Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at
Speaker 1: Bloomberg and I'm Baldanna hired across Acid Report at Bloomberg.
Speaker 1: And this week on the show, we'll talk about a
Speaker 1: big milestone for cryptocurrencies this week when some of the
Speaker 1: leading players in the industry went to Congress to answer
Speaker 1: some good questions and let's be honest, some not so
Speaker 1: good questions. But it's all about how digital assets should
Speaker 1: be regulated by the government. We're gonna talk to one
Speaker 1: of the executives who testified, as well as his colleague
Speaker 1: about some of the big issues that came up, as
Speaker 1: well as about what a wild year it was in crypto.
Speaker 1: But first of all, Donna, I have to tell you, you
Speaker 1: you know, I was watching this hearing yesterday and as
Speaker 1: you know, you give me a hard time for asking
Speaker 1: very long, convoluted questions. And after watching this hearing, I
Speaker 1: had an epiphany. I think I should run for Congress.
Speaker 1: I think I would fit in Oh wow, yeah, honestly
Speaker 1: you might. I have the same thought when I was
Speaker 1: watching the hearings. And if you do, all I want
Speaker 1: to ask you is that I be your campaign manager,
Speaker 1: because I don't think that your jokes might they might
Speaker 1: not be good enough for you to actually run for Congress.
Speaker 1: Really really sorry to break that to you. Yeah, well,
Speaker 1: I you know, I think the problem is you have
Speaker 1: questionable taste and jokes sexually, but you have excellent taste
Speaker 1: in podcast guests. And I'm super excited about the two
Speaker 1: that you talked and joining us this week. What a
Speaker 1: what great timing, Vilda. Timing is everything in in markets
Speaker 1: in podcast, and you've got us two great guests for
Speaker 1: this week, So uh, tell the listeners who they are
Speaker 1: and bring them into the show here. Yeah, I'm as
Speaker 1: excited as you are about the two guests we have.
Speaker 1: We have the chief executive officer of FTX that's Sam
Speaker 1: BANKMNT Freed, and we have f t x u S
Speaker 1: President Brett Harrison. They're both joining us, and I want
Speaker 1: to welcome you both to the podcast. Thanks for having us. Yeah,
Speaker 1: thank you. Yes, Sam, I've got a lot of questions
Speaker 1: about you know, sort of f t x's goals and
Speaker 1: the cryptocurrency world in general. First, though, I think a
Speaker 1: question that's on a lot of listeners minds outside of
Speaker 1: that space is I know you're in touch with Tom
Speaker 1: Brady from time to time, and I want to ask
Speaker 1: on behalf of all NFL fans other than the Tampa
Speaker 1: Bay Buccaneers, is this guy ever going to retire? I
Speaker 1: I hope not. I will see, but I'm I'm expecting
Speaker 1: Steven d That's that's my my kind of betting line.
Speaker 1: Age seventy. Oh my gosh. All right, all right, that's
Speaker 1: not good news to the rest of the NFL. I
Speaker 1: think he'll still be uh, he'll still be winning games
Speaker 1: at age seventy. Maybe you can talk to Giselle. I
Speaker 1: don't know, I don't know. Yeah, she's uh. They're both
Speaker 1: doing pretty well. And it's it's bad news for me
Speaker 1: because my team, the Buffalo Bills, are playing Brady this weekend.
Speaker 1: So that's bad that is might not be a good
Speaker 1: weekend for me. Well, they've got a history of that.
Speaker 1: But Sam, if we can maybe just start with you.
Speaker 1: Mike mentioned the hearings that we had this week. I
Speaker 1: want to actually ask you about what the hearings were like,
Speaker 1: because it seemed like the quality of the questions was
Speaker 1: a little bit better than what we've seen in the past,
Speaker 1: or maybe what even a lot of people were expecting. Yeah,
Speaker 1: I totally agree with that, and I think the questions
Speaker 1: were better in more informed than I was expecting. I
Speaker 1: also think that they were more more balanced. I think
Speaker 1: that I was expecting I think, more grandstanding, and and
Speaker 1: I think I was just wasn't we surprised? In general?
Speaker 1: I think I think like to has done a really
Speaker 1: good job of starting to get you know, to speed
Speaker 1: on digital assets, and I think that they showed a
Speaker 1: lot of eagerness to continue learning. You know, Sam and
Speaker 1: and Brett you chime into if you have any thoughts, obviously,
Speaker 1: But what I think about sort of the where we
Speaker 1: are in the evolution of the cryptocurrency market. You know,
Speaker 1: I'm I'm an older gentleman, as listeners know, I've been
Speaker 1: covered markets for a long time, and I think back
Speaker 1: to like ten or fifteen years when the stock market
Speaker 1: was sort of stole in the adolescents phase when it
Speaker 1: comes to you know, electronic trading, algorithmic trading and computerized markets,
Speaker 1: and boy, there were all sorts of hiccups and flash crashes,
Speaker 1: and you know the famous night Trading debacle where a
Speaker 1: bad algorithm almost you know, wiped out the firm. Uh
Speaker 1: in a few minutes, and it seems to me like
Speaker 1: there's a lot of parallels now where crypto is in
Speaker 1: sort of that that adolescent stage where there's still stuff
Speaker 1: going wrong. And I want to give us an example.
Speaker 1: A few months ago, Wasn't on FTX, another exchange where
Speaker 1: the price of bitcoin I believe it's due to some
Speaker 1: error and an algorithm, someone sold bitcoin for like eighty
Speaker 1: seven percent below the market price. I wondered, how you
Speaker 1: guys look at the market now in the sort of
Speaker 1: respect to this idea of regulation and what needs to
Speaker 1: be done to to get more mature. Is that type
Speaker 1: of thing I described, Um, is that a problem that
Speaker 1: you think needs to be solved or is it more
Speaker 1: the type of thing that's like, well, thanks for playing guide,
Speaker 1: you know, better luck next time. Yeah, I mean, I
Speaker 1: think breast some thoughts on this, but you know, I
Speaker 1: think briefly, is there one of many examples of times
Speaker 1: where yeah, I think these are absolutely problems that need
Speaker 1: to be solved, but I think that they're pretty straightforward
Speaker 1: solutions to a lot of them. And like, you know,
Speaker 1: price bands are just sort of like you know, it's
Speaker 1: not like we put them on JEX. Is not that complex,
Speaker 1: and I think that in a lot of cases is like, yeah,
Speaker 1: there's definitely ways the market needs to grow, but it
Speaker 1: shouldn't be that hard to get there. Yeah. I think
Speaker 1: the fact that cryptocurrency exchanges came about much later in
Speaker 1: the technological development of the Internet and software and just
Speaker 1: how how easy it is to deploy software on a cloud,
Speaker 1: for example, means that the barrier to entry to making
Speaker 1: an exchange was super loud, which has its good parts
Speaker 1: and it's bad parts. Like if you want to, you know,
Speaker 1: write in your garage some code and try to deploy
Speaker 1: a new nastac tomorrow, you can't. There's way too many
Speaker 1: barriers centers of doing that. But there are literally thousands
Speaker 1: of exchanges where you can buy bitcoint I certainly can't
Speaker 1: name them all, and there's only a couple that really
Speaker 1: matter in terms of volume. But there are thousands of exchanges,
Speaker 1: which means not all of those players, absent of a
Speaker 1: clear regulatory framework in the US, are going to create
Speaker 1: the right rules to make sure that their exchange doesn't
Speaker 1: scribble a lot and print something way down or just
Speaker 1: break or you know, be halted for a long time. Uh.
Speaker 1: And so it's up to exchanges like FTX is just
Speaker 1: sort of put in the right rules. And you know, Sam, myself,
Speaker 1: we were at Change Street and other trading firms for
Speaker 1: a long time. We're used to how other exchanges work,
Speaker 1: and it's like, okay, well here's a common sense thing
Speaker 1: which has put some price bands in place. Not a
Speaker 1: very difficult thing. But if you haven't been, you know,
Speaker 1: growing up in that environment, you don't think to do
Speaker 1: this sort of stuff. So Sam, you said, just to
Speaker 1: follow up on that and just to expand it a
Speaker 1: little bit more. You said, there's there are ways for
Speaker 1: the market to grow. And I know my team has
Speaker 1: been thinking about this a lot, because what I hear
Speaker 1: from time to time is that was the year that
Speaker 1: crypto sort of grew up is typically the phrase that
Speaker 1: I hear. So in what ways does the market still
Speaker 1: have to evolve and in what ways can it grow?
Speaker 1: As you say, there are ways for it to do. Yeah,
Speaker 1: I mean, I think like one obvious place is frankly
Speaker 1: on the regulatory side, where you know, I think that
Speaker 1: there is a lot of messy parts of the regulatory
Speaker 1: eco system today. I think that agains some some fairly
Speaker 1: straight forwards things could help that a ton. I think
Speaker 1: just like regulation enforcing that stable points are fully reserved
Speaker 1: is like something that would address I think a lot
Speaker 1: of the current concerns around them. And I think that
Speaker 1: you know, having a feer markets framework for digital asset
Speaker 1: would be really work. Right now, there is a framework
Speaker 1: for modity future is, there's a framework for security spot.
Speaker 1: It's not clear what their framework is for commodity spot market.
Speaker 1: They're not all the same framework. It's not clear with
Speaker 1: their registration framework for a digital asset security token. And
Speaker 1: I think that these these are all things which I
Speaker 1: think have to be addressed. But again I'm optimistic is
Speaker 1: not that hard to address them within the current system
Speaker 1: and and to kind of get to a much more
Speaker 1: robust um and mature place from regulatory perspective, you know,
Speaker 1: I know coin Base has proposed an s r O
Speaker 1: self regulatory organization similar to what's in the in place
Speaker 1: in the stock market and other markets where it's really
Speaker 1: the you know, the industry is policing itself and not
Speaker 1: as reliant on sort of an outside regulator to sort
Speaker 1: of cover the day by day issues, uh that come up?
Speaker 1: Is that something you guys would get on board with.
Speaker 1: Two In general, we're on board with that, and I'm
Speaker 1: actually one of the exchanges that we own f t
Speaker 1: x C strivatives. It is an s r oh, it's
Speaker 1: a d s r O. But when you think about
Speaker 1: how it is in the equity markets with finn Red
Speaker 1: for example, Finra as we know it today was the
Speaker 1: evolution of decades of equity markets. In order to get
Speaker 1: to the point where we have the ideal s r
Speaker 1: O for crypto, this is not something that's going to
Speaker 1: happen in three months or six months or a year.
Speaker 1: And we are in the situation right now where there
Speaker 1: is unclear regulation, with many exchanges choosing to impose different
Speaker 1: policies upon themselves and thus adding confusion and regulatory risk.
Speaker 1: And there's a lot of common sense things that we
Speaker 1: could do with the existing regulatory frameworks without having to
Speaker 1: wait for building the perfect s r O for crypto. Yeah,
Speaker 1: and I basically agree with that. I think, you know,
Speaker 1: also saying that there should be s ROS and crypto
Speaker 1: doesn't mean there shouldn't be federal regulatory oversight as well.
Speaker 1: Like I think that you know, in addition to s ROS,
Speaker 1: you know, the SEC and the CFC and other regulars
Speaker 1: have important les to plan the crypto regulatory ecosystem. I guess,
Speaker 1: you know, the the issue that comes up a lot
Speaker 1: is that, you know, sort of the light hand of
Speaker 1: regulators is kind of what's attractive to a lot of
Speaker 1: people in the crypto world and the defied world. Does
Speaker 1: the US focusing on this and and sort of being
Speaker 1: trying to be the standard bear for regulation, does that
Speaker 1: Do you think that makes the US a more attractive
Speaker 1: or less attractive sort of the capital of the world
Speaker 1: for for cryptocurrencies or is there a risk that you know,
Speaker 1: everything goes to uh to some country where uh, you know,
Speaker 1: they're they're a little more hands off. I would change
Speaker 1: the but the tenses there a little bit. It has
Speaker 1: been something that I think has led to that. And
Speaker 1: you look today, you know, the United States is something
Speaker 1: like five to ten percent of global crypto volume, just
Speaker 1: tiny compared to it's kind of broader fraction of uh,
Speaker 1: you know, most markets. But but I'm optimistic that it
Speaker 1: could become that could go from a negative choy positive
Speaker 1: again without that much work by you know, getting in
Speaker 1: a more stable position than any worlds in the world.
Speaker 1: But yeah, Bright, interested in your thoughts on this. Do yeah,
Speaker 1: my take is that it's not regulation alone that drives
Speaker 1: the business away from the US, it's lack of clarity
Speaker 1: and therefore regulatory uncertainty. Being worried that if you make
Speaker 1: the wrong decision you might be hit with an enforcement
Speaker 1: action two years from now makes it a pretty unattractive
Speaker 1: place to try to be an entrepreneur. The derivatives markets
Speaker 1: in the US, for example, on the CFDC are some
Speaker 1: of the strictest in the world, but we also have
Speaker 1: most of the world's liquidity and derivatives. Think about the
Speaker 1: SMP future or the treasury bond futures or gold futures
Speaker 1: are some of the most liquid instruments in the world
Speaker 1: under one of the strictest derivatives regimes in the world.
Speaker 1: But it's a clear regulatory framework, and that makes it
Speaker 1: possible for people to innovative, to be able to create exchanges,
Speaker 1: to be able to either become fcms or dc ms,
Speaker 1: you know, exchanges or clearing members, and be able to
Speaker 1: provide liquidity that way. It's just lack of priority, this
Speaker 1: gray area that everyone's operating in that I think is
Speaker 1: driving the talent and the new operations off shore. Yes,
Speaker 1: some I wanted to get back to that idea of
Speaker 1: stable coins you mentioned, you know, your your proponent that
Speaker 1: stable coins should be back on to one uh per dollar.
Speaker 1: And for listeners who don't aren't too familiar with this
Speaker 1: space of stable coins basically a cryptocurrency that is designed
Speaker 1: to track the dollar one to one or or some
Speaker 1: other currency one to one. I wondered how to algorithmic
Speaker 1: backed stable coins fit in or should they be in
Speaker 1: a completely other bucket than sort of the sort of
Speaker 1: the tethers of the world that are actually backed by
Speaker 1: by US dollars. Yeah, I think they should be in
Speaker 1: any diet. I'm guessing you know an example of one
Speaker 1: that you're thinking about there, And I think the basic
Speaker 1: answer is again, I think clarity and transparency are are
Speaker 1: the key things here. You know, maybe there's a different
Speaker 1: word like maybe you have sort of like they were
Speaker 1: fully reserved stable poins, any of like algorithmics, stable points,
Speaker 1: or whatever words you want to use, but it should
Speaker 1: be clearly disclosed users that this isn't a stable point
Speaker 1: in the sense of being backed one to one by
Speaker 1: a stable lasset, right, It's an algorithmic thing which attempts
Speaker 1: to maintain a price pag but could fail and I
Speaker 1: think it's an interesting product. I think it's a different
Speaker 1: product then you know, something like USDC is. While we're
Speaker 1: talking about regulation, I wanted to bring up tether because
Speaker 1: that tends to come up during conversations of crypto and regulation,
Speaker 1: and a lot of regulators say that tether has gotten
Speaker 1: so large that if something were to go awry, it
Speaker 1: actually could post challenges to other areas of the market.
Speaker 1: So if we if we do see something go awry,
Speaker 1: what areas might you look to to sort of to
Speaker 1: see that happening in the first place. Yeah, I mean
Speaker 1: I think I'll say, like this is I think one
Speaker 1: of the reasons why it would be really valuable to
Speaker 1: move to a system where you know, there is a
Speaker 1: clear regulatory framework for transparency around the reserves of stable points.
Speaker 1: I think that would go a long way here for
Speaker 1: it's providing um, you know, concerned protection, systemic risk. UM.
Speaker 1: I don't think that it's currently at a place where
Speaker 1: it is threatening. I think what people are most worried
Speaker 1: about most things, they do think it is probably back
Speaker 1: right now by by sufficient assets. But that doesn't necessarily
Speaker 1: mean it always will be, and that doesn't necessarily mean
Speaker 1: that there's enough transparency around that it would be I
Speaker 1: think healthy to move to a framework where there is
Speaker 1: sort of more enforced transparency around that because they won
Speaker 1: and wants to take part in uh, you know, in
Speaker 1: U S scrypto markets. One think I wanted to and
Speaker 1: I do want to sort of talk about FTX specifically
Speaker 1: and what's next for you guys. But one more sort
Speaker 1: of regulatory based question. And I'm fascinating with the notion
Speaker 1: of anonymity in the crypto space. I mean, obviously the
Speaker 1: whole industry was born in anonymity with Satoshi uh No,
Speaker 1: one's I'm still quite sure who he is. Maybe Sam,
Speaker 1: if you know, you can break some news here, but
Speaker 1: I'm guessing not. But to me, the more scrutiny, the
Speaker 1: more sort of effects you have looking into this space,
Speaker 1: the more dangerous anonymity gets, you know, especially when you
Speaker 1: get into stuff with you know, n f T s
Speaker 1: and you see these stories about wash trades where you know,
Speaker 1: it looks like someone selling an n f T to
Speaker 1: themselves for a couple of thousand ether, you know, and
Speaker 1: and and that sort of thing. Does the scrutiny do
Speaker 1: you guys think, does it sort of make anonymity a
Speaker 1: dangerous thing, something that's going to be less of a
Speaker 1: key pillar of of the crypto world going forward. Yeah, personally,
Speaker 1: I think that the blockchain technology on its own can
Speaker 1: exist independently of whether or not you have a fully
Speaker 1: anonymous system that's using that distributed ledge of technology. You
Speaker 1: think about what f t X does. Not only is it,
Speaker 1: you know, non anonymous. I mean we don't publish who
Speaker 1: is doing the trays with each other, right, it's it's anonymous.
Speaker 1: That's the same way that a stock exchange is anonymous
Speaker 1: in that sense. But we are fully ky seeing our users.
Speaker 1: We need to know exactly that they're not from a
Speaker 1: sanction jurisdiction or they're a sanctioned individual. We need to
Speaker 1: know enough information about them so that we can do
Speaker 1: proper tax reporting. So it's almost a complete opposite of
Speaker 1: anonymity in that sense. And even for cases like uh,
Speaker 1: non custodial while it address which doesn't have a name
Speaker 1: associated with it, there are all these great technological tools
Speaker 1: like chain analysis and TRM labs that help you identify
Speaker 1: known while it addresses that maybe they're coming from an exchange,
Speaker 1: or maybe they're coming from North Korea, and you know,
Speaker 1: to ban all deposits and withdrawals to and from those addresses.
Speaker 1: So there's a lot that we know about the network
Speaker 1: that's participating in blockchain transactions that's fairly not anonymous. And
Speaker 1: of course there's different tools that people have built, different
Speaker 1: kinds of coins that would enable stuff like that. That's,
Speaker 1: you know, not necessarily something that we're hugely supportive of,
Speaker 1: but it's it's also independent of the question of, you know,
Speaker 1: how where this technology is heading. And then Mike mentioned
Speaker 1: n f T s and I know Bloomberg had a
Speaker 1: story earlier this week that showed a really small portion
Speaker 1: of participants tend to reap the greatest gains when it
Speaker 1: comes to selling n f T. So I'm wondering, Brett,
Speaker 1: maybe you can answer this question. Do you think that
Speaker 1: the n f T market is a manipulated market? And
Speaker 1: I want to know if you guys participate in these
Speaker 1: so called white lists where these you know, this tiny
Speaker 1: portion of participants does tend to reap these benefits. So
Speaker 1: what we're seeing is that there's not just a number
Speaker 1: a small number of people reaping the benefits. There's a
Speaker 1: small number of people interacting with the n f T ecosystem. Period,
Speaker 1: and I think that has less to do with you know, manipulation.
Speaker 1: Let's yeah, maybe there is. It's hard to know exactly
Speaker 1: what's going on in that market. I think what is
Speaker 1: true is that the barrier to entry for for example,
Speaker 1: n f T marketplaces is pretty high for the existing marketplaces.
Speaker 1: And that's because let's say you want to go buy
Speaker 1: an n f T on opency. What do you have
Speaker 1: to do? Okay, Well, first you have to create a
Speaker 1: meta mask wallet, which is something which you have to
Speaker 1: install a browser extension and create a secret key password. Okay,
Speaker 1: that you have to open an account maybe an f
Speaker 1: b X or coin base and or something like this,
Speaker 1: and buy some ethereum there. Oh, then you have to
Speaker 1: transfer it out to your meta mass wallet, and you
Speaker 1: have to connect to your meta mask wallet to open.
Speaker 1: See we're already six steps in and for the average person,
Speaker 1: you're introducing twenty new concepts and it's very difficult. And
Speaker 1: as long as the n f T world remains very
Speaker 1: very much a defied product, I think there's going to
Speaker 1: be a very high barrier to entry for people, and
Speaker 1: that's why there's so few people interacting with it. That
Speaker 1: plus the idea of spending six million dollars on an image.
Speaker 1: It's a little bit hard to swallow, I think for
Speaker 1: the average person getting into this business. But it's why
Speaker 1: we're pretty excited about n f t s in general,
Speaker 1: because you know, we we do most of the exchange
Speaker 1: that transactions off chain. It's all bundled with the exchange itself,
Speaker 1: and we hope that this is the extent that this
Speaker 1: is going to be a viable market, let's say, for
Speaker 1: things like blockchain gaming or direct to consumer artwork, that
Speaker 1: it can exist in a way that's just as easy
Speaker 1: as you know, buying bitcoin on fd X. Well, I
Speaker 1: gotta ask you guys about meme coins. You know, I'm
Speaker 1: fascinated when you know, you see something like Sheba, you know,
Speaker 1: do what it did? Or or dose coin, do what
Speaker 1: it it did? You know, all of a sudden, you're
Speaker 1: you're looking at a top ten cryptocurrency worth tens of
Speaker 1: billions of dollars. Sam, I can only imagine your Twitter
Speaker 1: mentions are filled with pictures of Sheba. You knows on
Speaker 1: a deli basis, you know, But walk us through how
Speaker 1: you guys, sort of what your methodology is when you
Speaker 1: decide whether or not you know, to allow one of
Speaker 1: these coins on your exchange? You know, is there is
Speaker 1: there sort of a hard and fast rules? Is it
Speaker 1: a case by case type of thing? How how do
Speaker 1: you decide? All right, let's let's let the let's let
Speaker 1: the meme point on. Yeah, I s I'll say that
Speaker 1: there's a lot of factors that go into this, right.
Speaker 1: One of these is regulatory understanding, the regulatory framework and
Speaker 1: jurisdiction of it. And this is different in different countries
Speaker 1: as well, you know, understanding, you know, is this the security?
Speaker 1: Is there one one piece of this? I think another
Speaker 1: thing is looking at what is the demand for this? Right?
Speaker 1: Is this what our users want? And in the end,
Speaker 1: you know, we don't try to make investment decisions for
Speaker 1: our users. Like we see our users as the ones
Speaker 1: who are taking charge of their financial future here and
Speaker 1: we want to enable that. Um And I think one
Speaker 1: of these is like is there broad risk or something
Speaker 1: like that from this? You know, I think I think
Speaker 1: those tend to be it's kind of the biggest factors
Speaker 1: UM that that at least I think I usually look
Speaker 1: at on that front. And I'm guessing your users are
Speaker 1: skewed have more heavily towards the professional all the institutions,
Speaker 1: uh n less towards the retails, that's not a safe bet. Yeah,
Speaker 1: certainly relative to the average exchange and I think, you know,
Speaker 1: we have like three times point basis daily trading volume
Speaker 1: and I think they have something like ten times are
Speaker 1: user base. So speaking of your exchange and Sam, I'm
Speaker 1: hoping you could maybe enlighten us a little bit more
Speaker 1: on this. But there have been some reports that your
Speaker 1: latest funding round values you guys that around thirty two
Speaker 1: billion dollars, which is a really big number. So I
Speaker 1: wanted to ask you about that and whether or not
Speaker 1: you could confirm those reports for us and feel free
Speaker 1: to break news on the podcast. We would love that, um.
Speaker 1: But I also wanted to ask you why so soon
Speaker 1: you're raising money again following your previous round, which happened
Speaker 1: just back in October, So you know, you don't don't
Speaker 1: want to give certain details of it. I apologize for that,
Speaker 1: but you know, I think we'll say is that we've
Speaker 1: had a ton of demand to invest in f ts.
Speaker 1: We sort of continue to at that demand, and we
Speaker 1: want to find a way to meet that demand. And
Speaker 1: so I think a lot of this is just driven
Speaker 1: by you know, people are asking to invest, and we
Speaker 1: want to find a way to stillitate that. That's a
Speaker 1: big piece of this, you know, I think outside of that, like,
Speaker 1: I think the biggest things we're thinking about are, you know,
Speaker 1: there's a lot of really powerful use for MUSS for
Speaker 1: capital um that that we see in the ecosystems that
Speaker 1: we want to continue to be able to to fill here.
Speaker 1: You know, I think that that that is sort of
Speaker 1: everything from you know, acquisitions, you know, m may backstop funds,
Speaker 1: So I think those are sort of you know, those
Speaker 1: together are are most of what we're looking at. Guess
Speaker 1: from that perspective. Yeah, I think in general, like if
Speaker 1: you look at f t X and its growth and
Speaker 1: how long or rather not long it's been around as
Speaker 1: a company, the whole timeline is crunched into what we
Speaker 1: see as a good pace, But for the rest of
Speaker 1: the capital markets feels like warp speed, and I think
Speaker 1: that's just you know, well, why wait, there's fleally demand.
Speaker 1: There's clearly ways for us to deploy that capital quickly
Speaker 1: and use that to grow and continue to leverage what
Speaker 1: we see as our technological platform for all the adjacent
Speaker 1: areas that we can hook up into and you know,
Speaker 1: why not continue to to raise or to think about
Speaker 1: raising you know where we can Yeah, makes sense. I
Speaker 1: gott admit I've been going to ease you on. You guys, well,
Speaker 1: Donna will tell you. I usually ask like eleven park questions. Uh,
Speaker 1: he does. I'm gonna get a two part question in
Speaker 1: at least, um, what is you know what's next for
Speaker 1: f t X? You know what? What are sort of
Speaker 1: the ambitions? Is it capturing more market share? Are there
Speaker 1: sort of other you know, lanes of the of the
Speaker 1: crypto industry you can get into? And the second part
Speaker 1: is when you buy a Super Bowl ad, do you
Speaker 1: at least get a free ticket to the game? I'll
Speaker 1: say on the second one, I I don't think we
Speaker 1: got a free ticket to the game with that, although, um,
Speaker 1: I do think we may be able to stround some
Speaker 1: tickets up one way or another. Here. You know a
Speaker 1: few football players in our network, not really sure if
Speaker 1: we can name them, but there's a couple of people
Speaker 1: that were adjacent to their You need Brady to have
Speaker 1: a good playoffs, I guess to get the good seats.
Speaker 1: I can dream, but talk about those ambitions. You know
Speaker 1: what's what? How do you grow the company from here.
Speaker 1: I mean, uh and obviously such a as Valdanna said,
Speaker 1: a tour pace of growth. I mean, you know, one
Speaker 1: can only assume you've got to sort of take a
Speaker 1: take a deep breath and expect the growth to slow.
Speaker 1: But what are the ambitions going forward? And we have
Speaker 1: so many different ones, but you know, I can start
Speaker 1: with a couple, and you know, say, I'm could take
Speaker 1: a couple. But our most exciting area for growth right
Speaker 1: now has to do with derivatives. As you guys know,
Speaker 1: most of the world's crypto volume trades and derivatives. And
Speaker 1: the reason that FBX International became one of the largest,
Speaker 1: if not the largest crypto platforms in the world, has
Speaker 1: been through that it's superior technology and risk engine as
Speaker 1: a derivatives platform. And up to now, we haven't been
Speaker 1: able to bring those products the US customers because we
Speaker 1: didn't have the licenses. But now that we have finished
Speaker 1: acquiring ledger x and we branded them to f to
Speaker 1: X Strivatives, we now have the exchange and clearing house
Speaker 1: licenses to be able to offer these products. And our
Speaker 1: number one priority right now is working with the CFTC
Speaker 1: on approval to be able to bring margin derivatives, futures
Speaker 1: and options on crypto to start, although that's not the
Speaker 1: only place that that you know, we can go in
Speaker 1: terms of offering derivatives to US customers directly in a
Speaker 1: disintermediated model. So that's by far our biggest opportunity for
Speaker 1: growth I think in the company. Yeah, I completely agree
Speaker 1: with that, and I think that's that's that's the single
Speaker 1: biggest thing that we're looking at here. You know, what
Speaker 1: else are we looking at? Um? I think you know,
Speaker 1: we're looking at growing out our consumer platform. I think
Speaker 1: you know, we see extremely high upside on that front,
Speaker 1: and well, we haven't necessarily you know, I don't think
Speaker 1: that that is anything close to ACE or finished product UM,
Speaker 1: but I think it's an extremely exciting one and and
Speaker 1: I think we have a lot to grow on that
Speaker 1: front too. So I think that that's probably the second
Speaker 1: thing that we're thinking the most about right now. But
Speaker 1: you both skipped the most important question, which is when
Speaker 1: you guys are going to go public Crickets Crickets filled
Speaker 1: out at Crickets. It's something we're we're thinking about. We
Speaker 1: don't know whether or not we will, and it's still run.
Speaker 1: We we might we want to be ready to do
Speaker 1: it because we think that there is certainly upside and
Speaker 1: doing still. We all also it's obviously it's a big production.
Speaker 1: We're fortunate between a position where we don't have to
Speaker 1: you know, where we're we're profitable as it is, and
Speaker 1: we're able to raising UM private markets as well. So,
Speaker 1: you know, I think the honest answer there is, you know,
Speaker 1: we're thinking about it and will we'll see. But I
Speaker 1: don't know that answer, so I think I can't give
Speaker 1: you an answer to it. We're here. We're here for
Speaker 1: you when you're ready to answer that one. Sam, Well,
Speaker 1: we're willing to take well to have you back to
Speaker 1: break that news. UM. But I want to talk about obviously,
Speaker 1: the big buzzword this year was decentralized finance defy the
Speaker 1: centralized autonomous organizations. How does an exchange like f t
Speaker 1: X fit into that universe? Is it more of a
Speaker 1: risk or more of an opportunity? A little of both?
Speaker 1: You know, how how do you how do you guys
Speaker 1: fit into that whole world? I mean, I think it's
Speaker 1: an opportunity. I think that like we're excited to facilitate UM.
Speaker 1: You know, the cryptocurrency ecosystem in general, and I think
Speaker 1: that you know, what I see in a meeting cases
Speaker 1: is sort of a world where you know, you have
Speaker 1: a bunch of of centralized platforms with certain decentralized networks
Speaker 1: connecting them, and so it's not sort of necessarily in
Speaker 1: either or from that perspective, you know, we're pretty excited
Speaker 1: to continue working with a lot of the platforms in
Speaker 1: the space. On that, I think that there's always gonna
Speaker 1: be things that make more sense on one side or
Speaker 1: on the other. If you look at the growth of
Speaker 1: Salona as a network, f t X has played a
Speaker 1: huge role there um not least the fact that f
Speaker 1: TEX has been the main on ramp into this alan
Speaker 1: a DeFi ecosystem. If you want to participate in a
Speaker 1: application that is using the Salona protocol, well probably your
Speaker 1: first step is to open an account with fd xtraft
Speaker 1: xt rest and buy some soul and use that to
Speaker 1: transfer it to let's say an external wallet where you're
Speaker 1: going to use it to participate in some application or
Speaker 1: protocol or a staking pool or whatever it is if
Speaker 1: you want to do. And so we've we've always grown
Speaker 1: alongside them, and as Sam said, I think that the
Speaker 1: centralized exchanges are going to be the licensed gate keepers.
Speaker 1: You know, at some point regulation is going to come
Speaker 1: to defy as well, and it's going to be well,
Speaker 1: this thing can exist. We need to make sure that
Speaker 1: the right people are interacting with those platforms. Well, which
Speaker 1: platforms are currently set up to be able to k
Speaker 1: y C millions of users, to make sure that they
Speaker 1: are the right people to interact with them, well, de
Speaker 1: centralized exchanges like fd X, and we're also the Fiat
Speaker 1: on ramps and off ramps. If at the end of
Speaker 1: the day, you've made some profit on some protocol and
Speaker 1: you want to take that and actually converted to Fiat
Speaker 1: car and see, well the only real way to do
Speaker 1: that is through the centralized exchanges. So again, we're going
Speaker 1: to be these license gatekeepers that drop alongside the protocols.
Speaker 1: And but maybe you can answer this question as well.
Speaker 1: But I've been doing some reporting on DOWS and somebody
Speaker 1: I spoke with said to me, you know, not everything
Speaker 1: needs to be token ized, which I thought was a
Speaker 1: really good point. Where we're seeing that just more and
Speaker 1: more and more. So I'm wondering what you you might
Speaker 1: make up a statement like that. Yeah, I agree, I
Speaker 1: think that the use of blockchain in general, not just tokenization,
Speaker 1: needs to be the correct fit for the purpose. You know, what,
Speaker 1: what is blockchain really? It's sort of a slow, kind
Speaker 1: of bad database, but with some really really great features
Speaker 1: to it. And if you're only using it as a database,
Speaker 1: or you're only using a token as to get around
Speaker 1: the fact that it's something less exciting than it is,
Speaker 1: then it's not really that interesting. I think that even
Speaker 1: the word dow, I think some a lot of people
Speaker 1: are using the doubt term just to meet a group
Speaker 1: of people as opposed to a truly decentralized entity with
Speaker 1: a real like a governance token and some kind of
Speaker 1: blockchain based voting system. So it's a lot of buzzers
Speaker 1: are being thrown around a lot. But I think the
Speaker 1: concept of tokenization is really powerful. I think the idea
Speaker 1: in the future of tokenizing stocks in the US, for example,
Speaker 1: the way that Sam has been able to do on
Speaker 1: FTX International is really powerful and interesting. And there's a
Speaker 1: lot of great benefits of tokenization, like full of transparency
Speaker 1: on the blockchain, instant settlements twenty four seven availability, and
Speaker 1: these are the kinds of things that we should take
Speaker 1: away from tokenization. Alright, guys, I can't let you go
Speaker 1: without getting into some good old fashioned fud appear uncertainty
Speaker 1: and doubt one of my favorite pieces of FUND I
Speaker 1: gotta say. And as Sam, I know you mentioned you
Speaker 1: you talk a little bit about the sort of the
Speaker 1: potential of quantum computing, uh as computing just gets more
Speaker 1: and more powerful going forward. But one really interesting piece
Speaker 1: of FUND that landed in my inbox was someone making
Speaker 1: the case that dum computing is actually a risk to
Speaker 1: crypto if computers get so powerful that they're able to
Speaker 1: sort of break the cryptography. Is that Is that a
Speaker 1: valid concern to anyone? Or you know, am I just
Speaker 1: reading the wrong emails here? I guess you say briefly, like,
Speaker 1: I think some cryptographical protocols are in theory potentially vulnerable
Speaker 1: to it, although it depends on like in practice is
Speaker 1: very different from in theory. But it could also help
Speaker 1: read new ones that might be even more powerful. So
Speaker 1: I think it's like certainly something to pay attention to,
Speaker 1: although I don't think it's like kill the broader industry
Speaker 1: or anything like that. I mean, not to introduce more
Speaker 1: funds the equation here, but if we were fans of fun.
Speaker 1: Blockchain technology is built off of commonly known and commonly
Speaker 1: use cryptographic algorithms, in particular the ones that power all
Speaker 1: encryption of messages that are sent between different parties. So
Speaker 1: I think this, if you're going to be concerned about
Speaker 1: encryption breaking as there was alt of quantum computing, I
Speaker 1: think before you worry about bitcoin and not really working anymore,
Speaker 1: we need to worry worry about governments not being able
Speaker 1: to send messages to each other in private. And that's
Speaker 1: like a lot, a lot bigger of a concern than oh, no,
Speaker 1: Bitcoin is not working as well anymore. That's a great point.
Speaker 1: So I I do agree that if we're gonna start
Speaker 1: to approach that level of technology and application for quantum computing,
Speaker 1: I think way before that we just need to work
Speaker 1: in general and alternatives the current modern encryption methods. Yeah,
Speaker 1: that's that is some high quality foot there. I gotta say,
Speaker 1: goll donor I have I have a sort of related
Speaker 1: question and it's actually a market related question, and I
Speaker 1: didn't want to let you guys go without us bringing
Speaker 1: it up. And I'm actually shocked it hasn't come up yet.
Speaker 1: Which was last weekend. Scrypto crash, which every single person
Speaker 1: I talked to this week, equity, equity market strategists, everybody
Speaker 1: just kept bringing up crypto and the crash that we saw.
Speaker 1: So Sam, I'm hoping you can tell me. You know,
Speaker 1: something that comes up a lot is it's leverage that
Speaker 1: was sort of exacerbating what was happening last weekend. So
Speaker 1: how levered really is this market? And then I was
Speaker 1: hearing rumors that it was one whale out there who
Speaker 1: was doing a lot of the selling last weekend. So
Speaker 1: can you who who's the whale? And can you confirm
Speaker 1: that that's true? Yeah, So, I mean I don't I
Speaker 1: don't know who he's doing it. Um, I can say
Speaker 1: that I either's like not as much leverage as there
Speaker 1: once was in crypto. I think that, you know, Circuit
Speaker 1: twenty twenty, I think it was fairly leverage over the
Speaker 1: last year. Um, we've seen a lot more capital under
Speaker 1: this space, which is Sarah philled out a liquidity base,
Speaker 1: and you know, I f the extents of relatively low
Speaker 1: leverage as far as these things go. But you know,
Speaker 1: I think our average leverage is like to x or
Speaker 1: something like that, So not zero but not extremely high either. Yeah,
Speaker 1: I gotta say if I if I know how to
Speaker 1: write an algorithm, I'd write one that buys bitcoin like
Speaker 1: every Saturday morning around eight eight am and sells it
Speaker 1: on Friday afternoons. Thrown it out there to anyone out
Speaker 1: there who who's listening. You know you could, you could
Speaker 1: back test that pretty quickly. Actually, I don't know. I
Speaker 1: also want a meme coin named after Golden doodles. You know,
Speaker 1: I don't have a Sheba. You know I want a
Speaker 1: Golden Doodle coin. I think that one would do well.
Speaker 1: But we're missing cat points. Do Yeah, I have a
Speaker 1: Persian kittie. I'd love a coin for her. You need.
Speaker 1: There's no cat coins. I don't know what they say.
Speaker 1: Be the change you want to see in the world.
Speaker 1: Tiden up your straight jackets. It's time for the craziest
Speaker 1: things we saw in markets this week? Well, Donny, you
Speaker 1: kick us off. What's the craziest thing you saw this
Speaker 1: week in markets? Well, I've I've touched on like weird
Speaker 1: food products that companies are sort of trying to put
Speaker 1: out there to attract attention or something. In the past.
Speaker 1: I think you and I once talked about the Cheetos
Speaker 1: flavored Mountain Dew I think it was, which I have
Speaker 1: yet to try. But this week I saw that there's
Speaker 1: now an Oreo flavored or Oreo adjacent wine brand that's
Speaker 1: coming out. So there's a bottle of red wine and
Speaker 1: there's actual pictures of Oreos on it, and I guess
Speaker 1: it doesn't have any Oreo cookies crushed inside it, but
Speaker 1: it's supposed to have like a chocolate flavor, and it just, honestly,
Speaker 1: I don't know what to make of it. This is
Speaker 1: what happens when you legalize weed. I think this is
Speaker 1: the products that you get as a result. That's my
Speaker 1: take on things. I don't know how that has to
Speaker 1: do with markets PULD, but but I'll allow it. It's
Speaker 1: because it's these companies trying to so is it like
Speaker 1: for Mountain Dew, it's PepsiCo. Okay, okay, fair enough. Yeah,
Speaker 1: they're trying to monetize on these like weird flavors. I think.
Speaker 1: I don't know it's it's weird to me. It's weird
Speaker 1: to me, so it counts. I'll give you our loyal listener,
Speaker 1: Twiggy Sunday it in with a pretty good one too.
Speaker 1: This is not at all markets related but it's so
Speaker 1: crazy that it's worth bringing up. In Saudi Arabia, they
Speaker 1: every year hold a beauty contest for camels. Let me
Speaker 1: repeat that, Donna, a beauty contest for camels and there's
Speaker 1: a big scandal and it's this is high stakes. There's
Speaker 1: like sixty six million dollars in prizes. Big scandal this year. Uh,
Speaker 1: forty camels were disqualified because they had been injected with
Speaker 1: botox and had other uh cosmetic procedures performed on then.
Speaker 1: So you you must be making this. That's courtesy of
Speaker 1: CBS News via Twiggy Sunday True Story. Oh my gosh,
Speaker 1: who wins the sixty six million dollars? The camels? Miss Camel?
Speaker 1: I guess you know Miss Camel Universe, the you know,
Speaker 1: the most beautiful camel. Uh? So I again not I
Speaker 1: don't know if you can figure out the markets angle,
Speaker 1: but it's money, allow it. I'll allow it. Uh. That's
Speaker 1: really good because it's it's heavy on crazy, light on markets.
Speaker 1: How about you, guys, you got anything for us for
Speaker 1: the craziest things you've seen over at f t X
Speaker 1: this week. Well, I don't think I'm gonna be able
Speaker 1: to beat either of those two things, and I also
Speaker 1: need to call Peter right after the podcast. Um what
Speaker 1: what's crazy? I saw this week was Sushi swap. Um.
Speaker 1: I don't know if you guys been following the drama
Speaker 1: on Twitter, but you know there's there's all this drama
Speaker 1: around the chief technology officer, one of the main developers
Speaker 1: of Sushi that made a very big public display of
Speaker 1: his unhappiness with working for Sushi and then decided to leave.
Speaker 1: And you know, the token is probably suffering as a result.
Speaker 1: And I think it goes to show how much, you know,
Speaker 1: companies and projects really depend on the software developers. And
Speaker 1: think about fts. We have only, you know, a small
Speaker 1: handful of software developers, you know, something like twelve compared
Speaker 1: to maybe the thousands that might exist at other companies,
Speaker 1: you know, and we are awesome because we can go
Speaker 1: super nimble and quick with a very numerous developers at
Speaker 1: the same time. To think about a company, so it
Speaker 1: depended on one such that they can get out there.
Speaker 1: I'm really tanking the whole project. It's pretty terrifying in
Speaker 1: a lot of ways. Yeah, all right, I want to
Speaker 1: give you mine now. I don't know if you have one, Sam,
Speaker 1: but I'll let you think about it, I'll give you mine.
Speaker 1: Mine actually came from the hearing you were at our
Speaker 1: requiter here Bloombergy Crystal Kim wrote a story about a
Speaker 1: few crazy things about there. I'm not not gonna get
Speaker 1: into the big baseball analogy, which I uh I thought
Speaker 1: was a good one. But Democratic Rep. Brad Sherman of
Speaker 1: California became an inspiration for cryptocurrency token creators after he
Speaker 1: disparaged the coin eat coin world of digital assets. And
Speaker 1: I think he was he was telling a story. I
Speaker 1: think it was this children's book. There was an old
Speaker 1: woman who swallowed a fly. I don't know why she
Speaker 1: swallowed a fly, and then you know she swallowed it.
Speaker 1: I think it was a frog to eat the fly,
Speaker 1: and then a bigger animal to to eat eat the frog.
Speaker 1: And his point was he went on to say that
Speaker 1: bitcoin could be unseated by ether, which could be replaced
Speaker 1: by doze totally be replaced by hamster coin, and then
Speaker 1: cobra coin, and then would mongoose coin commedya cobra coin.
Speaker 1: Um So, needless to say, the people watching the show
Speaker 1: instantly went out and created, uh, mongoose coin and goose coin.
Speaker 1: There's a mong coin, all sorts of cryptocurrencies, uh inspired
Speaker 1: by this uh the series yesterday. So Brett, I don't
Speaker 1: know if you're gonna you guys will be trade mongoose
Speaker 1: coin soon. But who knows? That was it was quite
Speaker 1: a line of questioning. I respect the skepticism though, I think,
Speaker 1: you know it, thinking about what is the utility of
Speaker 1: some of the crypto assets is a reasonable thing to do,
Speaker 1: and so I think it's it's an important for us
Speaker 1: to answer and think about as an industry. But but yeah,
Speaker 1: it wasn't without its colorful moments that have found its
Speaker 1: way unto the crypto Twitter of course. Yeah, absolutely where
Speaker 1: they where they truly belong. Well, I think all those
Speaker 1: convoluted questions help you guys prepare for my my ridiculous questions.
Speaker 1: So it's good good training for that. And with that, Sam,
Speaker 1: I don't know, Brett, Brett had a pretty good crazy thing.
Speaker 1: I don't know if he can stop him, Yeah, you know,
Speaker 1: I mean, but honestly, it's the craziest thing I think
Speaker 1: for me was just how not crazy the hearing was.
Speaker 1: I think it was just massively above my expectations in
Speaker 1: terms of being you know, in terms of being I
Speaker 1: think like constructive and I think sometimes something in this
Speaker 1: environment not crazy is the new crazy. Yeah, I agree.
Speaker 1: I was saying before you got on, you know you guys, Uh,
Speaker 1: those hearings can get pretty ugly fast, and I think
Speaker 1: the the sort of mutual respect and dialogue was pretty interesting. Um,
Speaker 1: it's kind of what you want out of out of
Speaker 1: that type of hearing, um, rather than people just trying
Speaker 1: to get a good SoundBite or you know, viral video clip,
Speaker 1: which is sometimes would it seems like going on so
Speaker 1: truly crazy that the hearing didn't go off the rails?
Speaker 1: I agree with that guy's I think that might be
Speaker 1: all the time we have all. Donna, what do you
Speaker 1: think should we let these guys off the hook? Yeah?
Speaker 1: I think we should let them go. But they gave
Speaker 1: us so much of their their time, So thank you
Speaker 1: both so much. Thank you guys. Yeah, thank you. What
Speaker 1: goes up, We'll be back next week. Until then, you
Speaker 1: can find us on the Bloomberg Terminal website and app
Speaker 1: or wherever you get your podcasts. We'd love it if
Speaker 1: you took the time to rate and review the show
Speaker 1: on Apple Podcasts so more listeners can find us, and
Speaker 1: you can find us on Twitter, follow me at Reaganonymous.
Speaker 1: The Dota Hirich is that theill Dotta Hirich. You can
Speaker 1: also follow Bloomberg Podcasts at podcast and Thank you to
Speaker 1: Charlie Pelletta. Bloomberg Radio What Goes Up is produced by
Speaker 1: Laura Carlson. The head of Bloomberg Podcast is Francesco Levy.
Speaker 1: Thanks for listening, See you next time.