Speaker 1: My son in law introduced me to the topic. He
Speaker 1: had an interest in it, and he helped me by
Speaker 1: my first fit coin. This was in that twenty time frame.
Speaker 1: First introduction to this world was from my teenage Sonum.
Speaker 1: He was thirteen, and Endy came said, momot my bit point,
Speaker 1: and I said, absolutely not. I'm Stacy Marie Ishmael, Managing
Speaker 1: editor of Crypto for Bloomberg News, And this is Bloomberg
Speaker 1: Crypto at Daily Bloomberg I Heart Podcast. It's Friday, June seventeen.
Speaker 1: Today on Bloomberg Crypto, we're taking another look at the
Speaker 1: u S approach to regulate the cryptocurrencies. There's a real
Speaker 1: drive on Capitol Hill right now to figure out how
Speaker 1: to define and regulate this asset class and how best
Speaker 1: to protect consumers. This is especially true in the wake
Speaker 1: of the collapse of the Terra stable coin on the
Speaker 1: effects that had on retail investors. The latest and biggest
Speaker 1: attempt in this direction comes from the bipartisan duo of
Speaker 1: Democratic Senator Kirsten Gillibrand of New York and Republican Senator
Speaker 1: Cynthia Loomis of Wyoming. They're proposing legislation that would, among
Speaker 1: many other things, clarify the rules of how two very
Speaker 1: different government agencies, the CFTC and the SEC, would divvy
Speaker 1: up the crypto landscape. Their bill also contains a proposal
Speaker 1: for regularly saying crypto mining. But can it pass and
Speaker 1: how would it work in practice? Bloomberg report to Alison Verse.
Speaker 1: Brill joins me. Now, Alison, thank you so much for
Speaker 1: joining us today. We're going to talk about a pair
Speaker 1: of senators. We have on the one side, Senator Kristen Gillibrand,
Speaker 1: who is a Democrat from New York, and a Republican
Speaker 1: Senator Cynthia Loomis of Wyoming, who have just introduced a
Speaker 1: crypto regulation bill. What specifically is in it? So we
Speaker 1: saw several things in this bill. I mean, it's very
Speaker 1: sweeping by nature, but I think on a high level,
Speaker 1: we have stable coin regulation in here. You know, it
Speaker 1: would require issuers to have a hundred percent reserves and
Speaker 1: then make public disclosures about the assets backing their tokens um.
Speaker 1: We would also see a directive that the government a
Speaker 1: government watch out to a study on some of the
Speaker 1: opportunities and risks of investing in retirement savings and digital assets.
Speaker 1: We'd see the Commodities Feature Trading Commission get significantly greater
Speaker 1: role in regulating digital assets. Um. They would actually have
Speaker 1: you know, primary jurisdiction over coins like bitcoin and ether,
Speaker 1: which together make up more than half of the total
Speaker 1: market capitalization. So um, not a small amount of us.
Speaker 1: Not a small amount. And actually the senators after introducing
Speaker 1: this bill, you know, they mentioned so CFTC would have
Speaker 1: kind of, uh, the bigger role when it comes to
Speaker 1: market capitalization, but then sec would likely have a bigger role.
Speaker 1: And when it comes to the number of token that
Speaker 1: would fall under sort of the securities definition. Um, so
Speaker 1: kind of an interesting distinction there. And then we'd also
Speaker 1: have the creation of an advisory committee and this would
Speaker 1: be you know, consist of private and public sector members.
Speaker 1: And essentially the idea is to help the government keep
Speaker 1: pace with innovation, because we know that things move at
Speaker 1: a record pace when it comes to digital assets. Uh.
Speaker 1: And so this this committee would be tasked with coming
Speaker 1: up with recommendations and um, you know, on new developments
Speaker 1: and and kind of which agencies should be in charge.
Speaker 1: And you've got some of the backstory of how these
Speaker 1: senators got interested not just in crypto, but in working
Speaker 1: with each other. Tell me more about that. Both of
Speaker 1: those senators have expressed an interest in cryptocurrency, and I
Speaker 1: think it stems from two different places. With Senator Lemis,
Speaker 1: you know, she started investing in this very early. She
Speaker 1: has um bought her first bitcoin in at the recommendation
Speaker 1: of her son in law. And then and then Senator Delibery.
Speaker 1: And you know, she told me in another colleague of
Speaker 1: mine that she began working on the Senate Intelligence Committee
Speaker 1: about a year ago and really started participating in hearings
Speaker 1: on virtual currency and the blockchain UM. And she also,
Speaker 1: you know, she represents New York, which is the financial
Speaker 1: capital of the world, and so so New Yorkers will
Speaker 1: tell you so New Yorkers will tell you that's right.
Speaker 1: And so she you know, that's there's obviously been a
Speaker 1: lot of interest from local politicians in New York and
Speaker 1: so she's kind of jumping in on that. And you know,
Speaker 1: she was the one um to approach Senator Lummis. So
Speaker 1: she approached Sanis Lumis. Yes, that's the story we were told.
Speaker 1: So it's it's pretty interesting they um. You know, Senator Delibran,
Speaker 1: as she describes it, was working I think about a
Speaker 1: year ago on legislation to help sexual assault victims in
Speaker 1: the military, and she, you know, told a story about
Speaker 1: Senator Lumis being really willing to jump in on that
Speaker 1: effort without having to consult her staff. Um, you know,
Speaker 1: just knowing that it was an area that was of
Speaker 1: interest to Senator Jella Brand. She told us that that
Speaker 1: really really stuck with her. Um. She said, she felt
Speaker 1: like Senator Lammis was an a lawmaker that could make
Speaker 1: decisions quickly, that could act, you know, sort of outside
Speaker 1: of the normal partisan divides we sometimes see in Congress.
Speaker 1: And so when she started getting interested in cryptocurrency and
Speaker 1: she noticed that Senator Lammis was working on a big,
Speaker 1: sweeping bill um to regulate the industry, I came to Washington.
Speaker 1: I found out that very few of any members of
Speaker 1: the Senate had an awareness of how big bitcoin and
Speaker 1: other digital assets were becoming, and that there was a
Speaker 1: vacuum of both interest and knowledge about this topic. And
Speaker 1: yet it was becoming more and more apparent that a
Speaker 1: framework for regulation was going to be needed. She approached her,
Speaker 1: and you know, now we have both of them working
Speaker 1: together there. So, yeah, then is a genuinely refreshing thing
Speaker 1: to hear because you know, so much of how regulation
Speaker 1: is presented, and certainly so much of how politics is
Speaker 1: presented right now, comes from a very adversarial place. Sounds
Speaker 1: like these are two folks who are absolutely coming at
Speaker 1: crypto from very different perspectives, but who found enough to
Speaker 1: agree on. What are some of the things they agree on?
Speaker 1: What are they trying to do with this bill specifically?
Speaker 1: So they both talk a lot about innovation and seeing
Speaker 1: that there are some you know, potential areas um where
Speaker 1: they want to encourage companies to continue experimenting. But they
Speaker 1: also you know, mentioned things like the recent terror collapse
Speaker 1: and and the fact that you know, you need some guardrails,
Speaker 1: that things are getting really complex, um. And so they
Speaker 1: want to regulate, but they're trying to be a little
Speaker 1: bit more flexible. And I think one of the really
Speaker 1: interesting aspects of this bill that they talked to us
Speaker 1: about was this advisory body that they would like to
Speaker 1: create and essentially how that would work anytime there's a
Speaker 1: new development in the industry, So say, you know, non
Speaker 1: fungible tokens a year or so ago, um, then you
Speaker 1: would have this body look at that and kind of decide,
Speaker 1: you know, who should regulate that how should we approach
Speaker 1: us going forward? So they really want to be adaptable,
Speaker 1: which I think is is a pretty interesting concept. And
Speaker 1: now we'll see, uh, you know, how that works in
Speaker 1: the long run. But I think UM that's been one
Speaker 1: of the areas that I think is appealing to the
Speaker 1: industry as well. Is not acknowledging that maybe something that
Speaker 1: works today is not going to work in the future
Speaker 1: for this particular industry. I've talked for a lot of
Speaker 1: industry members and having clarity is extremely important to them
Speaker 1: because they don't want to build a business model that's
Speaker 1: some regulators going to say it is inappropriate three years
Speaker 1: from now or fires from now. They want to be
Speaker 1: able to know that their ideas can be manifest in
Speaker 1: UM a regulatory framework that works for them and works
Speaker 1: for consumer protection and safety and SAMUS and all those medicals.
Speaker 1: So I am optimistic it's still exactly that right, so
Speaker 1: very explicitly addressing the criticism that regulators always regulating the
Speaker 1: last five years and not the coming five years. Yes,
Speaker 1: who are some of the folks who would be key
Speaker 1: to having this have any chance at role at actually
Speaker 1: becoming law? Are there other you know, folks in Congress
Speaker 1: that they need to be allies or at least to
Speaker 1: not be adversaries. So I think, you know, obviously one
Speaker 1: of the positive aspects of this bill is that it's bipartisan,
Speaker 1: but I think you would really need buy in UM
Speaker 1: from leaders on the Senate Banking Committee. You have Chairman
Speaker 1: shared Brown and Ranking Member Pat to me, and then
Speaker 1: you also are going to want some buy in UH
Speaker 1: from leaders on other committees. Had just send it finance
Speaker 1: given that there are tax elements of this bill, so
Speaker 1: having some support from someone like Senator Ron wide And
Speaker 1: doesn't hurt it either. Are there any folks on there
Speaker 1: who may have always say competing interests? So you know,
Speaker 1: I think sometimes is it competing or is it a complementary?
Speaker 1: I think maybe the jury is still out, but we
Speaker 1: do know that Chairwoman uh Stabano of the Senate Agriculture
Speaker 1: Committee is working on a barpartisan bill with um Marky
Speaker 1: Member John Boseman on cryptocurrency oversight UM, specifically giving the
Speaker 1: CFTC more authority over coins like bitcoin and ether um.
Speaker 1: So it's pretty similar to what we're seeing in the
Speaker 1: Lummis and Gillibrand bill, but coming directly from the Chairwoman UM,
Speaker 1: which is important I think, and we've seen that the
Speaker 1: Senator's Lumis and Gilibran have talked about this being complementary
Speaker 1: to what they're doing and not necessarily supplanting kind of
Speaker 1: their real legislation and whole UM. They've actually talked about
Speaker 1: this being a positive sign that you know they're on
Speaker 1: the same page and working towards the same end goal.
Speaker 1: I think it is important though, when you're talking about
Speaker 1: the CFTC oversight piece of all of this is whether
Speaker 1: or not you can get other Senators from other committees
Speaker 1: like maybe Senate Banking UM who might have more of
Speaker 1: an interest in SEC oversight. UM. If you can get
Speaker 1: all of them on board too, agree to this change,
Speaker 1: we'll be right back. Is this one of those examples
Speaker 1: where everybody kind of agrees that something has to happen
Speaker 1: about the devil's in the details, or actually, are you
Speaker 1: seeing much more polarization than that? So I think there
Speaker 1: is a pretty significant consensus that there need to be
Speaker 1: guardrails for cryptocurrency UM. I think the differences are how
Speaker 1: you're approaching both the language and the details on that UM.
Speaker 1: So for the Banking Committee, you have someone like Chairman
Speaker 1: Shared Brown, who has been very critical of the industry,
Speaker 1: you know, has talked about their being fraud Big crypto
Speaker 1: companies are looking to make big profits, are desperate to
Speaker 1: reach as many Americans as they can. They brought in
Speaker 1: celebrities and gimmicks to make crypto sound exciting and daring
Speaker 1: and profitable. But the ads left a few things out.
Speaker 1: They didn't mention the fraud, the scams, and the outright theft.
Speaker 1: And when he was talking about the terracile apps, you know,
Speaker 1: it's pointing to that as a reason for why they
Speaker 1: need to be regulation, but why there needs to be
Speaker 1: strict regulation. And then his immediate counterpart is ranking Member
Speaker 1: Pat to me Um, who is very interested in this industry,
Speaker 1: thinks there's a lot of potential. Um He's put out,
Speaker 1: you know, draft bill of how to regulate stable coins
Speaker 1: and that you know, it was a little bit more
Speaker 1: flexible than what we saw from Treasury and these other
Speaker 1: financial regulators. So I think that'll be an interesting committee
Speaker 1: to watch because I do feel like they're probably on
Speaker 1: pretty different sides of how they would want to regulate,
Speaker 1: and so maybe if they can reach agreement, maybe you
Speaker 1: can disagreement anywhere. So stable coins hot topic. Does the
Speaker 1: bill address these specifically, and particularly as it relates to
Speaker 1: algorithmic stable coins like terra USD. So the bill, you know,
Speaker 1: talks about payment stable coins specifically, and it has this
Speaker 1: reserve requirement. It also has these public disclosures that they
Speaker 1: would have to have with the idea of being that
Speaker 1: it would event it would prevent collapses like the what
Speaker 1: happened with tera Um. It doesn't explicitly mention algorithmic stable coins,
Speaker 1: but you can draw the conclusion that if you have
Speaker 1: a hundred percent reserve requirement that maybe those type of
Speaker 1: stable coins would no longer be existing. There's also something
Speaker 1: in this bill too that relates to stable coin issuers
Speaker 1: regarding sanctions, and it would task the Treasury with developing
Speaker 1: guidance kind of clarifying the responsibility of stable coin issuers
Speaker 1: to comply with those restrictions. And when we talk about
Speaker 1: reserve requirements, what we're saying is, if you're issuing a
Speaker 1: stable coin, you actually have to have some kind of
Speaker 1: underlying assets that backs that. It might be dollars, it
Speaker 1: might be US treasuries, it might be you know, short
Speaker 1: term lending vehicles like commercial paper right right, And here
Speaker 1: they you know, they kind of specific like highly liquid assets, right,
Speaker 1: so they want to really ensure that these coins are
Speaker 1: actually stable, like they say, and that you can redeem
Speaker 1: them one for one um, for instance, with the US dollar,
Speaker 1: if that's what it's pig Two, what does the bill
Speaker 1: say about crypto mining? So crypto mining, you know, the
Speaker 1: bill doesn't um. It doesn't go so far as to
Speaker 1: require miners to maybe disclose their energy uses. It doesn't
Speaker 1: really like crack down on them on mining being able
Speaker 1: to exist. But it does require that the government, specifically
Speaker 1: the Federal Energy Regulatory Commission and consultation with the CFTC
Speaker 1: and the Securities in Exchange Commission, that they you know,
Speaker 1: analyze and report on energy consumption in the digital asset market,
Speaker 1: and that includes the energy usage of crypto minors. And
Speaker 1: I think it's safe to say that this was probably
Speaker 1: a compromise area. It gets that, you know, something that
Speaker 1: progressive Democrats care a lot about, but maybe it doesn't
Speaker 1: go so far as to turn off some of these
Speaker 1: other conservative Republicans on the opposite end. It seems like
Speaker 1: there's a lot of compromises on this bill. Yes, there
Speaker 1: is a lot of compromise as as is the way
Speaker 1: with bipartisan legislation. I think, you know, well, we'll have
Speaker 1: to see if there's enough here for for other Senators
Speaker 1: to really agree with. So it's very purpose strimity framework.
Speaker 1: So you know, if it's going to be regulated by
Speaker 1: the CFTC, um it will look more like in commodity,
Speaker 1: and it is going to be regulated by the SEC
Speaker 1: is going to look more like the security and the
Speaker 1: purposes will will align definitely. This bill would allow the
Speaker 1: CFTC to write to directly regulate cryptocurrency um. It would
Speaker 1: also allow the SEC to continue having authority over cryptocurrencies
Speaker 1: that act more like investment contracts. So if you're issuing
Speaker 1: them to the public with the expectation that you know
Speaker 1: there will be profits, then typically that's that falls within
Speaker 1: the SEC. This part of the bill is also the
Speaker 1: part that I think a lot of folks in the
Speaker 1: industry have a lot of angst over, and it's definitely
Speaker 1: caused the most push and pool, And I think what's
Speaker 1: interesting is sometimes you have more of these traditional players
Speaker 1: who are wanting to get involved in crypto and they
Speaker 1: actually might prefer the SEC as their regulator. They deal
Speaker 1: with them a lot already. They have their relationships, they
Speaker 1: have their relationships, um, and then it seems like really
Speaker 1: the crypto native firms or the associations are the ones
Speaker 1: that are really pushing for more CFTC oversight. You know,
Speaker 1: I'm so glad you raised that because it very directly
Speaker 1: speaks to the split between Wall Streets and the folks
Speaker 1: who are portraying themselves as defied decentralized finance, the great disruptors,
Speaker 1: people who are like reinventing investment banking but on the
Speaker 1: blockchain or whatever. And you know, this is really setting
Speaker 1: up this dynamic of the crypto native firms are looking
Speaker 1: for what would in practice be possibly a more conciliatory
Speaker 1: leader for them versus being regulated by the SEC, which
Speaker 1: has these tougher investment protections. So I like the culture
Speaker 1: clash there is really interesting, and I think you see
Speaker 1: it in other and other you know, parts of this
Speaker 1: space as well. Obviously you see it with stable coins. Um.
Speaker 1: You know, if you had if you followed the suggestions
Speaker 1: of Treasury and these other financial regulators who essentially want
Speaker 1: all stable coin issuers to be banks, um, then that
Speaker 1: is beneficial to the existing banks. Absolutely. They are like
Speaker 1: were they already you know, they have the charters, they've
Speaker 1: gone through, uh, the hurdles that they need to with regulators.
Speaker 1: Where you have maybe some of these crypto native firms,
Speaker 1: native firms who are currently issuing stable coins, and to
Speaker 1: get that bank charter, it could take them years or
Speaker 1: to get all the regulatory approvals that they need to.
Speaker 1: And I think that's why you see some pushing for
Speaker 1: we'll at least give us some flexibility. Let us be
Speaker 1: something else that's maybe regulated still but not exactly a bank,
Speaker 1: or let us maybe partner with a bank um And
Speaker 1: I think that's going to be something that's very interesting
Speaker 1: to watch. Well, thank you, Ali, I appreciate you taking
Speaker 1: the time, Thanks for having me. You can find more
Speaker 1: of Alison verse Bills reporting on the Bloomberg terminal on
Speaker 1: Bloomberg dot com and you can find her on Twitter
Speaker 1: at Ali their Sprill. That's v R S P R
Speaker 1: I L L E. On the next episode of Bloomberg Crypto,
Speaker 1: we're gonna tackle a little bit of a heavier subject.
Speaker 1: We're going to talk about crypto addiction. There are rehab
Speaker 1: centers for people seeking treatment for addictions to drugs, alcohol, gambling,
Speaker 1: and even recent online experiences like gaming these centers are
Speaker 1: currently seeing an uptick in people looking for help controlling
Speaker 1: their crypto trading. We'll have to Bloomberg reporters joining us,
Speaker 1: Claire Valentine and Charlie Wells. We're off on Monday June
Speaker 1: for Juneteenth. We'll be back on Tuesday. I'm Stacy Marie Ishmael,
Speaker 1: and this is Bloomberg Crypto, a daily podcast from Bloomberg's
Speaker 1: and I Heart Radio. For more shows from I Heart Radio,
Speaker 1: visit the I Heart Radio app, Apple Podcasts, or wherever
Speaker 1: you get your podcasts. Email your comments, questions or suggestions
Speaker 1: the Crypto at bloomberg dot Net. Follow us on Twitter
Speaker 1: at Crypto. The producer and editor of this episode is
Speaker 1: Vicky Verglina Desta wonder At is our engineer. Original music
Speaker 1: by Leo Sidron. Bloomberg's head of Podcasts is Francesca Levi