WEBVTT - Won't Anyone Think of the UK Crypto Investor? 0:00:02.480 --> 0:00:06.160 I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News. 0:00:06.640 --> 0:00:10.119 And this is Bloomberg Crypto, a daily Bloomberg I Heart podcast. 0:00:10.400 --> 0:00:19.680 It's Wednesday June. Richie Sunak is one of the most 0:00:19.680 --> 0:00:23.000 senior people in the UK government. This year he announced 0:00:23.040 --> 0:00:25.320 that he wanted to establish the country as a global 0:00:25.400 --> 0:00:28.200 hub for crypto. But he's got some catching up to do. 0:00:28.760 --> 0:00:31.640 The competition between different countries who are trying to attract 0:00:31.680 --> 0:00:36.000 crypto talent is only getting more intense. But this environment 0:00:36.520 --> 0:00:39.000 in which politicians seem to be willing to make major 0:00:39.080 --> 0:00:43.040 concessions to the crypto industry gives rise to an important question. 0:00:43.600 --> 0:00:51.400 Who's standing up for consumer protections? Nikkil Ratti, who who 0:00:51.479 --> 0:00:54.800 runs the SCA, He doesn't have very much time for 0:00:54.840 --> 0:00:58.400 crypto and he says repeatedly that anyone who invests in 0:00:58.480 --> 0:01:02.720 crypto must exp to lose all their money. That's Bloomberg 0:01:02.760 --> 0:01:05.880 reporter Will Shore. He joins me now to share more 0:01:05.959 --> 0:01:12.039 about the regulatory landscape for consumer protection in the UK. Well, 0:01:12.120 --> 0:01:15.280 thank you so much for joining us. Thank you. You 0:01:15.360 --> 0:01:19.319 have been reporting on the UK and UK financial services 0:01:19.400 --> 0:01:22.640 for a fair amount of time and more recently you 0:01:22.760 --> 0:01:27.479 have joined the shall we see slightly more chaotic crypto beats? Yeah, 0:01:27.520 --> 0:01:30.160 but that's right. Yeah, it's um. I've gone from covering 0:01:30.200 --> 0:01:33.840 Libel transition, which is all very dry regulation, to suddenly 0:01:34.200 --> 0:01:42.360 as a wild West world of crypto assets. Certainly a 0:01:42.400 --> 0:01:45.240 popular phrase around here, wild West. So one of the 0:01:45.680 --> 0:01:50.560 areas of concern in that more chaotic environment is the 0:01:50.600 --> 0:01:54.000 idea of consumer protections and I'd love for you to 0:01:54.280 --> 0:01:56.240 share with our listeners a little bit more of your 0:01:56.240 --> 0:01:59.920 reporting on what that looks like or perhaps doesn't look like. 0:02:00.080 --> 0:02:03.200 In the UK. Yeah. I think the way to understand 0:02:03.240 --> 0:02:05.920 this first of all is that a lot of this 0:02:06.040 --> 0:02:09.680 is coming from the UK Financial Conducts Authority, which is 0:02:09.760 --> 0:02:14.560 the main city regulator. You mean the City of London exactly, 0:02:14.639 --> 0:02:17.600 the City of London. Yeah, and so sort of understand 0:02:17.840 --> 0:02:19.960 understand the f c A, but you have to understand 0:02:20.440 --> 0:02:23.600 nikkil Ratti, who who runs the f c A. He 0:02:23.919 --> 0:02:26.960 he doesn't have very much time for crypto He grew 0:02:27.040 --> 0:02:29.720 up in a former ship building town in the northwest 0:02:29.720 --> 0:02:33.360 of England, um called Barrow in Finesse, where his his 0:02:33.440 --> 0:02:36.280 dad was a local doctor and a magistrate. He grew 0:02:36.360 --> 0:02:39.280 up watching trials at the local magistrate's court and was 0:02:39.320 --> 0:02:42.600 influenced by his dad's work with people that come from 0:02:42.639 --> 0:02:46.720 poorer backgrounds, and he's not very receptive to anything that 0:02:46.800 --> 0:02:50.280 might be deemed a scam directed at the vulnerable or 0:02:50.400 --> 0:02:54.520 get rich scheme. We've seen an explosion among younger people 0:02:54.960 --> 0:02:59.519 speculating on cryptocurrencies or other high risk investments. There was 0:02:59.560 --> 0:03:03.160 evidence too that, as with the game Stock episode, more 0:03:03.240 --> 0:03:08.480 people see investment as entertainment, behaving less rationally and more emotionally, 0:03:08.840 --> 0:03:13.840 egged on by anonymous and unaccountable social media influences. That's 0:03:13.880 --> 0:03:17.480 why we are creating an eleven million pound digital marketing 0:03:17.480 --> 0:03:20.040 campaign to warn them of the risks. As we have 0:03:20.120 --> 0:03:23.680 repeatedly made clear, investors in crypto assets should be prepared 0:03:23.720 --> 0:03:26.440 to lose all their money. And that's a pretty big 0:03:26.440 --> 0:03:29.160 contrast to other folks in you know, sort of high 0:03:29.160 --> 0:03:32.400 positions of UK authority in government and regulation, you know, 0:03:32.440 --> 0:03:36.000 some of whom have been extremely enthusiastic about the possibilities 0:03:36.000 --> 0:03:38.280 for crypto and saying things like they want the UK 0:03:38.400 --> 0:03:40.800 to become a global hub for this asset class. That 0:03:40.880 --> 0:03:44.440 kind of messaging is coming primarily from the Treasury. This 0:03:44.520 --> 0:03:47.640 idea as Britain as a global hub for crypto tech. 0:03:48.080 --> 0:03:52.120 It's something quite new. It's messaging that's quite new. I 0:03:52.160 --> 0:03:56.800 don't think they're necessarily like really detailed thought through ideas 0:03:56.880 --> 0:04:01.520 behind that position yet, And that's why I partly why 0:04:01.560 --> 0:04:04.360 it's the f c A which is still setting the tone. 0:04:04.800 --> 0:04:07.400 But Britain obviously has like recently come out of the 0:04:07.400 --> 0:04:11.880 European Union and it's got this opportunity to remake its regulations, 0:04:12.000 --> 0:04:14.960 like away from the framework from Brussels, and I think 0:04:14.960 --> 0:04:17.640 among optimists there's a bit of a hope that this 0:04:17.760 --> 0:04:21.720 might mean the kind of regulatory reforms that might help 0:04:21.760 --> 0:04:25.920 blockchain projects to to take route a bit in Britain. 0:04:26.120 --> 0:04:31.440 I think it's still quite early stages. What are some 0:04:31.520 --> 0:04:34.680 of the examples of the kinds of consumer protections that 0:04:34.760 --> 0:04:37.600 the SEA has either put into police or is considering. 0:04:38.120 --> 0:04:40.360 Over the past two years, the f c A has 0:04:40.440 --> 0:04:45.000 effectively banned Binance, the world's biggest crypto exchange by trading 0:04:45.080 --> 0:04:48.680 volume from the UK. It's denied permission for so called 0:04:48.720 --> 0:04:52.080 crypto a t m s, and it's made its standards 0:04:52.080 --> 0:04:56.120 for doing business so stringent that most digital currency companies 0:04:56.200 --> 0:04:58.640 that want to operate here are not able to do. 0:04:58.760 --> 0:05:02.360 So it's all been to quite interestingly through anti money 0:05:02.440 --> 0:05:07.039 laundering rules which which weren't crafted obviously with the crypto 0:05:07.160 --> 0:05:10.760 industry and mind. So everything is being seen through that 0:05:10.839 --> 0:05:14.480 prism in the absence of more established set of rules 0:05:14.800 --> 0:05:18.240 that have been set up to deal specifically with crypto. 0:05:18.680 --> 0:05:21.800 In the absence of those rules, as you say, you're 0:05:21.839 --> 0:05:25.000 getting this kind of harder line, as it were, from 0:05:25.080 --> 0:05:27.640 the FDA. Do you think there's a world in which 0:05:27.760 --> 0:05:30.800 if the Treasury does start to firm up a set 0:05:30.800 --> 0:05:34.719 of recommendations or even you know, policy or legislation, there 0:05:34.760 --> 0:05:36.960 may be like a meeting in the middle of these 0:05:36.960 --> 0:05:41.039 two approaches. I think that's probably right. The chief executive 0:05:41.040 --> 0:05:45.880 officer for Golden SAX International was speaking at a conference 0:05:45.880 --> 0:05:50.120 in London in April. He said that UK regulators could 0:05:50.200 --> 0:05:54.000 end up becoming world leaders in crafting rules for crypto, 0:05:54.160 --> 0:06:00.039 provided that Britain moves fast. And there is certainly in 0:06:00.040 --> 0:06:04.200 interest among big banks in what blockchain technology might mean 0:06:04.760 --> 0:06:07.560 for the bond trade, for example, and whether it can 0:06:07.600 --> 0:06:12.560 be incorporated into the settlements in the bond trade. And 0:06:12.600 --> 0:06:15.480 I think probably that's what the Treasury is is getting 0:06:15.480 --> 0:06:18.560 at when it talks about Britain being a global hub 0:06:18.600 --> 0:06:23.279 for crypto technology rather than rather than crypto assets. At 0:06:23.320 --> 0:06:26.680 the moment, that's all in its very early stages. You 0:06:26.720 --> 0:06:28.919 know what we've really got here. The narrative at the 0:06:28.960 --> 0:06:34.600 moment really is about protecting ordinary consumers from risky products 0:06:34.600 --> 0:06:37.920 that can swing very dramatically in price. To your point 0:06:37.960 --> 0:06:41.719 about that very nuanced distinction between the idea of a 0:06:41.720 --> 0:06:45.080 crypto asset, which might be something like a coin or 0:06:45.120 --> 0:06:49.040 a token or an n f T, and crypto technology, 0:06:49.080 --> 0:06:51.480 which is largely in kind of the context of the 0:06:51.520 --> 0:06:56.000 blockchain that you described, could have potentially interesting financial services regulations. 0:06:56.480 --> 0:07:00.040 Most consumers are most likely to encounter like bitcoin in 0:07:00.080 --> 0:07:04.479 the wild rather than an internal blockchain project at a 0:07:04.520 --> 0:07:07.680 major investment bank. Yeah, that's exactly right, isn't it. I mean, 0:07:08.200 --> 0:07:11.640 the Treasury is talking effectively about a crypto industry that 0:07:11.720 --> 0:07:14.800 doesn't really exist yet. It's talking about a kind of 0:07:15.040 --> 0:07:20.000 utopian situation where Britain is a world leader on a 0:07:20.040 --> 0:07:22.600 technology that hasn't really taken route yet in the way 0:07:22.600 --> 0:07:26.080 that the Treasury envitages um. Whereas like what the f 0:07:26.200 --> 0:07:29.400 c A is dealing with is the crypto industry as 0:07:29.440 --> 0:07:39.560 it stands, Thank you will, We'll be right back. I 0:07:39.560 --> 0:07:43.520 think that's such an important distinction, and one that seems 0:07:43.600 --> 0:07:47.280 to be very similar to the discussions that are happening 0:07:47.560 --> 0:07:49.720 here in the US with the SEC and the CFTC, 0:07:49.880 --> 0:07:53.000 the two biggest regulators that are attempting to kind of 0:07:53.040 --> 0:07:55.880 divvy up the world of crypto regulation between them. And 0:07:55.920 --> 0:07:58.040 then of course there are developments happening in the EU 0:07:58.160 --> 0:08:00.200 as well. Can you talk a little bit more about 0:08:00.880 --> 0:08:03.360 what those look like compared with what you're seeing in 0:08:03.360 --> 0:08:05.640 the UK. One of the things that people say about 0:08:05.640 --> 0:08:08.160 the US versus the UK when it comes to regulating 0:08:08.200 --> 0:08:12.840 crypto is that at least in Britain, we know who 0:08:12.920 --> 0:08:18.280 is regulating crypto point, which is the Financial Conducts Authority, 0:08:18.320 --> 0:08:21.160 which effectively sympathizes the issue for people a lot, Whereas 0:08:21.160 --> 0:08:24.240 I think in America there are kind of wide questions 0:08:24.280 --> 0:08:27.680 about exactly which regulator is doing what when it comes 0:08:27.680 --> 0:08:31.160 to digital assets. In terms of the European Union, so obviously, 0:08:31.200 --> 0:08:34.000 like Britain's not in the European Union anymore, each individual 0:08:34.040 --> 0:08:38.079 country is dealing with the crypto industry based on its 0:08:38.080 --> 0:08:41.559 own national laws again, you know, which haven't really been 0:08:41.600 --> 0:08:46.400 devised with with crypto in mind. European regulators want to 0:08:46.600 --> 0:08:51.240 see like a big pan European legislative framework put in 0:08:51.280 --> 0:08:53.840 place in order in order to deal with this and 0:08:53.840 --> 0:08:57.559 to standardize everything. There's no indication that that's going to 0:08:57.640 --> 0:09:02.000 happen anytime soon. So to someding agree, I think crypto 0:09:02.080 --> 0:09:05.439 firms are trying to work out which particular part of 0:09:05.480 --> 0:09:09.360 the European Union might be more receptive to their approaches. 0:09:09.760 --> 0:09:12.360 So if you look at Binance, for example, they got 0:09:12.440 --> 0:09:17.120 regulatory approval from the French government and the Italians and 0:09:17.160 --> 0:09:20.680 the Italians, and as I understand they're they're seeking it 0:09:20.720 --> 0:09:24.560 in Germany as well. Um they've they've been over in Britain. 0:09:24.600 --> 0:09:29.040 They're making similar overtures um in in the UK. So 0:09:29.520 --> 0:09:33.520 they ran pang. So the CEO was in town in 0:09:33.679 --> 0:09:37.640 early March for a dinner with people from the industry, 0:09:38.200 --> 0:09:41.000 people from government, a couple of a couple of politicians. 0:09:41.880 --> 0:09:45.520 By all accounts, um he it was something of a 0:09:45.559 --> 0:09:49.280 diplomatic offensive with them, you know, just trying to like 0:09:49.400 --> 0:09:54.200 warm people up, but build confidence, build confidence in the 0:09:54.280 --> 0:09:57.640 idea of finance. At the moment, I mean, I think 0:09:57.640 --> 0:10:00.880 there's there is a big contrast between approach that France 0:10:00.920 --> 0:10:04.080 has taken and they approached the approach that you that 0:10:04.200 --> 0:10:06.920 the UK has taken when it comes to finance and 0:10:07.080 --> 0:10:10.480 the UK, you know, the UK is just taking seemed 0:10:10.480 --> 0:10:17.160 to be taking a harder line. One of the interesting 0:10:17.200 --> 0:10:19.520 things about what you mentioned in terms of the EU 0:10:19.720 --> 0:10:22.199 as it will do, it's the European Union trying to 0:10:22.240 --> 0:10:25.200 get a big sweepye agreement that wraps in these twenty 0:10:25.240 --> 0:10:29.080 seven member states, is that is from a lot of 0:10:29.080 --> 0:10:32.440 folks in the crypto industry's perspective, like what they need right, 0:10:32.520 --> 0:10:35.720 what they need is consistency. It's much harder, they say, 0:10:35.800 --> 0:10:38.440 for them to on a country by country or even 0:10:38.440 --> 0:10:41.120 in the US, on a state by state basis, be 0:10:41.240 --> 0:10:46.040 dealing with slightly different regulations depending on where they want 0:10:46.080 --> 0:10:49.560 to operate. Do you have a perspective on, you know, 0:10:49.559 --> 0:10:51.640 whether from folks in the industry or folks in the 0:10:51.720 --> 0:10:54.720 UK government or regulators, where where the UK is actually 0:10:54.760 --> 0:10:57.840 like trying to move closer to something that resembles an 0:10:57.840 --> 0:11:01.200 aligned global regulatory framework or that is still very much 0:11:01.559 --> 0:11:04.560 each country to itself. Crypto firms are alive to that 0:11:04.640 --> 0:11:06.840 kind of rhetoric, which is coming out. But at the 0:11:06.920 --> 0:11:09.880 same time, I think they know that one of the 0:11:09.920 --> 0:11:13.080 things that's holding back the crypto industry is is a 0:11:13.160 --> 0:11:18.800 lack of like comprehensive standardized regulation that enables everyone to 0:11:18.880 --> 0:11:21.920 deal with each other on equal terms. And I think 0:11:22.000 --> 0:11:25.080 there is a sense that, you know, by standardizing the rules, 0:11:25.080 --> 0:11:27.720 like not just in the European Union but sort of 0:11:27.760 --> 0:11:30.960 around the world, that that might be what it takes 0:11:31.000 --> 0:11:33.839 to to bring crypto in and to know, add a 0:11:33.880 --> 0:11:37.040 bit more respectability to it, bring it more, and bring 0:11:37.080 --> 0:11:41.080 it more into the mainstream. Thank you, Will, that was 0:11:41.120 --> 0:11:44.079 so interesting. You can find more of Will's reporting on 0:11:44.120 --> 0:11:47.719 the Bloomberg terminal on Bloomberg dot com or following him 0:11:47.720 --> 0:11:53.680 on Twitter. He's at William Shaw five four six. It 0:11:53.800 --> 0:11:56.360 might feel like there's always some kind of election happening 0:11:56.360 --> 0:11:59.880 in the US, and that's because there is, Stephen. Local 0:11:59.880 --> 0:12:03.720 actions can happen every year, while congressional midterms occur every 0:12:03.760 --> 0:12:08.439 other year, allowing US voters to decide who will represent them. 0:12:08.520 --> 0:12:13.079 These elections really matter, and crypto executives are spending significant 0:12:13.080 --> 0:12:16.880 amounts of money to influence them. In two for the 0:12:17.000 --> 0:12:20.599 very first time, political spending by major figures in the 0:12:20.640 --> 0:12:25.280 crypto industry eclipse the dollars being spent on influencing elections 0:12:25.320 --> 0:12:28.320 by more traditional donors like folks who work in big 0:12:28.360 --> 0:12:32.520 tech or pharmaceuticals. On the next episode of Bloomberg Crypto, 0:12:32.640 --> 0:12:35.520 report to Alison ver sprole joins me to share her 0:12:35.520 --> 0:12:39.320 reporting on why crypto is emerging as a significant financial 0:12:39.360 --> 0:12:46.480 force in US politics. I'm Stacy Marie Ishmael, and this 0:12:46.520 --> 0:12:49.640 is Bloomberg Crypto, a daily podcast from Bloomberg and I 0:12:49.760 --> 0:12:52.800 Heart Radio. For more shows from I Heart Radio, visit 0:12:52.840 --> 0:12:55.840 the I Heart Radio app, Apple Podcasts, or wherever you 0:12:55.880 --> 0:12:59.360 get your podcasts. Email your questions, comments, or suggestions for 0:12:59.440 --> 0:13:02.439 the show to Crypto at Bloomberg dot net and you'll 0:13:02.480 --> 0:13:07.120 find us on Twitter at Crypto. The supervising producer of 0:13:07.120 --> 0:13:10.880 this episode is Vicky very Galina. Our producer is Mohammed Farouk, 0:13:11.320 --> 0:13:15.440 Associate producer is Zan Absudiki. Associate producer is Thy Butler. 0:13:15.800 --> 0:13:19.920 Associate producer is Moses on Desta wonder At is our engineer. 0:13:20.200 --> 0:13:22.559 Bloomberg's head of Podcasts is Francesca Levi.