speaker 1: something to decide who actually regulates crypto. Is that the CFTC, 360 00:22:41,400 --> 00:22:45,000 Speaker 1: is that the SEC? Is it something totally different? What's 361 00:22:45,040 --> 00:22:49,520 Speaker 1: the likelihood of Congress actually legislating on this or the 362 00:22:49,600 --> 00:22:54,439 Speaker 1: legislation getting passed. And then secondly, does political appetite to 363 00:22:54,840 --> 00:23:00,440 Speaker 1: interact and um legislate crypto? Does it change depending on 364 00:23:00,600 --> 00:23:02,720 Speaker 1: what's going on with the industry. I mean, we're in 365 00:23:02,720 --> 00:23:05,000 Speaker 1: a crypto winter right now. A lot of people have 366 00:23:05,160 --> 00:23:07,600 Speaker 1: lost quite a bit of money. Does it feel like 367 00:23:07,640 --> 00:23:10,640 Speaker 1: there's more political appetite right now to do something about 368 00:23:10,640 --> 00:23:13,440 Speaker 1: the industry than before. I think the answer is yes, 369 00:23:14,080 --> 00:23:18,920 Speaker 1: at least in some respects. So for instance, I believe 370 00:23:19,359 --> 00:23:26,320 Speaker 1: that when Terra and Luna collapsed, it seems to have 371 00:23:26,800 --> 00:23:31,400 Speaker 1: elevated the issue of stable coin regulation with the White 372 00:23:31,440 --> 00:23:36,479 Speaker 1: House and with the Administration in general, and with some 373 00:23:36,560 --> 00:23:41,720 Speaker 1: of my colleagues. So that real world event, and even 374 00:23:41,720 --> 00:23:44,359 Speaker 1: though it's an algorithmic stable coin, and I think the 375 00:23:44,440 --> 00:23:46,920 Speaker 1: most likely regulation on stable coin will actually be for 376 00:23:46,960 --> 00:23:50,280 Speaker 1: payment stable coins, the fact that there was a sort 377 00:23:50,280 --> 00:23:56,520 Speaker 1: of sensational bad event did move this up the list 378 00:23:56,560 --> 00:23:59,159 Speaker 1: of priorities, put it on people's radar who didn't have 379 00:23:59,200 --> 00:24:03,040 Speaker 1: it on their radar. So I do think what happens 380 00:24:03,119 --> 00:24:08,560 Speaker 1: in the crypto world does beer on Congress's inclination. I 381 00:24:08,600 --> 00:24:11,159 Speaker 1: still think there's a chance to get stable coin legislation 382 00:24:11,240 --> 00:24:14,399 Speaker 1: done this year. I think the administration would like to 383 00:24:14,440 --> 00:24:18,439 Speaker 1: get something done. There are Republicans pretty overwhelmingly would like 384 00:24:18,520 --> 00:24:21,280 Speaker 1: to get something done. Some Democrats would as well. On 385 00:24:21,359 --> 00:24:25,640 Speaker 1: the broader outside of stable coins, the question of ordinary 386 00:24:25,840 --> 00:24:29,119 Speaker 1: if I can say, you know ordinary crypto project, right, 387 00:24:29,280 --> 00:24:32,040 Speaker 1: what does that mean, but but non stable coin, let's 388 00:24:32,080 --> 00:24:35,840 Speaker 1: say that's that's tougher. I think it's more difficult. You 389 00:24:35,840 --> 00:24:39,439 Speaker 1: do have a bipartisan bill. You have actually two bipartisan bills, right, 390 00:24:39,800 --> 00:24:44,360 Speaker 1: they're they're they're different, the Lummis Jilla Brand Bill and 391 00:24:44,480 --> 00:24:49,360 Speaker 1: the Stavana Bozeman Bill. So you're starting to see some 392 00:24:49,440 --> 00:24:56,000 Speaker 1: engagement by members and members on relevant committees of jurisdiction. 393 00:24:56,920 --> 00:25:00,199 Speaker 1: So my I'm still going to hold out hope we 394 00:25:00,200 --> 00:25:03,240 Speaker 1: get a stable coin build done this year, and next 395 00:25:03,320 --> 00:25:08,120 Speaker 1: year Congress might do considerably more. You know, I understand that, 396 00:25:08,200 --> 00:25:11,000 Speaker 1: you know, stable coins are the low hanging fruit because 397 00:25:11,040 --> 00:25:14,520 Speaker 1: they're pretty straightforward, particularly the asset back lines, where really 398 00:25:14,560 --> 00:25:17,080 Speaker 1: the requirement is if you're going to have a dollar 399 00:25:17,160 --> 00:25:20,280 Speaker 1: stable coin, have a dollar equivalent in a bank account, 400 00:25:20,320 --> 00:25:23,440 Speaker 1: and let an auditor verify that it's that one to one. 401 00:25:23,800 --> 00:25:26,800 Speaker 1: But obviously the you know you mentioned the terror Luna 402 00:25:26,880 --> 00:25:29,280 Speaker 1: collapse knows an algorithmic stable coin, it would not be 403 00:25:29,440 --> 00:25:33,000 Speaker 1: covered under that. When you get into this more defy areas, 404 00:25:33,040 --> 00:25:34,679 Speaker 1: and I get I want to push on this a 405 00:25:34,680 --> 00:25:36,480 Speaker 1: little bit further. You think of some sort of like 406 00:25:36,560 --> 00:25:39,840 Speaker 1: defy exchange like unit swap, which is a piece of software. 407 00:25:40,440 --> 00:25:42,760 Speaker 1: But to most people looking at it, it looks like 408 00:25:42,800 --> 00:25:45,760 Speaker 1: a stock market, and it looks like an unregulated stock market. 409 00:25:45,840 --> 00:25:47,520 Speaker 1: At that it looks like there's a bunch of different 410 00:25:47,880 --> 00:25:50,040 Speaker 1: stop like things that you can buy, and you can 411 00:25:50,080 --> 00:25:52,000 Speaker 1: go there and you buy them an any amount like 412 00:25:52,119 --> 00:25:54,280 Speaker 1: you would at like you know, if you're using robin 413 00:25:54,320 --> 00:25:58,840 Speaker 1: Hood or Schwab except their crypto. Does that is that acceptable? 414 00:25:59,320 --> 00:26:02,760 Speaker 1: Is that? Do we need some sort of rules on defy? 415 00:26:03,000 --> 00:26:06,360 Speaker 1: Like can this go on this sort of active trading 416 00:26:06,920 --> 00:26:10,160 Speaker 1: in various protocols and way in which nobody really has 417 00:26:10,240 --> 00:26:13,480 Speaker 1: any sort of disclosure requirements at all? Is it tenable? 418 00:26:13,840 --> 00:26:16,920 Speaker 1: Not politically right? I think that there will be political 419 00:26:17,160 --> 00:26:22,000 Speaker 1: pressure to do something, and I could probably support some 420 00:26:22,119 --> 00:26:25,919 Speaker 1: kind of disclosure requirement, but you know, again, I'd go 421 00:26:26,000 --> 00:26:28,560 Speaker 1: back to the fact that I think we ought to 422 00:26:28,680 --> 00:26:34,240 Speaker 1: respect the judgment of consumers, and you know, I think 423 00:26:34,720 --> 00:26:38,199 Speaker 1: with some minimum disclosure, a consumer can decide do you 424 00:26:38,240 --> 00:26:44,159 Speaker 1: want to trade on unregulated, automated, decentralized crypto exchange or 425 00:26:44,200 --> 00:26:46,120 Speaker 1: do you want to go a coin base? You don't, 426 00:26:46,119 --> 00:26:47,919 Speaker 1: You don't have to, you know, it's not like you've 427 00:26:47,920 --> 00:26:51,560 Speaker 1: only got one choice. You've got multiple choices. I think 428 00:26:51,600 --> 00:26:54,840 Speaker 1: that's an acceptable place to lend. Now, I probably personally 429 00:26:55,359 --> 00:26:59,760 Speaker 1: would favor a lighter regulatory touch than most of my colleagues. 430 00:27:00,160 --> 00:27:04,159 Speaker 1: Who knows where that ends up, but I think I 431 00:27:04,200 --> 00:27:07,520 Speaker 1: think consumers can generally make good decisions for themselves. So 432 00:27:07,720 --> 00:27:11,680 Speaker 1: just on this point, there's another aspect of Gensler's sec 433 00:27:11,920 --> 00:27:15,000 Speaker 1: that you're critical of, and that is the proposal for 434 00:27:15,160 --> 00:27:20,359 Speaker 1: more climate disclosures. How does that square with you know, 435 00:27:20,760 --> 00:27:24,960 Speaker 1: your broader message on crypto, which is, give consumers more information, 436 00:27:25,920 --> 00:27:29,680 Speaker 1: get better disclosures, and then let them make their own decision. 437 00:27:30,040 --> 00:27:34,320 Speaker 1: Why isn't that the same case for companies and e 438 00:27:34,520 --> 00:27:37,680 Speaker 1: s G mandates and things like that. Well, well, it's 439 00:27:37,840 --> 00:27:39,840 Speaker 1: very very different. First of all, we're starting from a 440 00:27:39,880 --> 00:27:43,800 Speaker 1: point with crypto where there is zero regulation, right, There 441 00:27:43,880 --> 00:27:46,800 Speaker 1: is no requirement, there is no regime, there is no disclosure, 442 00:27:46,840 --> 00:27:51,800 Speaker 1: there is nothing, And so we're having a conversation about, well, 443 00:27:52,040 --> 00:27:54,120 Speaker 1: is there anything at all that we ought to provide? 444 00:27:54,119 --> 00:27:57,639 Speaker 1: And I'm suggesting, yeah, there probably is some. You can't 445 00:27:57,720 --> 00:28:01,040 Speaker 1: even begin to make that suggestion about or securities, right, 446 00:28:01,400 --> 00:28:05,640 Speaker 1: I mean, my god, we go way overboard in terms 447 00:28:05,680 --> 00:28:08,879 Speaker 1: of all the disclosures that are required useless information that 448 00:28:08,920 --> 00:28:13,639 Speaker 1: nobody reads, that does not helpfully informed investors. And what 449 00:28:13,680 --> 00:28:17,400 Speaker 1: Gary Ginsler is doing now with this proposed climate rule 450 00:28:17,800 --> 00:28:24,760 Speaker 1: is to add this massive new category, many multiples of 451 00:28:25,440 --> 00:28:28,240 Speaker 1: more expensive than all the rest that's ever been applied 452 00:28:28,280 --> 00:28:31,880 Speaker 1: before in terms of the cost of compliance, and it's 453 00:28:31,880 --> 00:28:36,840 Speaker 1: not even financially material to the issuere right, So where 454 00:28:36,880 --> 00:28:39,920 Speaker 1: they're proposing that somebody, by virtue of the fact that 455 00:28:39,960 --> 00:28:43,920 Speaker 1: you issue stock or bonds on an exchange, that you 456 00:28:44,040 --> 00:28:49,000 Speaker 1: have to disclose not just the amount of c O 457 00:28:49,120 --> 00:28:53,520 Speaker 1: two that your business operation releases, but you've got to 458 00:28:53,520 --> 00:28:56,000 Speaker 1: figure out how much CO two is released by the 459 00:28:56,160 --> 00:29:00,840 Speaker 1: source of the energy that you purchase. And then, in 460 00:29:01,160 --> 00:29:03,520 Speaker 1: in the what I think is the height of absurdity, 461 00:29:04,040 --> 00:29:08,480 Speaker 1: you're supposed to figure out all the CEO two released 462 00:29:08,480 --> 00:29:12,000 Speaker 1: by all of your suppliers and all of your customers. 463 00:29:12,600 --> 00:29:16,280 Speaker 1: This is ridiculous. It's not even possible to comply with, 464 00:29:16,440 --> 00:29:21,000 Speaker 1: I don't think, and it's not meaningful, and there's no authority, 465 00:29:21,000 --> 00:29:23,920 Speaker 1: by the way, for the SEC to do this. You know, 466 00:29:24,000 --> 00:29:27,920 Speaker 1: the the authority for the SEC is to require the 467 00:29:27,960 --> 00:29:32,000 Speaker 1: disclosure of material information, and I think that's always been 468 00:29:32,080 --> 00:29:37,120 Speaker 1: understood to be financially material, and here we have this 469 00:29:37,440 --> 00:29:43,560 Speaker 1: really speculative guesses about c O two emissions by your customers. Uh, 470 00:29:43,800 --> 00:29:47,600 Speaker 1: this is way way beyond anything that Congress is authorized, 471 00:29:47,600 --> 00:29:50,400 Speaker 1: in my view. Senator pad to me, thank you so 472 00:29:50,480 --> 00:29:52,880 Speaker 1: much for coming on odd lock to really appreciate you 473 00:29:52,960 --> 00:29:55,240 Speaker 1: taking some of your time to chat with us. Hey, 474 00:29:55,280 --> 00:30:11,280 Speaker 1: thanks very much for having me. Senator paid to me, 475 00:30:11,400 --> 00:30:14,000 Speaker 1: is really plugged into crypto? Yeah, I'm kind of wondering, like, 476 00:30:14,120 --> 00:30:18,560 Speaker 1: is he like hanging out like field farming or something. 477 00:30:19,280 --> 00:30:21,120 Speaker 1: Is he like in the No, he's like like for 478 00:30:21,120 --> 00:30:24,560 Speaker 1: for an elected official. He clearly obviously, Look, you know, 479 00:30:24,600 --> 00:30:27,880 Speaker 1: it's sort of he has this sort of regulatory, light touchstance, 480 00:30:27,920 --> 00:30:32,280 Speaker 1: which I think is not particularly surprising given his political ideology. 481 00:30:32,320 --> 00:30:35,440 Speaker 1: But he uh, you know, you hear from some people 482 00:30:35,520 --> 00:30:38,440 Speaker 1: in d C and this is this big thing that's 483 00:30:38,440 --> 00:30:40,600 Speaker 1: coming and they don't seem to be particularly plugged in 484 00:30:40,680 --> 00:30:43,040 Speaker 1: or no the arguments or anything. But that's clearly not 485 00:30:43,080 --> 00:30:45,640 Speaker 1: the case with him. No. You know what I can't 486 00:30:45,640 --> 00:30:48,280 Speaker 1: believe after listening to that conversation is that we've never 487 00:30:48,320 --> 00:30:51,600 Speaker 1: done an episode on the Howie Test. How have we 488 00:30:51,720 --> 00:30:54,320 Speaker 1: really not? No? I think It's come up at various times, 489 00:30:54,400 --> 00:30:59,000 Speaker 1: especially in very early crypto interviews, maybe with Matt Levin 490 00:30:59,200 --> 00:31:01,160 Speaker 1: at one point or another, but we've never done an 491 00:31:01,200 --> 00:31:04,880 Speaker 1: episode specifically on that, but we probably should. To the 492 00:31:04,920 --> 00:31:08,120 Speaker 1: senator's point, it is kind of crazy that we're trying 493 00:31:08,160 --> 00:31:13,280 Speaker 1: to relate, you know, tokens and defy to a Supreme 494 00:31:13,320 --> 00:31:16,760 Speaker 1: Court precedent that was set in the nineteen thirties. It's 495 00:31:16,800 --> 00:31:20,800 Speaker 1: really tricky. And you know, to his point, like, disclosure 496 00:31:20,920 --> 00:31:24,920 Speaker 1: is a good seems like a disclosure seems uncontroversial, right, 497 00:31:24,960 --> 00:31:27,440 Speaker 1: disclosure is good, and maybe there's a level of disclosure 498 00:31:27,480 --> 00:31:30,200 Speaker 1: that's appropriate for a crypto. I still don't even know 499 00:31:30,240 --> 00:31:32,600 Speaker 1: like how it would work in practice, because look, you 500 00:31:32,600 --> 00:31:36,160 Speaker 1: could just have someone in Estonia, like you just it's 501 00:31:36,160 --> 00:31:38,480 Speaker 1: just to create a piece of code that interact with 502 00:31:38,520 --> 00:31:41,000 Speaker 1: another piece of code and it lives maybe on the 503 00:31:41,040 --> 00:31:44,680 Speaker 1: ethereum blockchain, as you know, an e r C twenty token. 504 00:31:44,920 --> 00:31:47,280 Speaker 1: How do you enforce that and how do you are 505 00:31:47,320 --> 00:31:50,360 Speaker 1: you going to enforce like defy exchanges that operate in 506 00:31:50,400 --> 00:31:54,080 Speaker 1: the US to block I think, like, I think this 507 00:31:54,200 --> 00:31:57,360 Speaker 1: is going to be very tricky because even an uncontroversial 508 00:31:57,360 --> 00:32:00,400 Speaker 1: idea like some sort of disclosure I do. I don't 509 00:32:00,400 --> 00:32:02,560 Speaker 1: even see how you go about and forcing that against 510 00:32:02,560 --> 00:32:05,200 Speaker 1: like you know, it's like you know Pickle Farm, well 511 00:32:05,320 --> 00:32:10,280 Speaker 1: the but no, sorry, I gotta credit Frank Chaparo over 512 00:32:10,320 --> 00:32:12,400 Speaker 1: at the block always like hiss, like he's like, how 513 00:32:12,440 --> 00:32:13,880 Speaker 1: are you going to regulate pickle? So I think that 514 00:32:13,960 --> 00:32:17,680 Speaker 1: got stuck in my head. Okay, all right, But the 515 00:32:18,040 --> 00:32:20,560 Speaker 1: big issue that I see is that actually a lot 516 00:32:20,640 --> 00:32:25,560 Speaker 1: of crypto projects already have excellent disclosures and are quite transparent, 517 00:32:25,640 --> 00:32:27,760 Speaker 1: and you can go and look at the source code 518 00:32:28,200 --> 00:32:31,000 Speaker 1: and try to understand it, and yet that doesn't stop 519 00:32:31,040 --> 00:32:34,840 Speaker 1: anyone from doing stupid things like Tara Luna right, like, 520 00:32:34,960 --> 00:32:38,440 Speaker 1: you knew how that worked. It's an algorithmic stable coin. 521 00:32:38,520 --> 00:32:41,240 Speaker 1: You could see what was supposed to happen, and people 522 00:32:41,360 --> 00:32:45,160 Speaker 1: talked about the nightmare scenario of what would happen in 523 00:32:45,160 --> 00:32:49,440 Speaker 1: a panic, and then exactly that occurred. The whole thing collapsed. 524 00:32:49,520 --> 00:32:54,360 Speaker 1: It's not like we didn't have disclosures. So I guess 525 00:32:54,360 --> 00:32:57,160 Speaker 1: my question is like, how do you, yeah, does it 526 00:32:57,240 --> 00:32:59,960 Speaker 1: actually change that much now? And you're absolutely right, like 527 00:33:00,080 --> 00:33:02,560 Speaker 1: you can you could. I've seen people make this argument 528 00:33:02,600 --> 00:33:05,160 Speaker 1: that actually it's all extremely transparent. It's all right there 529 00:33:05,200 --> 00:33:07,800 Speaker 1: on the chain. It's a it's a public blockchain, and 530 00:33:07,840 --> 00:33:09,720 Speaker 1: you can look at like you know, the get hub 531 00:33:09,800 --> 00:33:12,760 Speaker 1: uploads and read the code. The problem is, like there's 532 00:33:12,840 --> 00:33:15,400 Speaker 1: this huge gap right between the people who are like 533 00:33:15,720 --> 00:33:18,680 Speaker 1: buying tokens from money versus the people that can actually 534 00:33:18,720 --> 00:33:21,440 Speaker 1: look at code and understand the token omics of the code. 535 00:33:21,920 --> 00:33:25,320 Speaker 1: I don't know. I think even uncontroversial ideas like the 536 00:33:25,360 --> 00:33:28,960 Speaker 1: stable coin regulation, it does not strike me is that hard. 537 00:33:28,960 --> 00:33:33,200 Speaker 1: But even there it seems tricky because you could have 538 00:33:33,280 --> 00:33:37,280 Speaker 1: again someone outside the US launching something that's called a 539 00:33:37,320 --> 00:33:41,080 Speaker 1: stable coin that's algorithmic, and suddenly like where do you go? 540 00:33:41,240 --> 00:33:43,440 Speaker 1: So I think there's this like little bit of low 541 00:33:43,520 --> 00:33:46,320 Speaker 1: hanging fruit, would like say the U S. D C's 542 00:33:46,440 --> 00:33:48,480 Speaker 1: of the world, where you can sort of very transparently 543 00:33:48,960 --> 00:33:50,760 Speaker 1: audit do you have a dollar or do you have 544 00:33:50,760 --> 00:33:53,720 Speaker 1: a dollar's worth of what the SEC considers catch equivalence? Okay, 545 00:33:53,720 --> 00:33:56,680 Speaker 1: you're good. But I think beyond that, like regulation is 546 00:33:56,680 --> 00:33:58,400 Speaker 1: just going to prove to be very tricky. And I'll 547 00:33:58,440 --> 00:34:01,440 Speaker 1: say one other thing, you know, is he pointed out 548 00:34:01,480 --> 00:34:03,959 Speaker 1: that look a lot of these aren't like companies in 549 00:34:04,000 --> 00:34:06,240 Speaker 1: the sort of traditional sense. Maybe they don't they're not 550 00:34:06,320 --> 00:34:09,480 Speaker 1: Howie or whatever. They don't pass, but like they're not companies, 551 00:34:09,520 --> 00:34:11,440 Speaker 1: but they do have teams and many of them are 552 00:34:11,560 --> 00:34:14,759 Speaker 1: on Twitter and not anonymous, and they kind of look 553 00:34:14,840 --> 00:34:19,439 Speaker 1: like companies. Okay, Despite all these questions, I think one 554 00:34:19,520 --> 00:34:21,840 Speaker 1: thing is clear, which is it does feel like we 555 00:34:21,880 --> 00:34:24,560 Speaker 1: are kind of coming to a crunch point on some 556 00:34:24,640 --> 00:34:27,760 Speaker 1: of these issues. Like there is enough momentum right now 557 00:34:27,840 --> 00:34:31,080 Speaker 1: in d C and elsewhere to actually start thinking about this. 558 00:34:31,160 --> 00:34:33,439 Speaker 1: The industry is big enough to start thinking about how 559 00:34:33,480 --> 00:34:35,560 Speaker 1: are we actually going to regulate it? Are we okay 560 00:34:35,640 --> 00:34:37,319 Speaker 1: with the status quo? Or do we want to do 561 00:34:37,360 --> 00:34:39,839 Speaker 1: something different. I have a feeling we're going to be 562 00:34:39,920 --> 00:34:41,839 Speaker 1: talking about this a lot more, and it was great 563 00:34:41,880 --> 00:34:43,839 Speaker 1: to hear from him, and yes, a lot more coming 564 00:34:43,880 --> 00:34:45,960 Speaker 1: on this. Okay, shall we leave it that. Let's leave 565 00:34:46,000 --> 00:34:48,719 Speaker 1: it there. This has been another episode of the All 566 00:34:48,760 --> 00:34:51,440 Speaker 1: Thoughts Podcast. I'm Tracy Alloway. You can follow me on 567 00:34:51,480 --> 00:34:54,279 Speaker 1: Twitter at Tracy Alloway and I'm Joe Wisn't Though. You 568 00:34:54,320 --> 00:34:57,080 Speaker 1: can follow me on Twitter at the Stalwart. Follow our 569 00:34:57,120 --> 00:35:00,400 Speaker 1: guests on Twitter. Senator pat to Me, He's at send 570 00:35:00,440 --> 00:35:04,120 Speaker 1: to Me. Follow our producer Carmen Rodriguez at Carmen Arman. 571 00:35:04,480 --> 00:35:08,280 Speaker 1: Follow our substitute producer for this episode, our colleague Dashel 572 00:35:08,320 --> 00:35:11,279 Speaker 1: Bennett who filled in. He's at Dashbot and want to 573 00:35:11,280 --> 00:35:15,000 Speaker 1: give a big thanks to our Bloomberg booker colleague in 574 00:35:15,120 --> 00:35:19,200 Speaker 1: d C. Matt Shirley. He's on Twitter at Matt or Shirley. 575 00:35:19,320 --> 00:35:21,799 Speaker 1: And check out all of our podcasts at Bloomberg unto 576 00:35:21,840 --> 00:35:24,280 Speaker 1: the handle at podcasts. Thanks for listening.