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Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg Views,

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Speaker 1: and this is Bloomberg Crypto, a daily Bloomberg I heard podcast.

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Speaker 1: It's Monday, July twenty. Mary Catherine Later has a story

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Speaker 1: to tell. She was a rising star at black Rock

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Speaker 1: when she left Wall Street and traditional finance for crypto

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Speaker 1: and decentralized finance. She's now chief operating officer at unit

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Speaker 1: swap Labs, creator of the world's biggest decentralized exchange protocol.

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Speaker 1: Mary Catherine joined my colleague Bloomberg reporter Olga Karif to

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Speaker 1: talk about her belief in blockchain, what comes next after

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Speaker 1: the terror collapse, and how she sees defy shaping the future.

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Speaker 1: Here's that conversation. Mary Catherine A. Later is here with

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Speaker 1: us MC. So appreciate you taking the time. Let's start

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Speaker 1: by talking a little bit about your career and how

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Speaker 1: you ended up in crypto. So, I know you got

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Speaker 1: your start at Goldman, Uh, could you possibly walk us

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Speaker 1: through the twists in turns of your career and sort

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Speaker 1: of how you initially got into crypto. Well, first, thanks

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Speaker 1: so much for having me. You're right, I started my

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Speaker 1: career at Goldman Sachs in a completely different time, and

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Speaker 1: so I had grown up always wanting to be at

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Speaker 1: the intersection of how the economy works in technology and

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Speaker 1: just felt like the Internet was the most important thing

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Speaker 1: in my lifetime. And I ended up um in a

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Speaker 1: job that wasn't doing tech investing in Goldman Sachs um

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Speaker 1: and my second week is when Lehman Brothers collapsed, and

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Speaker 1: so it was a front row seat to how the

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Speaker 1: risk management of large financial institutions could have just a

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Speaker 1: dramatic domino effect on so many people who didn't even

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Speaker 1: think about the connection they might have to the global

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Speaker 1: financial system. And so after a few years at Goldman,

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Speaker 1: I went to law school and business school thinking that

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Speaker 1: there could be policy solutions to how the financial system

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Speaker 1: could work better, and then also maybe tech might be

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Speaker 1: a driver of more access and ultimately did a fintech startup,

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Speaker 1: then landed up black Rock. My fintech startup failed and

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Speaker 1: I shut it down. It was when I was a

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Speaker 1: black Rock, I think in my first or second week

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Speaker 1: there that Larry Thanks, the founder and CEO, made some

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Speaker 1: comments about how blockchain and crypto were used for money laundering,

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Speaker 1: and I first gotten interested in bitcoin in two thousand

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Speaker 1: eleven as a law student because it really interested in

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Speaker 1: how the Internet was creating more access to technology and

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Speaker 1: financial services. And I had a seminar where we were

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Speaker 1: reading about open source systems and the sort of legal

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Speaker 1: implications of them, and I learned about bitcoin. So when

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Speaker 1: Larry made these comments, I wrote, in sort of an

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Speaker 1: impertinent moment, I wrote a memo as to what I

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Speaker 1: thought should be different in what black Rock should be

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Speaker 1: doing in blockchain. And I didn't think anything of it

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Speaker 1: except that I hope somebody listened to me, and it

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Speaker 1: got forwarded to senior management, and you know, they then

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Speaker 1: after a few meetings, were like, okay, you figured this out,

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Speaker 1: and so with with a group of other people, you know,

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Speaker 1: we've created working open and create a little lab of

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Speaker 1: engineers who volunteered to start building prototypes. So that was

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Speaker 1: we worked with Consensus and the Ethereum Foundation to do

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Speaker 1: an Ethereum smart contract prototype. We worked with some of

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Speaker 1: the different consortion groups that were being formed at the

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Speaker 1: time to get big financial institutions interested in blockchain and

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Speaker 1: the applications. We did work around how bank loans could

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Speaker 1: be on block chains and how equity trading and derivative

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Speaker 1: settlement could be different. That got me hooked six months

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Speaker 1: of my full time focus the black Rock and then

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Speaker 1: moved on to other roles building fintech businesses for black Rock,

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Speaker 1: but I still kept a foot in crypto. And what changed,

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Speaker 1: I think a year ago was that we moved from

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Speaker 1: a time of most of the energy in the crypto

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Speaker 1: ecosystem being focused on building core infrastructure to a time

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Speaker 1: when you could start to build applications and businesses on

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Speaker 1: top of that infrastructure. And so to me, it felt

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Speaker 1: like the right time to make the jump and make

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Speaker 1: the move to work in crypto and web three full time.

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Speaker 1: A quid check of lateness business slash headlines Bitcoin US

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Speaker 1: through sixty dollars as a stimulus fueled valley of the

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Speaker 1: past few months of sets concerns over speculation. Bitcoin has

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Speaker 1: surged over the past year, lifted in part by support

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Speaker 1: from Elon Musk and some in the corporate world. The

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Speaker 1: original digital coin traded for just a few cents for

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Speaker 1: several years after its debut a decade ago. It is

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Speaker 1: now gained more than a thousand percent in twelve months.

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Speaker 1: You made the move to unit swap, the world's biggest

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Speaker 1: decentralized exchange protocol during sort of the bullmarket in crypto,

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Speaker 1: which is a very different situation than sort of what

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Speaker 1: we are seeing today, and you alluded that it's kind

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Speaker 1: of in many ways similar to the financial crisis of

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Speaker 1: when you were at Goldman and I was wondering so today,

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Speaker 1: you know, just in the last couple of months, we've

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Speaker 1: seen high profile firms go insolvent announcing bankruptcy. Crypto prices

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Speaker 1: have fallen a lot. Has that shaken your convictions about

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Speaker 1: defy And how are your thoughts about defy and it's

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Speaker 1: promised different if they are from from a year ago

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Speaker 1: when you meet this jump from traditional finance into decentralized finance.

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Speaker 1: I jumped to you know, swap in particular because I

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Speaker 1: felt like it was revolutionary technology that could have a

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Speaker 1: positive impact on the financial system, regardless of the market dynamics,

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Speaker 1: regardless of whether token prices were up or down, but

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Speaker 1: that the idea that anyone in the world can create

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Speaker 1: a market for anything, and that anyone can be a

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Speaker 1: market maker using code, and that that could be more

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Speaker 1: efficient and as effective as a central intermediary was compelling

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Speaker 1: to me. After fifteen years in finance, and I still

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Speaker 1: believe has huge potential. Interestingly enough, I am really optimistic

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Speaker 1: that we'll see more or at least a lot of

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Speaker 1: partnership and innovation with big players in finance. If we're

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Speaker 1: in a bear market, certainly a different time than we

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Speaker 1: were a year ago. For crypto, it's still a good

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Speaker 1: time to be building and innovating. There's almost like less

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Speaker 1: distraction from the frenzy of the market dynamic and then

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Speaker 1: there was a year ago. And so I'm really excited

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Speaker 1: that this is a time when we can focus on

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Speaker 1: which companies are good actors with real technology and not

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Speaker 1: just writing a wave and not just excited about the

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Speaker 1: hype and driven by momentum. When I was deciding whether

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Speaker 1: to join units WEP full time, I thought really hard

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Speaker 1: about what the opportunity for the company and the protocol,

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Speaker 1: which are related but different, would be in any market condition.

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Speaker 1: You often talk about how decentralized finance will essentially change

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Speaker 1: the way traditional finance works. Would you maybe talk a

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Speaker 1: little bit about that, and what do you think the

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Speaker 1: world will look like as the shift takes place, How

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Speaker 1: will things look differently, you know, in a few years,

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Speaker 1: and also how will some of the difficult things. Some

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Speaker 1: of the challenges that crypto is going through right now

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Speaker 1: with a lot of insolvency and bankruptcy issues, how will

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Speaker 1: that impact how things develop? Well, first of all, the

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Speaker 1: insolvency and bankruptcy issues aren't really decentralized finances, as you

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Speaker 1: know really well from from covering this. We're seeing right

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Speaker 1: now is how centralized companies that we're managing balance sheets

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Speaker 1: didn't do a good job of managing their own risk

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Speaker 1: and weren't disclosing the risk to users and investors. And

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Speaker 1: I think that actors who are taking on those kinds

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Speaker 1: of risks need to be treated similarly to anyone who's

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Speaker 1: managing a balance sheet and managing client assets. So to me,

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Speaker 1: that's not decentralized finance. That's not defied, that's not about

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Speaker 1: changing the underlying technology. Those are almost traditional in some senses,

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Speaker 1: traditional financial forms that happened to be managing cryptos and

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Speaker 1: asset class and they did a bad job and they're failing,

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Speaker 1: just as there were in the early days of the Internet.

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Speaker 1: We have a huge task ahead of us as a

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Speaker 1: as a field to reduce spam, to reduce phishing, to

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Speaker 1: reduce potential risks, to those who are interacting in Web

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Speaker 1: three and the sort of decentralized applications and protocols. But

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Speaker 1: that is part of what I know. You can Swap

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Speaker 1: labs were in investing in and we are looking at

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Speaker 1: different ways to screen tokens for risk. We're looking at

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Speaker 1: different ways to identify what's called a rug pole when

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Speaker 1: somebody could manipulate the market and drive down the price

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Speaker 1: of a token. The good news is that because all

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Speaker 1: this activity is on chain, you have so much more

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Speaker 1: data to work with, and so you can identify bad

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Speaker 1: behavior quickly and transparently, and you can build models that

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Speaker 1: can then detect that kind of I'm bad behavior. So

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Speaker 1: in many ways, I hope that some of the positive

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Speaker 1: changes are not even observable to individuals who just might

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Speaker 1: be like saving and investing or two individuals who are

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Speaker 1: trying to reach communities through token communities for example. I

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Speaker 1: hope that some of what feels safe about today's financial

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Speaker 1: system is replicated, but with really different structures from making

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Speaker 1: for creating safety and more technology driven solutions for creating

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Speaker 1: some of that safety. Will be right back with more

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Speaker 1: from Lamoug Reports, Ogakarif and Unit Swaps CEO Mary Catherine later,

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Speaker 1: one of your strategic goals at unit swap is to

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Speaker 1: make wol Street more comfortable with decentralized finance and to

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Speaker 1: bring them on board. And I was wondering, how has

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Speaker 1: woll Street reacted to the recent events in crypto. Is

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Speaker 1: it more difficult to persuade them to sort of join

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Speaker 1: decentralized finance. There are many leaders in traditional financial services

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Speaker 1: who are familiar with blockchain and have been thinking about

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Speaker 1: it for years and know what the opportunities are. Every

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Speaker 1: time I explained to someone who spent their career in

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Speaker 1: finance what unit swap is and how it works that

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Speaker 1: they could take tokens that they own and deposit them

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Speaker 1: on a protocol and start to get the fees from

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Speaker 1: trades from which they're providing liquidity. The notion that code

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Speaker 1: could be a market maker kind of blows people's minds.

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Speaker 1: So I haven't noticed a change in people's reactions. Some weeks,

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Speaker 1: it's felt like a little bit more interest from people

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Speaker 1: who could partner with us and use the technology. I

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Speaker 1: wonder if there's less of like a cultural resistance because

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Speaker 1: you have to focus on technology right now. It's not

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Speaker 1: just about like token prices being up into the right.

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Speaker 1: That's really interesting. So there is actually more interest because

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Speaker 1: maybe some of the Wall Street firms that are coming

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Speaker 1: in are in there not because of speculation, but because

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Speaker 1: they want to deploy this for specific business purposes where

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Speaker 1: the blockchain technology could be helpful or more efficient. And

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Speaker 1: that's consistent with what you know we're trying to do.

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Speaker 1: Like our mission is to unlock universal ownership and exchange,

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Speaker 1: and that means more people, more assets, more partners, and

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Speaker 1: that means our technology has to be global financial system scale,

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Speaker 1: and it has to be safe and it has to

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Speaker 1: be simple. That does not mean that we that like

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Speaker 1: un swap for example, is identifying what assets should be

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Speaker 1: supported by the technology, and players in traditional finance have

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Speaker 1: no shortage of assets that might benefit from being on chain,

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Speaker 1: from transparent systems, from uh simplifying the number of players

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Speaker 1: and and and intermediaries were in a given trade. So

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Speaker 1: some of the challenge is that changing the infrastructure of

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Speaker 1: financial sert US is also means cutting someone's revenue stream

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Speaker 1: and changing the incentives. But ultimately, if we end up

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Speaker 1: having like somewhat more consistent infrastructure across different asset classes,

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Speaker 1: I think that's a really positive outcome, and there's plenty

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Speaker 1: of people on Well Street who are excited about that,

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Speaker 1: and are they waiting for sort of more regulatory certainty

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Speaker 1: in terms of, you know, how things shake out and

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Speaker 1: what exactly do you think are some of the biggest

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Speaker 1: issues that are they're waiting to get resolved in what's

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Speaker 1: your sense as to how soon they would get resolved.

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Speaker 1: We're spending a lot of time thinking about the right

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Speaker 1: policy outcomes, because I think the most important thing is

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Speaker 1: that we have policies that protect investors effectively, that can

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Speaker 1: reduce fraud, but not to regulate code that has the

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Speaker 1: potential to be extremely positive for so many people and

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Speaker 1: to really um serve the interests of policymakers. So we

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Speaker 1: tired recently ahead of policy, and we're spending a lot

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Speaker 1: of time thinking about the right kinds of policies that

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Speaker 1: can achieve those objectives protect people, keep them safe, but

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Speaker 1: also mean that we don't quash the innovation of these

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Speaker 1: decentialized protocols. So regulating n f T s is like

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Speaker 1: regulating PDFs or regulating you know, an fungible token, which

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Speaker 1: is what unit swap supports today, is like regulating again

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Speaker 1: like a dot dot or something like that, and so

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Speaker 1: that's not really the right lens. It's like, what is

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Speaker 1: that file format trying to do? What is that format

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Speaker 1: for value trying to accomplish? And one of the risks

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Speaker 1: associate with it. So we need to kind of evolve

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Speaker 1: the way that we're thinking about it and not be

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Speaker 1: as simplistic as just bucketting all tokens and all n

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Speaker 1: f t s together and assuming that they need some

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Speaker 1: more regulatory treatment. Really interesting that we continue to see

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Speaker 1: the fallout of the Terra collapse. Really we are getting

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Speaker 1: coin market Cap website, for example, saying that the wipe

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Speaker 1: out of wealth has been around two hundred billion dollars

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Speaker 1: in twenty four hour time periods. So really, the gyrations

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Speaker 1: in the crypto space have been huge with kind of

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Speaker 1: the recent events where you know a lot of people

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Speaker 1: have lost money through just the coin values dropping, or

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Speaker 1: through fraud or insolvents of some companies. Are you concerned

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Speaker 1: that this would lead to a tightening of the regulatory

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Speaker 1: oversight and the regulatory environment to the point where innovation

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Speaker 1: is stifled and how do you think you can prepare

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Speaker 1: for something like this? Well, smart regulation is going to

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Speaker 1: be really important for the whole fields growth. Having rules

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Speaker 1: that create clarity is only positive for the companies that

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Speaker 1: are building in Web three in terms of how we

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Speaker 1: can help make sure that we end up with smart regulation.

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Speaker 1: As I said, we're not waiting. We're already building stuff

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Speaker 1: that we hope helps serve some of those policy aims. Right,

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Speaker 1: So I mentioned that we have a team now of

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Speaker 1: data scientists that are looking at how to screen tokens

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Speaker 1: to identify their level of risk. So one example is,

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Speaker 1: you know, our system flagged the lunar coin and terra

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Speaker 1: as riskier than um etherory, for example, and like it

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Speaker 1: would have given a user a warning to that effect.

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Speaker 1: And I think the best thing we can all be

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Speaker 1: doing is just explaining what the benefits are more clearly,

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Speaker 1: right um, why the technology is useful, and then also

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Speaker 1: trying to build products and features that make the whole

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Speaker 1: system better. In general, traditional assets that could trade on

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Speaker 1: UNITSWAP could include everything from like real estate to company

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Speaker 1: shares to those kind of things. Right well, in theory,

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Speaker 1: because the token is just a file format, you could

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Speaker 1: start to represent any kind of asset as a token,

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Speaker 1: right And so you know, from the time when I

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Speaker 1: first started working, when I was a black rocking crypto

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Speaker 1: part time. And there's been excitement about tokenizing real estate

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Speaker 1: or tokenizing bank loans or you know, having all kinds

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Speaker 1: of different assets in the black chain, and there are

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Speaker 1: really specific reasons why those things don't work, because, for example,

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Speaker 1: there's plenty of assets where people make money on the

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Speaker 1: time that it takes to trade in the time that

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Speaker 1: it takes to settle, and so there's not a lot

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Speaker 1: of incentive to have those things settle and trade fast.

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Speaker 1: Or for example, you know, I'm not suggesting that that

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Speaker 1: we need to have a wholesale transition of how all

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Speaker 1: markets work if we don't need to. There definitely are areas,

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Speaker 1: like you think about long tail fixed income, so like

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Speaker 1: not very frequently traded bonds or small cap stocks and

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Speaker 1: things like that, where if you have the ability to

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Speaker 1: boots drap liquidity, that could be really advantageous. For example,

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Speaker 1: for like the major e t F fishuers who to

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Speaker 1: trade e t fs that include fractions of those assets

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Speaker 1: um but effectively, then what happens is the e t

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Speaker 1: f n's up pricing those assets as opposed to the

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Speaker 1: trading of the underlying primary themselves. So that's just like

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Speaker 1: one small example, and I think it's excitement about that

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Speaker 1: is part of why UM Stacy Cunningham, it was the

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Speaker 1: most recent president of the New York Stock Exchange until December,

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Speaker 1: joined us and as an advisor because she was excited

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Speaker 1: about different current use cases that could be moved from

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Speaker 1: traditional finance UM to crypto. But we're not in the

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Speaker 1: business of accelerating a lot of that right now. We're

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Speaker 1: trying to just invest in the core technology and driving

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Speaker 1: education about it and then as I mentioned, a lot

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Speaker 1: and making it simpler and safer to use. So if

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Speaker 1: we were to look at ten years from now, what

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Speaker 1: do you think traditional finance and and defy will look

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Speaker 1: like and how will it be different from today? Well,

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Speaker 1: I've been around crypto Longe enough to know that it's

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Speaker 1: really foolish to make any projections, So I'll just say

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Speaker 1: I hope it's much bigger. I hope it's much safer.

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Speaker 1: I hope there's a lot more women in the whole space,

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Speaker 1: and I'm optimistic that that will be a positive outcome

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Speaker 1: for how the global financial system works. But who knows.

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Speaker 1: On one time for him, thank you so much, thank you,

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Speaker 1: thank you, thank you, Olga for taking us inside of

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Speaker 1: Unit Swap and thank you Mary Catherine for being a

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Speaker 1: guest on the show. You can find Olga's reporting on

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Speaker 1: the Bloomberg terminal on Bloomberg dot com, or follow Ulga

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Speaker 1: on Twitter at Olga karif that's k H A R

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Speaker 1: I F. There's an old joke in finance. When companies fight,

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Speaker 1: lawyers win, and right now in crypto, lots of companies

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Speaker 1: are fighting, some for their corporate lives. Kirk Lindon Ellis,

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Speaker 1: one of the biggest law firms in the world by revenue,

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Speaker 1: has emerged as a major player in crypto. Earlier this month,

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Speaker 1: the firm signed on to work on the bankruptcy filings

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Speaker 1: for both Celsius Network and Voyage of Digital. There's relatively

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Speaker 1: little case law that addresses how crypto assets and their

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Speaker 1: holders should be treated in a bankruptcy. For more on this,

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Speaker 1: you'll hear from Bloomberg reporter Jeremy Hill. I'm Stacy Marie Ishmael,

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Speaker 1: and this is Bloomberg Crypto, a daily podcast from Bloomberg

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Speaker 1: and I Heart Radio. For more shows from I heart Radio,

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Speaker 1: visit the i heart Radio app, Apple Podcasts, or wherever

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Speaker 1: you get your podcasts. Email your questions comments or suggestions

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Speaker 1: for the show to Crypto at Bloomberg dot net, and

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Speaker 1: you'll find us on Twitter at Crypto. The supervising producer

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Speaker 1: of Bloomberg Crypto is Vicky Vergalina. Our senior producer is

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Speaker 1: Janet Babin. Our producer is Mohammed Ferup. Our producer is

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Speaker 1: Sharon Burriro, associate producer is Mosses and um Desta wander

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Speaker 1: Ad is our engineer. Original music by Leo Sidrin