Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News.
Speaker 1: And this is Bloomberg Crypto, a new daily podcast from
Speaker 1: Bloomberg and I Heart Radio. It's Friday, June three. Cryptocurrencies
Speaker 1: are increasingly popular as investments. Everyone from traders on Reddit
Speaker 1: to big institutional shops like Fidelity seem to have a
Speaker 1: crypto strategy. But what happens when the people investing in
Speaker 1: this asset class are also the ones in charge of
Speaker 1: regulating it? Senators like Pat too Me of Pennsylvania. So
Speaker 1: I'm just asking the SEC to provide some clarity. Let
Speaker 1: us know, why do you think this is a security?
Speaker 1: What are the characteristics? And Cynthia Lemus of Wyoming known
Speaker 1: to many as somewhat of a bitcoin evangelist, so I'm
Speaker 1: very confident that bitcoin will withstand the test of time.
Speaker 1: Both hold crypto investments while also considering who and how
Speaker 1: might potentially regulate this asset class. So what are the
Speaker 1: ethical implications when members of Congress buy and hold bitcoin? Today?
Speaker 1: I speak with bloombag reports Aquila Gardner about how to
Speaker 1: regulate the regulators. Welcome with Kaela. Thank you, Stacy, Marie.
Speaker 1: Great to have you. So, first of all, you've been
Speaker 1: reporting on this, tell me a little bit about your story,
Speaker 1: what you've found so far, what's interesting. So basically, we
Speaker 1: got some data from a research organization called two i Q,
Speaker 1: and they track the trading habits of Congress members and
Speaker 1: really compile the things that they're investing in. And so
Speaker 1: what they found is about one point eight million dollars
Speaker 1: worth of crypto related investments owned by members of Congress.
Speaker 1: And so those include stocks that are related to crypto,
Speaker 1: like coin based block which obviously offer trading, and that
Speaker 1: also includes cryptocurrencies like your bitcoin, your theory um doche coin,
Speaker 1: and investments in crypto investment funds. And what's interesting about
Speaker 1: this is all the funds that were invested are owned
Speaker 1: by gray Scale, which is one of the biggest crypto
Speaker 1: asset managers, and there's about two or three um Congress
Speaker 1: members who have holdings and Gray Skill investment funds. Got it. So,
Speaker 1: you said a couple of things that I find really interesting,
Speaker 1: And I want to start with a kind of a question,
Speaker 1: which is, as you were reporting this, were you surprised
Speaker 1: by either the size of the investments or you know,
Speaker 1: maybe you thought it was small, maybe you thought it
Speaker 1: was big, or even just the names of the folks
Speaker 1: who were popping up in this data sets. I think
Speaker 1: what was interesting is just the amount there was twenty
Speaker 1: one members in total who fall under that um, eleven Democrats,
Speaker 1: ten Republicans. But more interesting perhaps was the amount of
Speaker 1: senators representatives who hold cryptocurrencies, because obviously you have to
Speaker 1: kind of go out of your way to invest in those.
Speaker 1: Some of the stocks are just a part of a
Speaker 1: four one K exact, a fun that they might have
Speaker 1: that's managed by a third party. But that number was
Speaker 1: particularly interesting. The people that actually own bitcoin, ethereum and
Speaker 1: some even fringe names like Basic Attention Token like those
Speaker 1: investments were really interesting. And then also the investment funds
Speaker 1: because they're becoming more popular, but still they're not as
Speaker 1: widely held as your four one case, your retirement savings.
Speaker 1: Got it. So, folks in Congress own lots of things
Speaker 1: all the time. They have access to lots of information
Speaker 1: all the time. With crypto and with some of what
Speaker 1: you're describing, some of the conflicts are perhaps less immediate.
Speaker 1: Right there's as you've identified, this is still a growing
Speaker 1: asset class. It's much less widespread but this is also
Speaker 1: an asset class that is under intense regulatory scrutiny right now,
Speaker 1: and some of these folks, some of these members may
Speaker 1: have themselves be considering sponsoring bills about regulating crypto, or
Speaker 1: you know, are on committee is that are interested in
Speaker 1: regulating crypto. Can you tell me a little bit more
Speaker 1: about what you found on that angle. I think you
Speaker 1: bring up an interesting point, which is this debate has
Speaker 1: kind of happened for a long time, whether it's tech
Speaker 1: stocks or defense stocks. You know, there's always been questions
Speaker 1: should you serve on the Committee of Armed Services and
Speaker 1: also hold defense stocks? And the same thing goes for
Speaker 1: tech and so it's really interesting about crypto, particularly because
Speaker 1: it's still so early in that process of regulation. And
Speaker 1: the two committees, or the two areas of committees both
Speaker 1: in the Senate in the House. Um that we looked
Speaker 1: at in this story was the Committee of Agriculture and
Speaker 1: the Committee of Banking, and those go under different names
Speaker 1: under different chambers, but those committees are particularly important because
Speaker 1: they oversee the SEC and the CFTC, the two biggest
Speaker 1: potential regulators for crypto at the moment. There's a bit
Speaker 1: of a tug of war right now about which cryptocurrencies
Speaker 1: are considered commodities and which are considered securities. And different
Speaker 1: Congress members have different motivations for why they want one
Speaker 1: regulator to take more control than another, and so it
Speaker 1: was definitely interesting. Seven of the members that we found
Speaker 1: in this study are part of those committees, so you
Speaker 1: have to consider how their investments might play into their
Speaker 1: decision making, because whether we like it or not, regulation
Speaker 1: does have an impact on the market and on the prices,
Speaker 1: and oftentimes when big regulatory actions come out, it can
Speaker 1: move the needle on whichever coins of the day, and
Speaker 1: that's something that's definitely being raised with our story. So
Speaker 1: one thing we should know is none of this is
Speaker 1: technically illegal right right there. There's no rule that says
Speaker 1: you're not allowed if you're thinking about a bill that
Speaker 1: regulates bitcoin miners to hold or not hold bitcoin. I
Speaker 1: know folks are very strong opinions about whether there should
Speaker 1: in fact be more rules, but I'm interested in hearing
Speaker 1: what are the members themselves saying about any of this. Well,
Speaker 1: some of the big names in this story was Senator
Speaker 1: Pat to Me, who owns investments in gray Scale, speaking
Speaker 1: of sensative to me. He was on CNBC recently talking
Speaker 1: about regulating crypto. Let's listen to that. I'm not in
Speaker 1: the camp that thinks that there should never be any
Speaker 1: kind of regulation over any cryptocurrency, and that saw my
Speaker 1: position at all. But I do think there needs to
Speaker 1: be transparency and objectivity about what we're doing here, and
Speaker 1: the SEC is taking enforcement actions without first having laid
Speaker 1: out how they interpret how they apply existing securities law
Speaker 1: to this really really important and innovative new category of finance.
Speaker 1: His spokesperson says crypto makes up less than one percent
Speaker 1: of his portfolio, but he explicitly said he does not
Speaker 1: support the kind of proposals that are out there right
Speaker 1: now that specifically ban individual investments in stocks or other
Speaker 1: categories bonds and something like crypto might fall under that
Speaker 1: as well, because he doesn't want it to deter people
Speaker 1: who could potentially run for cong Roice or for Senate.
Speaker 1: So he sees it as there's just too much in
Speaker 1: the economy that Congress overseas to restrict any of these.
Speaker 1: But we should say some of these proposals, there's multiple
Speaker 1: out there, have support from both parties. There's bipartisan support
Speaker 1: for some of these proposals that would ban these individual investments.
Speaker 1: But yeah, a lot of the people we spoke to,
Speaker 1: especially people who have stocks like coin Basin Block, said,
Speaker 1: you know, my portfolio is managed by someone else, but
Speaker 1: even the thought or the realization of knowing that those
Speaker 1: things could be in their portfolio could still impact their
Speaker 1: decision making. When we return, a look at another crypto
Speaker 1: enthusiast who also happens to be a sitting Senator, Wyoming's
Speaker 1: Cynthia Lemmas, we'll be right back. Okay, So you know,
Speaker 1: in the story you mentioned in the SEC and the CFCC,
Speaker 1: the Commodity Future of Trading Commission are still figuring out
Speaker 1: this kind of regulatory context. It's it's a pretty big
Speaker 1: tug of war between the two committees that you reference,
Speaker 1: the Sundate Banking and Agriculture. Do you find that there
Speaker 1: were more members from those particular committees than you were expecting,
Speaker 1: or any like individual ones other than to me. Another
Speaker 1: person is Senator Loomis Um. She's been a longtime investor
Speaker 1: in bitcoin. She's very outspoken about her belief that bitcoin
Speaker 1: and crypto is an avenue for freedom, and she's also
Speaker 1: putting forth a bill that would set out some guidelines
Speaker 1: for the SEC and the CFTC under which they can
Speaker 1: regulate certain spot markets, futures markets. And that's something that's
Speaker 1: really interesting because she's also partnering with somebody on AGGS.
Speaker 1: She sits on the Banking Committee with to me as well, well, Okayla,
Speaker 1: we actually have a clip of Senator Loomis thanks to
Speaker 1: our producers. Here's what she has to say recently on
Speaker 1: Meet the Press about the need for cryptoregulation. So I'm
Speaker 1: very confident that bitcoin will withstand the test of time.
Speaker 1: I'm not confident that every other digital asset that's out
Speaker 1: there has the same qualities of permanence and complete decentralization.
Speaker 1: So there's some fraud that's going to occur, which is
Speaker 1: why I think it's so important for the United States
Speaker 1: to create a regulatory framework that allows for innovation but
Speaker 1: still creates rules of the road that protect individual privacy,
Speaker 1: but that also have disclosure components to them, so the
Speaker 1: purchaser knows what they're getting, and you just have to
Speaker 1: wonder someone who holds bitcoin for a long time and
Speaker 1: her range that she reported is between fifty thousand and
Speaker 1: a hundred thousand, and value of the bitcoin that she holds.
Speaker 1: So that's a pretty big number or a pretty big
Speaker 1: range at pretty big range as well. Yes, we should
Speaker 1: note that as well, that all of the representatives have
Speaker 1: to report a range in the assets that they hold,
Speaker 1: regardless of whether they're crypto or not um and so
Speaker 1: that one point eight million number is a range of
Speaker 1: all of the things that they reported. So that's a
Speaker 1: particularly interesting one because you have someone who's outspoken about
Speaker 1: where she believes certain things should fall under, and you
Speaker 1: have to think about how that could potentially impact her holdings.
Speaker 1: Thank you. One other thing about these reports is, as
Speaker 1: you say, it represents the value of the crypto held
Speaker 1: at that moment in time. So one of the fun
Speaker 1: things fun slash challenging things about crypto as an asset
Speaker 1: class is it's really volatile. And so if we were
Speaker 1: having this conversation two months, you could be saying that
Speaker 1: that one point eight million number is a lot bigger
Speaker 1: or a lot smaller, even if none of the members
Speaker 1: had acquired or sold any crypto as a report to
Speaker 1: do you find that covering this asset class is more
Speaker 1: or less challenging because of this volatility and the kinds
Speaker 1: of data that you have to be looking at to
Speaker 1: really get the full story. I think that's an interesting question,
Speaker 1: especially because bitcoin right now is trading in such a
Speaker 1: tight range. It's hard to know how much their assets
Speaker 1: are really valued because they don't have to report exactly
Speaker 1: how much they hold. But the thing to know is
Speaker 1: it has to be over at least a thousand dollars.
Speaker 1: So these ranges are pretty wide, but we don't actually
Speaker 1: have a full picture of how much they're investing in,
Speaker 1: whether it's these individual tokens or the stocks. We we
Speaker 1: don't have that full picture to see how much UM
Speaker 1: it's impacting. And so that's why we have to reach
Speaker 1: out to these members and ask them, why can you
Speaker 1: give us a better idea so we can let readers
Speaker 1: know what exactly you're holdings entail. So that's like something
Speaker 1: like Senator to me telling us that it's one percent
Speaker 1: of his asset class. It gives us a better picture. Okay,
Speaker 1: this is how much Disco potentially impact him personally. I
Speaker 1: should say a lot of the other members gave much
Speaker 1: less detail um into those amounts, But that's something that
Speaker 1: would be great to have if we could have that data. Yeah,
Speaker 1: I would love just a list of the wallets addresses
Speaker 1: of all of the different members that would be That
Speaker 1: would be fantastic and definitely make our lives easier. So
Speaker 1: tell me who are the players and what is the
Speaker 1: partisan or bipartisan representation that you're seeing. So we found
Speaker 1: twenty one members of Congress own crypto related investments, and
Speaker 1: so that includes stocks like coin base and block It
Speaker 1: also includes cryptocurrencies like bitcoin ethereum, and these crypto investment
Speaker 1: funds which are all under Gray Scale, which happened to
Speaker 1: be issued by Gray Skill. And we found that the
Speaker 1: breakdown of that is Democrats Republicans is eleven to ten.
Speaker 1: Democrats were much more likely to own these stocks as
Speaker 1: a part of perhaps like a widely held fund or
Speaker 1: an education trust. Another thing to mention to. These reportings
Speaker 1: also include the holdings of their spouses, perhaps their children
Speaker 1: as well the household exactly. But the kind of differences
Speaker 1: is definitely Democrats tend to hold more of the stocks,
Speaker 1: while Republicans happened to dabble more in the cryptocurrencies and
Speaker 1: the funds. I want to also, you know, you mentioned
Speaker 1: there's kind of both bipartisan supports and bipartisan rejection of
Speaker 1: some of these various proposals. Can you tell me a
Speaker 1: little bit more about any of the Dems that popped
Speaker 1: up in this data sets. One Democrat who invested in
Speaker 1: we call this category like cryptocurrencies or funds focused specifically
Speaker 1: on crypto So that Democrat was Marie Newman. She had
Speaker 1: investments in a gray Scale fund. She declined to comment
Speaker 1: for this story, but yeah, again, it's interesting to see
Speaker 1: the amount of people that are specifically gravitating towards gray
Speaker 1: Scale um. That could say something about why people are
Speaker 1: choosing this. And what's interesting about Gray Scale is they
Speaker 1: have a big lobbying effort right now for the SEC
Speaker 1: to approve lots of comment letters exactly to prove a
Speaker 1: spot bitcoin et F. So they're having a really big
Speaker 1: push for that right now. And you have to think
Speaker 1: about if members are investing in gray Skill, how does
Speaker 1: that impact their thinking when they're communicating with regulators, when
Speaker 1: regulators are coming to the House or the Senate to
Speaker 1: be questioned. And that's something important to talk about. Two
Speaker 1: is this relationship between the regulators and Congress. While they're
Speaker 1: technically separate, Congress votes them in, they can organize hearings,
Speaker 1: They have tremendous agenda setting powers, and so even though
Speaker 1: there's a separate relationship, there's still very much communication throughout
Speaker 1: the year, and Congress members are constantly letting them know
Speaker 1: what they think is the best idea and if they
Speaker 1: should choose to make regulation, that would be law over
Speaker 1: anything the regulators do individually. And so that's another thing
Speaker 1: is will Congress actually put legislation in place in terms
Speaker 1: of crypto or will the regulators kind of work themselves
Speaker 1: out with different actions. I talked to one lawyer who
Speaker 1: said he thinks it's less likely that we'll see legislation
Speaker 1: and more likely that regulators will just kind of come
Speaker 1: out with their own stances and kind of work it out.
Speaker 1: There's a lot of legal implications too, so there's question
Speaker 1: exactly all of these things are kind of working themselves out,
Speaker 1: But we can't negate the fact that Congress has this
Speaker 1: tremendous agenda setting power. You can find more of a
Speaker 1: Kala gardeners reporting on Bloomberg dot Com, the Bloomberg Terminal
Speaker 1: on Twitter. A Gardener a Kala on the next episode
Speaker 1: of Bloomberg Crypto. Sometimes it's good to define our terms,
Speaker 1: even for those of us who do this for a Living.
Speaker 1: Join me Monday for a conversation with Bloomberg's Hannahmilla and
Speaker 1: Vildana Hodrick. We'll be reviewing their handy Crypto glossary. You'll
Speaker 1: hear about terms like staking, bridges and more. I'm Stacy
Speaker 1: Marie Ishmael and this is Bloomberg Crypto Daily podcast from
Speaker 1: Bloomberg and I Heart Radio. For more shows from I
Speaker 1: Heart Radio, visit the I Heart Radio app, Apple Podcasts,
Speaker 1: or wherever you get your podcasts. Email your comments, questions
Speaker 1: or suggestions to Crypto at Bloomberg dot net and you'll
Speaker 1: find us on Twitter at Crypto. The producer and editor
Speaker 1: of this episode is Vicky Vergelina. Our engineer is Blake Maples.
Speaker 1: Original music by Leo Sidran. Bloomberg's head of Podcasts is
Speaker 1: Francesca Levi