1 00:00:03,120 --> 00:00:06,439 Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Hood podcast, 2 00:00:06,600 --> 00:00:10,559 Speaker 1: and I'm Annereira, senior editor for Bloomberg News. It's Friday, 3 00:00:10,680 --> 00:00:28,160 Speaker 1: March eleventh. Welcome to the wacky and wild world of 4 00:00:28,240 --> 00:00:32,760 Speaker 1: crypto legal battles, tough regulators, and a troubled bank. It's 5 00:00:32,760 --> 00:00:37,280 Speaker 1: all happening in the crypto markets this week, another major 6 00:00:37,280 --> 00:00:41,920 Speaker 1: crypto player is down because of FTX Silvergate, the troubled 7 00:00:41,920 --> 00:00:45,519 Speaker 1: crypto friendly bank plans to wind down operations and liquidate 8 00:00:45,560 --> 00:00:49,600 Speaker 1: itself after a long struggle with US regulators. But that's 9 00:00:49,640 --> 00:00:52,520 Speaker 1: not all. The court gavels are knocking loud and clear 10 00:00:52,640 --> 00:00:55,440 Speaker 1: as Gray Skille fights the SEC over the bitcoiny tf 11 00:00:55,800 --> 00:01:00,920 Speaker 1: and ftx's Alameda over redemptions. Meanwhile, Voyager also one court 12 00:01:00,920 --> 00:01:04,200 Speaker 1: approval to sell itself to Finance US. Joining me in 13 00:01:04,240 --> 00:01:06,160 Speaker 1: the studio to help me make sense of this week's 14 00:01:06,160 --> 00:01:18,320 Speaker 1: news are Bloomberg reporters Emily Nicole and Justina Lee. Another week, 15 00:01:18,360 --> 00:01:22,959 Speaker 1: another crypto failure. Now, actually it's reached traditional finance in 16 00:01:23,000 --> 00:01:25,880 Speaker 1: a way, right, So Silvergate, which is like a crypto 17 00:01:25,920 --> 00:01:29,800 Speaker 1: friendly bank based in California, has decided to sort of 18 00:01:29,840 --> 00:01:34,120 Speaker 1: liquidate its bank. What's what's going on there? Just you 19 00:01:34,160 --> 00:01:37,080 Speaker 1: know what happened. Yeah, I mean, there was a last 20 00:01:37,120 --> 00:01:40,840 Speaker 1: dish effort to try to find investors to shore up Silvergate, 21 00:01:40,920 --> 00:01:43,640 Speaker 1: but it appears that all of those efforts have fallen through, 22 00:01:44,040 --> 00:01:47,920 Speaker 1: and so Silvergate has decided to wind down operations and 23 00:01:48,000 --> 00:01:51,720 Speaker 1: liquidate the bank. And it's kind of it's kind of 24 00:01:51,760 --> 00:01:55,840 Speaker 1: interesting because Silvergate is entangled in the FTX collapse. You know, 25 00:01:55,880 --> 00:02:00,600 Speaker 1: it famously was the bank for FTX slash Alameda, and 26 00:02:00,680 --> 00:02:05,120 Speaker 1: I think early on they kind of identified avoid in 27 00:02:05,160 --> 00:02:07,200 Speaker 1: the market, which is that a lot of big banks 28 00:02:07,200 --> 00:02:10,760 Speaker 1: were simply too risk averse to bank for cryptoclients, and 29 00:02:10,840 --> 00:02:14,880 Speaker 1: so by expanding aggressively into this space they could capture 30 00:02:14,960 --> 00:02:17,400 Speaker 1: a lot of that business. But things kind of turned 31 00:02:17,520 --> 00:02:22,360 Speaker 1: last year with the cryptowinter because obviously, with crypto prices falling, 32 00:02:22,400 --> 00:02:25,280 Speaker 1: a lot of their cryptoclients started to withdraw. But at 33 00:02:25,320 --> 00:02:28,119 Speaker 1: the same time, it was a double whammy because they 34 00:02:28,160 --> 00:02:31,959 Speaker 1: had invested a lot of that money into you know, 35 00:02:32,120 --> 00:02:36,040 Speaker 1: fixed income securities, which were also depreciating because of US 36 00:02:36,120 --> 00:02:38,760 Speaker 1: interest rate increases. I guess we can say those two 37 00:02:38,800 --> 00:02:42,600 Speaker 1: things in a way are tightly correlated. Given that US 38 00:02:42,720 --> 00:02:46,240 Speaker 1: rate increases we're also hitting crypto prices, and so in 39 00:02:46,320 --> 00:02:47,680 Speaker 1: the end it kind of became a bit of a 40 00:02:47,720 --> 00:02:51,600 Speaker 1: classic bank run and a mismatch between assets and liabilities. 41 00:02:52,160 --> 00:02:55,000 Speaker 1: So it was like a crypto collapse, but not really. 42 00:02:55,080 --> 00:02:56,920 Speaker 1: I guess the reason why it was a crypto collapse 43 00:02:57,000 --> 00:02:59,959 Speaker 1: was because they started losing deposits because of what was 44 00:03:00,120 --> 00:03:02,920 Speaker 1: going on in crypto naming the other failures. But it 45 00:03:03,000 --> 00:03:05,399 Speaker 1: wasn't you know, like, in the end, it just did 46 00:03:05,400 --> 00:03:07,320 Speaker 1: what banks do, but it didn't do it very well. 47 00:03:07,720 --> 00:03:10,200 Speaker 1: So one of the things that Silvergate had was a 48 00:03:10,280 --> 00:03:13,520 Speaker 1: network called sen which was a network which allowed crypto 49 00:03:13,560 --> 00:03:16,880 Speaker 1: companies to settle payments between each other as fast as 50 00:03:16,960 --> 00:03:19,919 Speaker 1: like crypto trades, because obviously there's a mispatch between how 51 00:03:19,960 --> 00:03:22,200 Speaker 1: fast trades settle on a blockchain or like how fast 52 00:03:22,240 --> 00:03:26,280 Speaker 1: crypto trades can sort of be executed and how traditional 53 00:03:26,320 --> 00:03:28,560 Speaker 1: payments work, especially in the US where they're very slow. 54 00:03:28,639 --> 00:03:31,919 Speaker 1: So that not running anywhere could potentially pose a problem 55 00:03:32,000 --> 00:03:33,760 Speaker 1: for crypto firms because like, how are they going to 56 00:03:33,840 --> 00:03:37,120 Speaker 1: do payments? Do they go back to sort of the 57 00:03:37,440 --> 00:03:40,560 Speaker 1: dark ages of before. But then there's also like an 58 00:03:40,560 --> 00:03:44,800 Speaker 1: ongoing question about you know, what happens to crypto firms 59 00:03:44,800 --> 00:03:46,960 Speaker 1: looking for a bank because one of the reasons silver 60 00:03:47,040 --> 00:03:49,400 Speaker 1: Gate exploded, it was also because it wasn't very easy 61 00:03:49,440 --> 00:03:53,400 Speaker 1: for crypto firms to find other other people or other 62 00:03:53,440 --> 00:03:56,080 Speaker 1: firms to give to give them a bank account. So 63 00:03:56,520 --> 00:04:00,119 Speaker 1: what are how is this banking sort of a problem 64 00:04:00,120 --> 00:04:03,880 Speaker 1: for crypto in general. Well, suer Gate is gone now 65 00:04:03,960 --> 00:04:06,920 Speaker 1: and the other alternative used to be a signature bank, 66 00:04:07,600 --> 00:04:10,560 Speaker 1: you know, another American bank, but they've recently announced a 67 00:04:10,640 --> 00:04:14,400 Speaker 1: decision to retreat from the crypto business, and we already 68 00:04:14,400 --> 00:04:18,320 Speaker 1: seeing ramifications across the market. By Bit, a pretty major 69 00:04:18,360 --> 00:04:22,880 Speaker 1: derivatives exchange recently announced that they're stopping dollar transfers. I mean, 70 00:04:22,920 --> 00:04:26,080 Speaker 1: Finance has done the same, and so I mean this 71 00:04:26,200 --> 00:04:29,680 Speaker 1: has really left the industry searching for you know, banking partners, 72 00:04:29,800 --> 00:04:32,280 Speaker 1: especially for dollars, and I don't think there's an obvious 73 00:04:32,279 --> 00:04:36,720 Speaker 1: solution at all. I mean, one solution is just to 74 00:04:36,920 --> 00:04:39,920 Speaker 1: kind of focus more on crypto transactions, you know, using 75 00:04:39,960 --> 00:04:44,160 Speaker 1: stable coin. Some people have talked about turning more to europairs, 76 00:04:45,120 --> 00:04:47,320 Speaker 1: but I think ultimately, you know, it's still the same issue, 77 00:04:47,360 --> 00:04:49,400 Speaker 1: which is that you know, for a lot of retail 78 00:04:49,480 --> 00:04:52,400 Speaker 1: investors having a FIAT on and off ramp has been 79 00:04:52,480 --> 00:04:57,520 Speaker 1: very convenient, and that is now severely lacking. But another 80 00:04:57,920 --> 00:05:01,520 Speaker 1: long standing crypto issue which is even more sort of 81 00:05:01,920 --> 00:05:04,039 Speaker 1: or not let's say, it's not not as as long 82 00:05:04,080 --> 00:05:06,800 Speaker 1: as the banking problem, but also, like along saga has 83 00:05:06,839 --> 00:05:09,000 Speaker 1: been will the US ever get a bitcoin ETF? And 84 00:05:09,040 --> 00:05:12,200 Speaker 1: we've had some developments this week with one of the 85 00:05:12,200 --> 00:05:14,200 Speaker 1: biggest proponents of it, which is gray Scale, which is 86 00:05:14,200 --> 00:05:16,480 Speaker 1: one of the companies which is part of DCG Group, 87 00:05:16,680 --> 00:05:20,080 Speaker 1: who also on Genesis, who's which lending armament bankrupt. So 88 00:05:20,160 --> 00:05:22,200 Speaker 1: they've been in the news a lot. But what's going 89 00:05:22,200 --> 00:05:27,080 Speaker 1: on with Grayscale and the SEC. Well, there's currently a lawsuit, 90 00:05:27,520 --> 00:05:31,440 Speaker 1: you know, with Grayscale kind of suing the SEC about 91 00:05:31,480 --> 00:05:36,200 Speaker 1: their rejection to convert the Bitcoin Trust into an ETF. 92 00:05:36,800 --> 00:05:39,680 Speaker 1: And the basic the basis of their argument is that 93 00:05:39,760 --> 00:05:43,719 Speaker 1: since the SEC did approve, you know, the Bitcoin future 94 00:05:43,760 --> 00:05:46,680 Speaker 1: is ATF, there's no good reason for it not to 95 00:05:46,720 --> 00:05:50,160 Speaker 1: do the same for a spot bitcoin ETF because essentially 96 00:05:50,240 --> 00:05:53,760 Speaker 1: the two kind of move in the same direction. The 97 00:05:53,839 --> 00:05:56,760 Speaker 1: other lawsuit, very much in focus today relates to Grayscale 98 00:05:57,080 --> 00:06:00,920 Speaker 1: versus the SEC and oral arguments perhaps wearing more toward 99 00:06:01,000 --> 00:06:04,600 Speaker 1: the gray scale under the spectrum then maybe was previously anticipated. 100 00:06:04,600 --> 00:06:07,440 Speaker 1: Traders are now betting on a higher probability of Grayscale 101 00:06:07,480 --> 00:06:10,960 Speaker 1: actually winning going into the case Bloomberg Intelligence. And the 102 00:06:11,000 --> 00:06:14,360 Speaker 1: reason does this is significant issue is because the Grayscale 103 00:06:14,360 --> 00:06:17,520 Speaker 1: Bitcoin trust has been the bane of many crypto players 104 00:06:17,600 --> 00:06:21,599 Speaker 1: existence and arguably kind of contributed to the downfall of 105 00:06:21,640 --> 00:06:24,880 Speaker 1: the crypto Hutch Fund Three Arrows Capital. And the reason 106 00:06:24,920 --> 00:06:27,000 Speaker 1: that is is because you know, in the early days, 107 00:06:27,040 --> 00:06:29,719 Speaker 1: when it was pretty hard for retail traders to access 108 00:06:29,760 --> 00:06:33,240 Speaker 1: bitcoin in a regulated product, it was a pretty popular 109 00:06:33,279 --> 00:06:36,320 Speaker 1: product that got to charge i would say higher than 110 00:06:36,400 --> 00:06:40,279 Speaker 1: market management fees for kind of holding bitcoin and being 111 00:06:40,360 --> 00:06:44,479 Speaker 1: a liquid will not do liquid investment product. But kind 112 00:06:44,480 --> 00:06:47,560 Speaker 1: of as the Bitcoin Futures etf came to be and 113 00:06:47,600 --> 00:06:51,640 Speaker 1: then there were more retail products to buy bitcoin, that 114 00:06:51,680 --> 00:06:56,200 Speaker 1: product kind of became increasingly unpopular and started trading at 115 00:06:56,200 --> 00:07:00,800 Speaker 1: a discount to the bitcoin and actually held. And at 116 00:07:00,839 --> 00:07:03,280 Speaker 1: the same time, the other issue is that once you 117 00:07:03,520 --> 00:07:06,799 Speaker 1: buy into that trust, you can't just redeem it whatever 118 00:07:06,839 --> 00:07:09,720 Speaker 1: you want. And the reason why it kind of entrapped 119 00:07:09,720 --> 00:07:12,200 Speaker 1: a lot of crypto players is because they had bard 120 00:07:12,280 --> 00:07:16,600 Speaker 1: shares of this etf to kind of conduct this rather 121 00:07:16,680 --> 00:07:19,800 Speaker 1: complicated arbitrat trade and they couldn't get their money out 122 00:07:19,840 --> 00:07:23,920 Speaker 1: when they wanted to, which segues perfectly into another news 123 00:07:23,920 --> 00:07:27,040 Speaker 1: of the week, which is someone who seems to be 124 00:07:27,040 --> 00:07:29,160 Speaker 1: coming back from the dead. Right. I read the headline 125 00:07:29,160 --> 00:07:31,480 Speaker 1: and it took me a minute to realize. But Alameda, 126 00:07:31,680 --> 00:07:36,600 Speaker 1: which was sam Bank when Freed's hedge fund, is issuing Grayscale. Now, 127 00:07:36,640 --> 00:07:40,680 Speaker 1: so's what's going on. Yeah, so Alameda was FTX is 128 00:07:40,720 --> 00:07:42,800 Speaker 1: trading outfit. We all used to say they were separate 129 00:07:42,800 --> 00:07:44,720 Speaker 1: back in the day, and now we firmly know that not. 130 00:07:44,880 --> 00:07:49,560 Speaker 1: Alameda is now trying to recover assets wherever it can. Right, 131 00:07:49,640 --> 00:07:52,160 Speaker 1: it's supposedly the one part of the FTX and buy 132 00:07:52,200 --> 00:07:55,800 Speaker 1: that probably lost the most money of the creditor assets 133 00:07:55,800 --> 00:07:59,080 Speaker 1: it still owes, and one of those is in gray Scale. 134 00:07:59,280 --> 00:08:03,320 Speaker 1: Alamida says it has about two hundred and ninety million 135 00:08:03,400 --> 00:08:06,440 Speaker 1: dollars worth of shares in the various crypto trust that 136 00:08:06,520 --> 00:08:10,080 Speaker 1: gray Scale offered, and you know, depending on whether or 137 00:08:10,120 --> 00:08:13,000 Speaker 1: not gray Scale was to honor those shares at the 138 00:08:13,040 --> 00:08:16,080 Speaker 1: current price of the cryptocurrency, because, as Justina said, it's 139 00:08:16,120 --> 00:08:18,280 Speaker 1: at a discount at the minute, that could actually be 140 00:08:18,320 --> 00:08:21,679 Speaker 1: about five hundred and forty million dollars worth of stuff 141 00:08:21,720 --> 00:08:23,720 Speaker 1: to come back to Alameter if they won the case. 142 00:08:24,640 --> 00:08:26,720 Speaker 1: It's an argument that has been made by quite a 143 00:08:26,760 --> 00:08:28,840 Speaker 1: few people who own gray Scale trust, Like a lot 144 00:08:28,840 --> 00:08:31,119 Speaker 1: of the crypto community used to love gray Scale because 145 00:08:31,120 --> 00:08:34,559 Speaker 1: it offered this liquid route to bitcoin owning, and now 146 00:08:34,600 --> 00:08:37,160 Speaker 1: everybody is it's a little bit on the other side 147 00:08:37,200 --> 00:08:38,760 Speaker 1: of the coin because they can't get their money out 148 00:08:38,760 --> 00:08:42,360 Speaker 1: while bitcoin's down, and Alameter is one of those basically 149 00:08:42,440 --> 00:08:44,680 Speaker 1: piping up in a courtroom saying like, this is the 150 00:08:44,760 --> 00:08:46,560 Speaker 1: argument that we're putting forward. This is the argument that 151 00:08:46,559 --> 00:08:49,480 Speaker 1: everybody else also says, which is that it's not fair 152 00:08:49,520 --> 00:08:52,160 Speaker 1: to be able to be withholding this amount when Bitcoin 153 00:08:52,320 --> 00:08:54,360 Speaker 1: is trading so much higher than what the price of 154 00:08:54,360 --> 00:08:56,960 Speaker 1: gray Scale shares are. And just because there's difficulties going 155 00:08:56,960 --> 00:08:59,400 Speaker 1: on elsewhere doesn't mean we should be able to shouldn't 156 00:08:59,400 --> 00:09:01,400 Speaker 1: be able to cash out those shares as well. But 157 00:09:01,480 --> 00:09:04,520 Speaker 1: while this spot ECF decision is going on, it also 158 00:09:04,640 --> 00:09:08,000 Speaker 1: makes everything extremely complicated for gray Scale. Yeah, I mean, 159 00:09:08,000 --> 00:09:11,439 Speaker 1: it just feel like in the ballmarket days, the high 160 00:09:11,520 --> 00:09:15,480 Speaker 1: crypto prices were covering a lot of the underlying issues. 161 00:09:15,640 --> 00:09:18,560 Speaker 1: I mean, we're talking about these gray Scale lawsuits and 162 00:09:18,640 --> 00:09:21,840 Speaker 1: there are actually two more from as A managers that 163 00:09:22,000 --> 00:09:24,440 Speaker 1: say that you know, you know, one of them said 164 00:09:24,480 --> 00:09:28,439 Speaker 1: gray Scale misled them about the chances of an ETF conversion. 165 00:09:28,640 --> 00:09:31,400 Speaker 1: And now that you know, we're in a bit of 166 00:09:31,400 --> 00:09:33,840 Speaker 1: a crypto winter, we're definitely kind of starting to see 167 00:09:33,880 --> 00:09:36,280 Speaker 1: these lawsuits coming up. One thing I do think was 168 00:09:36,320 --> 00:09:39,719 Speaker 1: interesting this week is we saw the regulators get the 169 00:09:39,760 --> 00:09:43,000 Speaker 1: brunt of the legal fight. So we had three cases 170 00:09:43,040 --> 00:09:45,040 Speaker 1: going on this week. We had gray Scale against the 171 00:09:45,160 --> 00:09:48,280 Speaker 1: SEC for the spot at TWENTYTF. We had Ripple versus 172 00:09:48,280 --> 00:09:50,720 Speaker 1: the SEC to its first arguments for that case which 173 00:09:50,720 --> 00:09:53,559 Speaker 1: has been ongoing for ages. And we also had a 174 00:09:53,679 --> 00:09:57,760 Speaker 1: judge approve the sale of Voyage's assets to Binance Us. 175 00:09:58,000 --> 00:10:01,560 Speaker 1: Those are three cases where regulators have come out and said, 176 00:10:01,600 --> 00:10:04,520 Speaker 1: you know, like we disagree with this, whether it's like 177 00:10:04,559 --> 00:10:07,000 Speaker 1: grace Gus shouldn't have a spot bitcoinetia for you know, 178 00:10:07,080 --> 00:10:09,280 Speaker 1: in the case of Ripple, that they think that x 179 00:10:09,600 --> 00:10:13,560 Speaker 1: XRP should be considered security. And so far, actually it 180 00:10:13,600 --> 00:10:16,079 Speaker 1: hasn't really all been going the regulators way. Obviously, we're 181 00:10:16,080 --> 00:10:18,280 Speaker 1: still at the early stages of these cases, and we're 182 00:10:18,280 --> 00:10:21,320 Speaker 1: still yet to hear some other arguments as well, but 183 00:10:21,640 --> 00:10:24,480 Speaker 1: Ripple was very confident talking about it. It's hearing yesterday 184 00:10:24,520 --> 00:10:27,400 Speaker 1: that it had quite a bit of a strong argument 185 00:10:27,480 --> 00:10:29,720 Speaker 1: against the SEC who had two of the experts they 186 00:10:29,760 --> 00:10:32,880 Speaker 1: were speaking they were using in the case struck from 187 00:10:32,880 --> 00:10:35,960 Speaker 1: the record. And then like a lot of regulators all 188 00:10:36,000 --> 00:10:39,920 Speaker 1: over the US, protested about Binance buying Voyager and that's 189 00:10:39,920 --> 00:10:41,480 Speaker 1: when I returned too, it's going to it's going to 190 00:10:41,520 --> 00:10:43,800 Speaker 1: get to be able to do that. So, yeah, not 191 00:10:43,840 --> 00:10:47,040 Speaker 1: been a good week for them in court. Emily, do 192 00:10:47,040 --> 00:10:48,760 Speaker 1: you want to maybe explain a bit more what's going 193 00:10:48,800 --> 00:10:52,320 Speaker 1: on with Voyager and on what's happened there maybe like 194 00:10:52,600 --> 00:10:54,600 Speaker 1: taken a little step back, like who's going to buy 195 00:10:54,640 --> 00:10:58,079 Speaker 1: Voyager when it collapse? And then why didn't they? Yeah, 196 00:10:58,120 --> 00:11:00,760 Speaker 1: So Voyager is one of the crypto unders the collapse 197 00:11:00,840 --> 00:11:02,360 Speaker 1: last year. There were quite a few of them, but 198 00:11:02,400 --> 00:11:04,760 Speaker 1: the Voyager was one of them, and it was one 199 00:11:04,800 --> 00:11:06,480 Speaker 1: of the ones that was more high profile, I think 200 00:11:06,520 --> 00:11:10,559 Speaker 1: because they had previously kind of given the the indication 201 00:11:10,640 --> 00:11:13,480 Speaker 1: that maybe some of their customer assets would have had insurance, 202 00:11:13,480 --> 00:11:15,319 Speaker 1: and so when it went when it went bankrupt. That 203 00:11:15,400 --> 00:11:18,120 Speaker 1: everybody was pretty shocked to find out that actually nothing 204 00:11:18,240 --> 00:11:22,600 Speaker 1: was covered. And originally the company that was going to 205 00:11:22,640 --> 00:11:25,880 Speaker 1: buy Voyager out last summer was FDx. They had already 206 00:11:25,880 --> 00:11:28,480 Speaker 1: extended quite a lot of credit to Voyager in the 207 00:11:28,480 --> 00:11:30,760 Speaker 1: form of loans. Alameda had given it something like close 208 00:11:30,760 --> 00:11:34,280 Speaker 1: to five hundred million in dollar five hundred million dollars, 209 00:11:34,679 --> 00:11:37,720 Speaker 1: and so FDx was all set to buy Voyager. Then 210 00:11:37,720 --> 00:11:40,760 Speaker 1: FDx went bus so that deal went and put Voyager 211 00:11:40,800 --> 00:11:43,160 Speaker 1: then also, you know, was owed quite a lot of 212 00:11:43,240 --> 00:11:45,000 Speaker 1: money that they may or may not have to go 213 00:11:45,040 --> 00:11:47,800 Speaker 1: back to the FCX estate because of those loans that 214 00:11:47,880 --> 00:11:50,360 Speaker 1: accepted before, and so it had to go through the 215 00:11:50,360 --> 00:11:54,560 Speaker 1: auction process again. And Binance US, the US exchange that 216 00:11:54,640 --> 00:11:58,560 Speaker 1: is separate from the big Binance International entity UM put 217 00:11:58,559 --> 00:12:00,000 Speaker 1: its hand up said oh, we want to buy Voye 218 00:12:00,600 --> 00:12:02,880 Speaker 1: and it won that bid with about I think it 219 00:12:02,880 --> 00:12:05,320 Speaker 1: was about a billion was the bid for Voyager, compared 220 00:12:05,320 --> 00:12:07,880 Speaker 1: to one point four billion that FTX of previously bids, 221 00:12:07,880 --> 00:12:09,679 Speaker 1: so a bit of a discount in those few months. 222 00:12:09,720 --> 00:12:11,600 Speaker 1: But a lot of regulators put their hands up and said, 223 00:12:11,960 --> 00:12:14,080 Speaker 1: we don't think this is a good idea. We can't 224 00:12:14,080 --> 00:12:17,000 Speaker 1: see you know everything about Finance and its financials. They're 225 00:12:17,000 --> 00:12:20,360 Speaker 1: all pretty obscure. We don't fully understand the separation between 226 00:12:20,360 --> 00:12:23,360 Speaker 1: Binance and Binance US. Can we really trust this company 227 00:12:23,400 --> 00:12:26,360 Speaker 1: to be owning another US entity like Voyager, which has 228 00:12:26,360 --> 00:12:28,800 Speaker 1: a very large amount of assets under management that needs 229 00:12:28,800 --> 00:12:32,000 Speaker 1: to go back to creditors or be remanaged as under 230 00:12:32,280 --> 00:12:34,920 Speaker 1: in terms of this deal. So that was the issues 231 00:12:34,920 --> 00:12:38,120 Speaker 1: at stake. We'll be right back with more from Bloomberg 232 00:12:38,160 --> 00:12:52,079 Speaker 1: as Justina Lee and Emily Nicole. So just just to 233 00:12:52,120 --> 00:12:54,360 Speaker 1: get a bit of context on Binance, because Binance has 234 00:12:54,400 --> 00:12:56,840 Speaker 1: also been in the news. There was a story recently 235 00:12:56,840 --> 00:12:59,000 Speaker 1: which wasn't our story, but the Journal did a story 236 00:12:59,040 --> 00:13:02,480 Speaker 1: about sort of finances history, specifically in the US and 237 00:13:02,520 --> 00:13:05,520 Speaker 1: the separation between the two entities that Emily mentioned. She 238 00:13:05,600 --> 00:13:08,840 Speaker 1: mentioned US and Binance dot Com, So can you discuss that. 239 00:13:09,400 --> 00:13:12,960 Speaker 1: So in twenty nineteen, Finance started a US arm that 240 00:13:13,040 --> 00:13:15,840 Speaker 1: they call Binance dot US. And the reason they did 241 00:13:15,920 --> 00:13:20,080 Speaker 1: that is because with a US entity that is more 242 00:13:20,160 --> 00:13:23,840 Speaker 1: compliant with US law, they were trying to insulate the 243 00:13:24,200 --> 00:13:28,680 Speaker 1: global cash cow, which is their international website, Binance dot Com, 244 00:13:28,800 --> 00:13:33,720 Speaker 1: from potential US regulatory actions and US lawsuits. But the 245 00:13:33,800 --> 00:13:36,560 Speaker 1: problem with this is that obviously it depends a lot 246 00:13:36,640 --> 00:13:40,280 Speaker 1: on the two entities actually being separate, and this has 247 00:13:40,320 --> 00:13:44,080 Speaker 1: always been something that has divided a lot of people. 248 00:13:45,160 --> 00:13:47,280 Speaker 1: And this week we had a story from the Wall 249 00:13:47,320 --> 00:13:50,640 Speaker 1: Street Journal kind of detailing the contact between the two 250 00:13:50,640 --> 00:13:54,640 Speaker 1: exchanges and it used some text messages among the key 251 00:13:54,679 --> 00:13:58,000 Speaker 1: executives to show that all along the Binance dot Com 252 00:13:58,000 --> 00:14:02,800 Speaker 1: executives were quite heavily involved with the running of dot us. 253 00:14:02,800 --> 00:14:06,160 Speaker 1: You know, for instance, the dot Us teams would report 254 00:14:06,240 --> 00:14:09,520 Speaker 1: a lot of their work to the dot Com executives. 255 00:14:09,679 --> 00:14:13,120 Speaker 1: Or for instance, when dot Us started trading, it was 256 00:14:13,160 --> 00:14:18,480 Speaker 1: actually triggered by an engineer in Shanghai. And that is because, 257 00:14:18,480 --> 00:14:21,760 Speaker 1: you know, according to the Journal article, the software code 258 00:14:21,960 --> 00:14:26,160 Speaker 1: that operates Finance dot us is actually done out of Shanghai. 259 00:14:26,720 --> 00:14:29,400 Speaker 1: And now Finance's defense for all of this has always 260 00:14:29,440 --> 00:14:31,760 Speaker 1: been that, you know, dot Us does have a licensing 261 00:14:31,800 --> 00:14:34,480 Speaker 1: agreement with the Global Exchange. But I think putting all 262 00:14:34,520 --> 00:14:37,080 Speaker 1: of this together, it does kind of raise questions over 263 00:14:37,200 --> 00:14:40,880 Speaker 1: exactly how separate they are, because you know, after all, 264 00:14:40,920 --> 00:14:45,800 Speaker 1: the same person CZ is the largest shareholder in both 265 00:14:45,880 --> 00:14:49,440 Speaker 1: dot Com and dot us, and I think you know, 266 00:14:49,520 --> 00:14:54,200 Speaker 1: especially with the rising regulatory scrutiny into finance dot com. 267 00:14:54,240 --> 00:14:56,720 Speaker 1: I mean, I think there is even more attention on 268 00:14:56,760 --> 00:14:59,680 Speaker 1: this question now and if the two entities are actually 269 00:14:59,680 --> 00:15:02,440 Speaker 1: not that separate, and that it kind of raises a 270 00:15:02,520 --> 00:15:06,040 Speaker 1: question of what US regulators might do with dot com. 271 00:15:06,160 --> 00:15:08,840 Speaker 1: We should be clear though, that the text the Wall 272 00:15:08,840 --> 00:15:11,680 Speaker 1: Street Journal said they had seen were from twenty eighteen 273 00:15:11,720 --> 00:15:16,400 Speaker 1: to twenty twenties, so they're not like recent ones. Moving on, 274 00:15:16,480 --> 00:15:18,880 Speaker 1: you mentioned Emily that you know, it's not been a 275 00:15:18,880 --> 00:15:23,840 Speaker 1: great week for regulators, but the global regulatory cracktone on 276 00:15:23,920 --> 00:15:27,080 Speaker 1: crypto has continued. We had some action in India, of 277 00:15:27,160 --> 00:15:29,640 Speaker 1: all places, which was already pretty tough on crypto. These 278 00:15:29,680 --> 00:15:32,600 Speaker 1: sort of like the markets kind of semi dead there now. 279 00:15:32,960 --> 00:15:34,520 Speaker 1: And then also the UK. Do you want to like 280 00:15:35,000 --> 00:15:38,560 Speaker 1: quickly run down what's happened in India and then we 281 00:15:38,600 --> 00:15:41,840 Speaker 1: could talk about the UK, which is mine And maybe 282 00:15:41,840 --> 00:15:44,120 Speaker 1: I wasn't being fat I should say the US regulators 283 00:15:44,120 --> 00:15:47,160 Speaker 1: of a bit of a tough week. But in India 284 00:15:47,240 --> 00:15:49,560 Speaker 1: they announced some changes to anti money laundering laws to 285 00:15:49,560 --> 00:15:52,400 Speaker 1: bring crypto companies under that. So they had already made 286 00:15:52,440 --> 00:15:54,760 Speaker 1: it pretty tough for crypto exchanges to operate in the 287 00:15:54,800 --> 00:15:58,000 Speaker 1: country last year with changes they made there then some 288 00:15:58,120 --> 00:16:00,280 Speaker 1: you know, some punitive tax measures and things like that 289 00:16:00,360 --> 00:16:03,640 Speaker 1: for users, and now it's like officially under that umbrella 290 00:16:03,720 --> 00:16:06,560 Speaker 1: that if cryptocompanies see fraud on their platform, if they 291 00:16:06,600 --> 00:16:09,360 Speaker 1: see something that doesn't look quite right, they have to 292 00:16:09,440 --> 00:16:11,600 Speaker 1: report that to the authorities. Previously it was a bit 293 00:16:11,640 --> 00:16:14,040 Speaker 1: of a like if you want to find but I mean, 294 00:16:14,440 --> 00:16:16,360 Speaker 1: really it's up to you. And now it's like, you know, 295 00:16:16,600 --> 00:16:18,440 Speaker 1: like any other financial company, you're going to have to 296 00:16:18,440 --> 00:16:21,520 Speaker 1: submit those kinds of reports. And then in the UK 297 00:16:22,080 --> 00:16:24,880 Speaker 1: the Financial Conduct Authority made some changes last year that 298 00:16:25,240 --> 00:16:28,560 Speaker 1: meant that bitcoin ATMs is like calling like cash points 299 00:16:28,600 --> 00:16:31,240 Speaker 1: where you can withdraw bitcoin rather than cash, need just 300 00:16:31,360 --> 00:16:35,280 Speaker 1: be register registered with the regulator. And since then there 301 00:16:35,280 --> 00:16:38,200 Speaker 1: are still ATMs operating all across the country, but none 302 00:16:38,240 --> 00:16:40,520 Speaker 1: of them are registered with the regulator. Nobody has yet 303 00:16:40,520 --> 00:16:43,640 Speaker 1: come forward to register their cash machines or bitcoin cash 304 00:16:43,640 --> 00:16:46,920 Speaker 1: regiser to say. And in East London this week a 305 00:16:46,920 --> 00:16:49,000 Speaker 1: bunch of bitcoin ATMs were found in the back of 306 00:16:49,040 --> 00:16:51,880 Speaker 1: some shops by the Metropolitan Police and the FSA went 307 00:16:51,920 --> 00:16:55,160 Speaker 1: along to do a little bit of an investigation. Inspection, 308 00:16:55,280 --> 00:16:57,360 Speaker 1: see what's going on, and mostly, you know, just re 309 00:16:57,520 --> 00:17:00,720 Speaker 1: up the warning to everybody. The bitcoin ATMs are currently 310 00:17:00,880 --> 00:17:03,480 Speaker 1: not regulated unless they're registered, and none of them have 311 00:17:03,560 --> 00:17:06,520 Speaker 1: been registered yet. So if you're hanging around in shortage 312 00:17:06,520 --> 00:17:09,440 Speaker 1: and the SWAT team arrived and took down then ATM, 313 00:17:09,520 --> 00:17:11,359 Speaker 1: that that's what was going on. If you think it 314 00:17:11,400 --> 00:17:13,359 Speaker 1: was funny, I wonder if they arrived all masked. But 315 00:17:13,440 --> 00:17:15,159 Speaker 1: it did make it seem as it was like in 316 00:17:15,200 --> 00:17:17,280 Speaker 1: my head it was like an Essex thing. I don't know, 317 00:17:17,560 --> 00:17:21,040 Speaker 1: you know it's shortage bitcoin ATMs or maybe you know Hackney, 318 00:17:21,320 --> 00:17:24,159 Speaker 1: this is too niche for this podcast. Yes, but I 319 00:17:24,200 --> 00:17:27,640 Speaker 1: just imagine them arriving like throwing down the door, kicking 320 00:17:27,680 --> 00:17:31,840 Speaker 1: down the you're under arrest. The suits follow behind with 321 00:17:31,880 --> 00:17:34,800 Speaker 1: the little clipboard exactly. Yeah. It'd be curious because we've 322 00:17:34,840 --> 00:17:37,600 Speaker 1: done stories before about how volumes had dropped on bitcoin ATMs, 323 00:17:37,640 --> 00:17:39,960 Speaker 1: so I wonder if there's actually any money flowing through them. 324 00:17:40,040 --> 00:17:42,680 Speaker 1: The final blows basically we had India give the final 325 00:17:42,720 --> 00:17:45,680 Speaker 1: blow to crypto there and then they here the ATMs 326 00:17:45,680 --> 00:17:47,760 Speaker 1: are finally knocked out. I guess, yeah, but they're still 327 00:17:47,840 --> 00:17:50,720 Speaker 1: very popular in developing countries like El Salvador and in 328 00:17:50,800 --> 00:17:53,240 Speaker 1: Latin America. They are one of the ways that the 329 00:17:53,320 --> 00:17:55,240 Speaker 1: government in El Salvadore has been trying to get people 330 00:17:55,240 --> 00:17:58,200 Speaker 1: to use more bitcoin, so they do still exist. Cool. 331 00:17:58,280 --> 00:18:01,160 Speaker 1: So on this great positive note about bit quinn ATMs 332 00:18:01,200 --> 00:18:03,760 Speaker 1: in developing countries, I think we can wrap it up. 333 00:18:03,800 --> 00:18:06,280 Speaker 1: Thank you so much for joining me. Thanks, thank you. 334 00:18:07,040 --> 00:18:10,760 Speaker 1: That was Bloomberg reporters Emil Nicole and Justina Lee. You 335 00:18:10,800 --> 00:18:13,040 Speaker 1: can find more of their work on the Bloomberg terminal 336 00:18:13,280 --> 00:18:16,440 Speaker 1: on Bloomberg dot com. For more, be sure to check 337 00:18:16,480 --> 00:18:25,240 Speaker 1: out our twice weekly newsletter, Bloomberg Crypto. This is Bloomberg Crypto, 338 00:18:25,440 --> 00:18:29,280 Speaker 1: a daily podcast from Bloomberg and iHeartRadio. For more shows 339 00:18:29,320 --> 00:18:33,480 Speaker 1: from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever 340 00:18:33,560 --> 00:18:37,080 Speaker 1: you get your podcasts. Send us your comments, questions or 341 00:18:37,080 --> 00:18:40,120 Speaker 1: suggestions for the show to Crypto at Bloomberg dot net. 342 00:18:43,320 --> 00:18:47,040 Speaker 1: The supervising producer of Bloomberg Crypto is Vicky Vergelina. Our 343 00:18:47,080 --> 00:18:50,919 Speaker 1: senior producer is Janet Babin. Our producers are Mohammed Faroup 344 00:18:50,960 --> 00:18:54,320 Speaker 1: and Sharon Barrero. Our associate producers are Ty Butler and 345 00:18:54,400 --> 00:18:59,320 Speaker 1: Moses on Desto wanderad is our engineer. Original music by 346 00:18:59,440 --> 00:19:04,199 Speaker 1: Leo sid I'm Stacy, Marie Ishmael. Have a great weekend.