Speaker 1: Bloomberg Audio Studios, podcasts, radio news. We've been watching bitcoin
Speaker 1: almost as much as stocks lately because it's been so
Speaker 1: intrinsically tied to the markets. Remember when it was supposed
Speaker 1: to be its own universe. That was the whole point
Speaker 1: the decentralized cryptocurrency. It is bouncing back today, up fifty
Speaker 1: four hundred dollars in approaching ninety two thousand dollars a coin.
Speaker 1: So maybe it bottomed unclear as we've had multiple folks
Speaker 1: including Mike mcglohe at Bloomberg Intelligence predict another crypto winter.
Speaker 1: Michael Sailor also preparing for one at Strategy. Despite the love,
Speaker 1: this administration has shown the embrace of the crypto industry
Speaker 1: as we remember the ways with Donald Trump since he
Speaker 1: took office.
Speaker 2: Listen last year, I promised to make America the bitcoin
Speaker 2: superpower of the world and the crypto capital of the planet.
Speaker 2: With the right legal framework, institutions large and swow liberated
Speaker 2: to invest, innovate, and take part in one of the
Speaker 2: most exciting technological revolutions in modern history. For years, you
Speaker 2: were mocked and dismissed and counted out. You accounted out
Speaker 2: as little as a year and a half ago, But
Speaker 2: this signing is a massive validation.
Speaker 1: A massive validation as we watch the gyrations in the
Speaker 1: crypto market. Pleasure to spend some time with Gary Gensler
Speaker 1: as we consider the crypto space regulations and the plumbing
Speaker 1: in the market. He's with us live now, former Chair
Speaker 1: of Course of the Securities and Exchange Commission, Professor of
Speaker 1: the practice at MIT Sloan School of Management. Mister Gensler,
Speaker 1: Welcome back to Bloomberg TV and radio. Is that you
Speaker 1: buying the dip in bitcoin?
Speaker 3: Joe? It's good to be back and good to be
Speaker 3: with all of your viewers. But now I'm not participating
Speaker 3: in that market.
Speaker 1: Well, what do you think of this? We've spent a
Speaker 1: lot of time talking about this when you were in
Speaker 1: the job at the SEC and the many warnings that
Speaker 1: you made about this potentially risky asset, and we're witnessing
Speaker 1: a reckoning in the marketplace right now. What do you
Speaker 1: think is behind it?
Speaker 3: Look, I think it's a risk asset. In the American
Speaker 3: public and the worldwide public has been fascinated with cryptocurrencies,
Speaker 3: but it's a highly speculative, volatile asset. And putting aside
Speaker 3: bitcoin for a minute, all the thousands of other tokens,
Speaker 3: not the stable coins that are backed by US dollars,
Speaker 3: but all the thousands of their tokens. You have to
Speaker 3: ask yourself, what's the fundamentals, what's underlying it. You don't
Speaker 3: get a dividend, you don't get usual returns, and so
Speaker 3: the investing public just needs to be aware of those
Speaker 3: risks in this highly volatile space.
Speaker 1: What do you make of the politicization of crypto? The
Speaker 1: fact that the Trump administration has become involved to this
Speaker 1: extent has reportedly turned off some investors as they watched
Speaker 1: the Trump family enriched themselves with gains, like this, is
Speaker 1: this a democrat versus Republican thing?
Speaker 2: Now?
Speaker 3: No, I don't think so. I mean it's about our
Speaker 3: capital markets. The US have the greatest capital markets and
Speaker 3: they benefit from common sense rules of the road. And
Speaker 3: when you buy and sell a stock or a bond,
Speaker 3: you want to get, you know, various information, and you
Speaker 3: want to know that you're getting the same treatment as
Speaker 3: you know, the big investors. That's the fairness in these
Speaker 3: capital markets that are so important.
Speaker 1: For a lot about the impact of ETFs on this space,
Speaker 1: that's something you know a lot about the initial ETFs
Speaker 1: that were greenlit to start buying crypto. Did that just
Speaker 1: change the plumbing in the crypto market here by tying
Speaker 1: it directly to the stock market.
Speaker 3: Well, ever, since antiquity, finance goes towards centralization, So it's
Speaker 3: not surprised that that which was started as a decentralized
Speaker 3: ecosystem and that was the vision, has become more integrated
Speaker 3: and more centralized. Investors can express themselves in gold and
Speaker 3: silver through exchange traded funds, and as of a couple
Speaker 3: of years ago, actually all the way back to my
Speaker 3: first year in the job, they were exchange traded funds
Speaker 3: on bitcoin futures, just as there is for gold and silver.
Speaker 2: Yeah.
Speaker 1: Well, mister chairman, I want to ask you about, speaking
Speaker 1: of plumbing in the markets, what happened at the CME
Speaker 1: last week and whether you think the CFTC should be
Speaker 1: investigating this outage. Should the CME be facing additional scrutiny.
Speaker 3: Look, it's something really well understood that our major stock
Speaker 3: exchanges and futures markets, the Chicago Mercantile Exchange trades very
Speaker 3: consequential parts of our US Treasury market, interst rates markets
Speaker 3: their critical infrastructure and Thanksgiving evening, they had an outage
Speaker 3: at a data center. Importantly, it wasn't actually their computers.
Speaker 3: It was the chillers, as I understand it, the cooling
Speaker 3: system in this data center, and they had an outage
Speaker 3: for about ten hours, and so markets planned for that.
Speaker 3: The Chicago Mercantile Exchange considered they didn't go to their
Speaker 3: backup data center. They stayed partly because it was Thanksgiving evening.
Speaker 3: As I understand it, I'm sure that they at the
Speaker 3: Chicago Mercantile Exchange and the various regulators will keep looking
Speaker 3: at it and look for lessons learned. You always look
Speaker 3: for lessons learn and how can we do things better
Speaker 3: in the future.
Speaker 1: Well, we've experienced an incredible number of inquiries about this
Speaker 1: at Bloomberg. Our readers are asking, our viewers and listeners
Speaker 1: are asking about this. It put a real chill in
Speaker 1: the markets. To use a terrible pun in this case,
Speaker 1: mister chairman, you don't sound that worried about this being systemic.
Speaker 3: Look, I think that the New York Stock Exchange, CME,
Speaker 3: the clearing houses are systemically important, no doubt about it,
Speaker 3: systemically important. But what happened here at this specific moment
Speaker 3: is the cooling system as I understand how to glitch.
Speaker 3: By the way, this data center is operated by a
Speaker 3: third party. It's not operated by CME, so they have
Speaker 3: a contract for a certain performance levels, and they didn't
Speaker 3: go to their backup data center, which is I think
Speaker 3: located elsewhere in New Jersey. If this would happen at
Speaker 3: ten am on a Monday, I think the management team
Speaker 3: would make a different decision and probably would switch over
Speaker 3: to the backup data center more quickly. The markets probably
Speaker 3: would have a little less liquidity. Not every high frequency
Speaker 3: trading shop or principal trading firm has the same connectivity
Speaker 3: to the backup data center, so that's an interesting business choice.
Speaker 3: And for your institutional listeners, if that happened, they'd probably
Speaker 3: see a little less liquidity until they get back to
Speaker 3: that primary data center.
Speaker 1: Always fascinating to look onto the hood with Gary Gensler,
Speaker 1: former chair of the SEC, Professor of the Practice MIT
Speaker 1: Sloan School of Management. Thank you, mister Chairman, for the
Speaker 1: time