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Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,

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Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for

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Speaker 1: Bloomberg News. It's Thursday, December twenty two. Two was supposed

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Speaker 1: to be the year of crypto regulation. Multiple CEOs, venture capitalists,

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Speaker 1: trade groups for the industry. They had all hired lawyers,

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Speaker 1: on lobbyists and prepared policy papers, blog posts, tweet threads

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Speaker 1: over and over again. One thing was clear. They were

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Speaker 1: all hoping for quote regulatory clarity. In the US, the

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Speaker 1: Biden administration announced an executive order too much fanfare that

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Speaker 1: called for a national policy on digital assets. It required

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Speaker 1: federal agency is to get their digital asset policies in order,

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Speaker 1: but it lacked either teeth or specifics. Individual US lawmakers

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Speaker 1: across the political spectrum proposed their own bills on crypto

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Speaker 1: asset regulation, some of which competed with or even contradicted

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Speaker 1: each other. And against this backdrop, things were going mostly

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Speaker 1: poorly for investors in the industry. Token prices plunged in value.

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Speaker 1: One buzzy crypto company after another filed for bankruptcy, including FTX,

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Speaker 1: which had sought to position itself as exceptional in every way,

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Speaker 1: and it's now a former CEO, Sam Bankman Freed, has

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Speaker 1: been arrested and is facing allegations of fraud and other crimes.

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Speaker 1: So will three be the year the crypto gets regulated?

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Speaker 1: He a source out where we are and to look

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Speaker 1: at head at what we're likely to see our Bloomberg reports.

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Speaker 1: Allison Verse Brull. You know a lot of people that

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Speaker 1: took money from Sam Bateman Freed are getting tough questions

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Speaker 1: from reporters saying, you know, what do you plan to

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Speaker 1: do with that money? Like did you did you veted?

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Speaker 1: And and all of these other, you know, questions that

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Speaker 1: they likely don't want to have to answer in their

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Speaker 1: daily in their daily life. And Bill Allison, he allegedly

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Speaker 1: used other people to donate money. And this was two

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Speaker 1: campaigns and to party committees which have contribution limits. You

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Speaker 1: can only give so much money. It's twenty now, Allison, Bill,

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Speaker 1: welcome to the show. Bill, how are you doing? I'm

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Speaker 1: doing great. I'm Bill Allison. I cover campaign finance for

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Speaker 1: Bloomberg News. Allison, you've been on the show a bunch

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Speaker 1: of times. When keeping you busy? What's happening in your world?

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Speaker 1: So I'm Alison versus Brilla. I cover crypto regulation for

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Speaker 1: Bloomberg News and it definitely has been a busy couple

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Speaker 1: of months. Is also going to be a busy year,

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Speaker 1: you know. Certainly. I think we're now going to expect

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Speaker 1: a lot of talk about cryptopod polley and what should

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Speaker 1: be done next, um. You know. Noteworthy, the Financial Stability

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Speaker 1: Oversight Council, which is led by the Treasury Department, recently

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Speaker 1: put out its h annual report and a big focus

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Speaker 1: of that was cryptocurrencies, and so there were kind of

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Speaker 1: two takeaways from that. First, uh, the Oversight Council said

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Speaker 1: that they wanted different agencies to kind of use their

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Speaker 1: existing authorities and enforced existing laws in the crypto space.

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Speaker 1: And then they also said, look, we have a lot

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Speaker 1: of gaps in this space as well where we need

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Speaker 1: Congress to step in, UM. One of those being providing

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Speaker 1: authority to a federal agency to oversee cryptocurrencies that aren't securities. UM.

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Speaker 1: So you know, I think we're expecting those talks to continue.

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Speaker 1: Will definitely expect more conversations about stable coin regulation, for instance.

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Speaker 1: I think what remains to be seen is is what

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Speaker 1: can actually get done. Well. I'm glad that you mentioned

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Speaker 1: that because there have been so many reports, there have

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Speaker 1: been white papers, there have been executive orders, there have

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Speaker 1: been requests for comment, there have been like how about

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Speaker 1: we have a hearing, and I'm not sure very many

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Speaker 1: things have actually happened. Well, it's you know, it's it's

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Speaker 1: interesting because one of the bills that seem to have

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Speaker 1: a lot of momentum before f t x's collapse was

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Speaker 1: this bill from Senators Uh Stabino and step Senators Bozeman

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Speaker 1: that would have given the Commodity Features Trading Commission more

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Speaker 1: power to oversee cryptocurrencies. Uh Senate Agriculture Committee Chairwoman Debbie

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Speaker 1: Statement Now and the committee's top Republican John Bozeman dropping

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Speaker 1: a brand new bill this morning that would give the

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Speaker 1: Commodities Futures in Trading Commission more regulatory authority to oversee

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Speaker 1: the crypto market and regulate bitcoin and ether as commodities. Now,

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Speaker 1: this bill, and the issue with that bill, of course,

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Speaker 1: was that ft S is former CEO Sam Bateman. Freed

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Speaker 1: was a vocal supporter of that. He was constant only

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Speaker 1: on the hill talking about the need for that legislation.

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Speaker 1: And so, you know, regardless of maybe the merits of

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Speaker 1: the bill. Um, there are a lot of folks who

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Speaker 1: see that as tainted. Why have your members vote on

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Speaker 1: a bill that could put them in a tough political position, Um,

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Speaker 1: given how how close to the effort Sam Bankman Freed was.

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Speaker 1: So you know that that bill of course kind of

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Speaker 1: fell apart for for those reasons, though, I know that

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Speaker 1: those senators are still keen on trying to do something

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Speaker 1: in that space. So maybe it's as simple as saying,

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Speaker 1: we went back to the drawing board. Um, we have

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Speaker 1: looked at the bill, We've tightened provisions to make sure

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Speaker 1: that it's a stronger bill, and we still feel like

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Speaker 1: we need to give the CFTC this authority. So we're

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Speaker 1: moving forward with that, and then on other bills. You know,

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Speaker 1: the stable Coin bill that the House was drafting that

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Speaker 1: was never actually formally introduced. There were a number of

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Speaker 1: challenge challenges. That was a big bill. UM. There were

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Speaker 1: disagreements about the role of state regulators versus federal regulators. UM.

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Speaker 1: I think that those types of disagreements are going to

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Speaker 1: continue into next year. And now we'll have you know,

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Speaker 1: the House and Republican control, so kind of a different conversation.

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Speaker 1: New dynamics too, to you know, navigate. So it'll be

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Speaker 1: an interesting going back to that idea of the politics

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Speaker 1: of all of this. You know, I think going into

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Speaker 1: the beginning of two there was this idea that all

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Speaker 1: of the Dems were anti crypto and all of the

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Speaker 1: Republicans were pro crypto. Has that been true? No, I

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Speaker 1: would say that. You know, throughout the last year, we

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Speaker 1: saw more Democrats kind of coming on board. We saw

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Speaker 1: Senator Corey Booker talking about crypto a lot more. We

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Speaker 1: saw um, Senator Kerson Gillibrand from New York. She was

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Speaker 1: actually a bipartisan co sponsor on a bill with Republican

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Speaker 1: Cynthia Lummis. So there were Democrats that were coming and saying, um,

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Speaker 1: you know, look, we think there are are benefits to cryptocurrency.

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Speaker 1: And then of course all of these failures in the market,

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Speaker 1: the declines and token prices, um. You know, FTX was

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Speaker 1: not the only company to go bankrupt. Those have caused

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Speaker 1: some problems. And you know what I hear now, I

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Speaker 1: was talking to a lobbyists recently who represents a lot

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Speaker 1: of these crypto firms, and basically, you know, that person

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Speaker 1: was saying that there's a lot more skepticism around around lawmakers,

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Speaker 1: probably why you're not seeing a ton of them coming

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Speaker 1: out and being um especially on the Democratic side, like

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Speaker 1: avid crypto supporters at this point. Uh So, I think

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Speaker 1: that will be interesting to see if this does become

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Speaker 1: more of a partisan issue going inte than it was

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Speaker 1: becoming towards the end of Bill. I want to ask

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Speaker 1: you about I don't know if it's your personal favorite topic,

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Speaker 1: but it's certainly your professional favorite topic, which is which

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Speaker 1: is cow paiin finance? Because this was a thing where,

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Speaker 1: you know, we got into the mid term cycle and

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Speaker 1: you and others were publishing stories about the fact that

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Speaker 1: donations from crypto affiliated you know, political entities were record breaking.

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Speaker 1: They were like, defense, whatever, we've got this. We're crypto,

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Speaker 1: we have opinions, and we have money to spend. We

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Speaker 1: now have this interesting cork where Sandbag when freed. Among

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Speaker 1: the various charges that he's facing, and he has not

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Speaker 1: been convicted of any of them, and he's certainly been

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Speaker 1: accused of a lot have to do with campaign finance violations,

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Speaker 1: there's possibly three things that he could be in trouble for.

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Speaker 1: The indictment goes to two. One is is that he

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Speaker 1: allegedly used other people to donate money, and this was

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Speaker 1: to campaigns and two party committees, which have contribution limits.

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Speaker 1: You can only give so much money. It's tars now,

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Speaker 1: and a lot of times when you have campaign finance

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Speaker 1: laws being broken, it's somebody who uses five or six

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Speaker 1: buddies to all give the maximum to a campaign and

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Speaker 1: he's paying for it out of his own pocket, and

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Speaker 1: you know, so that's that's you know, violation number one.

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Speaker 1: Number two is the indictment alleges that he was using

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Speaker 1: corporate money to actually pay for that, and politicians cannot

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Speaker 1: accept corporate money in any way, shape or form. So

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Speaker 1: if this proves to be true, there's gonna be a

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Speaker 1: lot of campaigns and party committees that are writing refund

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Speaker 1: checks to ft X because they're not allowed to take

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Speaker 1: that money. And then a third possibility is, you know

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Speaker 1: ft X is a sprawling international company with all kinds

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Speaker 1: of different incorporated divisions. Some of this may be foreign money,

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Speaker 1: which is also illegal for for US campaigns and superpacks

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Speaker 1: to take. So there's there's just the number of potential

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Speaker 1: violations are are are huge based on what the indictment

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Speaker 1: is saying. So, Allison, going back to your point about

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Speaker 1: you know, politicians being like, I don't know if I

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Speaker 1: want to be associated with this guy. Is some of

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Speaker 1: these alleged campaign violations, is like, is that a consideration

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Speaker 1: for any of the folks who were saying sponsors or

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Speaker 1: supporters of any of these bills. You know, you have

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Speaker 1: to think that it it factors into their decisions. A

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Speaker 1: lot of them are getting you know, a lot of

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Speaker 1: people that took money from Sam Bringman Freed are getting

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Speaker 1: tough questions from reporters saying, you know, what do you

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Speaker 1: plan to do with that money? Like did you did

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Speaker 1: you veted and and all of these other, you know,

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Speaker 1: questions that they likely don't want to have to answer

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Speaker 1: in their daily in their daily life. Um So, yeah,

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Speaker 1: you gotta think that this is going to factor into

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Speaker 1: how they feel about the crypto industry, how close they

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Speaker 1: want to get to the crypto industry going forward. Obviously

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Speaker 1: this past year there have been a lot of investigations

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Speaker 1: opened on crypto firms. We have all of these allegations

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Speaker 1: of fraud, so you know, it's it's definitely something that

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Speaker 1: these lawmakers I think are going to be considering as

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Speaker 1: they move forward. Up next, you'll hear more from Bloomberg

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Speaker 1: Reports is Allison Verse Brull and Bill Allison. We'll be

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Speaker 1: right back, Bill. Has there ever been a case I know,

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Speaker 1: you know we've even mentioned on this podcast, like Enron

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Speaker 1: is an example of an entity that had a lot

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Speaker 1: of people associated with it who were big political givers

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Speaker 1: or influential in some way. But is there like a

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Speaker 1: course correction where politicians would be like crypto money absolutely not,

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Speaker 1: thank you goodbye? Or are they going to realize that

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Speaker 1: campaigns are expensive? And if there's another crypto company the

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Speaker 1: want to, you know, that has a CEO that wants

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Speaker 1: to give them money, they'll at least take the meeting. Yeah,

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Speaker 1: you know, with politics, you know, as long as you

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Speaker 1: haven't been indicted yet, they'll say your money. And you

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Speaker 1: know we already see Tom emer out. It was a

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Speaker 1: very powerful Republican talking about crypto regulation and he's and

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Speaker 1: his his argument is basically that f t X is

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Speaker 1: all about Sam Bank and Freed. It's all about you know,

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Speaker 1: it's this one person, it's the one bad Apple or

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Speaker 1: bad Egg, and that the industry. You know that what

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Speaker 1: you need is the kind of regulatory frame work that

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Speaker 1: you know, Sam bankman Free was talking about what is

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Speaker 1: very kind of decentralized, regular story oversight. And so I

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Speaker 1: think that you know, you're going to see politicians who

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Speaker 1: are not going to be afraid, you know, for ideological

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Speaker 1: reasons to embrace people in the crypto industry. And you know,

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Speaker 1: I think the other thing is that as we get

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Speaker 1: further along and this becomes you know, the bankruptcy case

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Speaker 1: will be about Sam Bankman Freed and f t X,

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Speaker 1: and but other companies I think will probably be able

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Speaker 1: to distance themselves from that that. You know, it's it's

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Speaker 1: you know, just because Enron collapse did not mean that

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Speaker 1: every single energy company stopped giving or politicians stop taking

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Speaker 1: money from every single energy company. Uh, it's it really is,

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Speaker 1: you know. In some ways, you know, because he becomes

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Speaker 1: such a big story, it gives a little bit of

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Speaker 1: cover to everybody else that that's where the attention is,

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Speaker 1: and they can go about things, probably in a more

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Speaker 1: quiet way, but they'll still be giving money. I would think,

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Speaker 1: now Allison, US regulation is new tour previously parochial in

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Speaker 1: the sense of folks tend to make decisions through a

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Speaker 1: lens of you know, national security or what's good for

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Speaker 1: the US or like the U s economic system, and

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Speaker 1: every single country has kind of a similar perspective on

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Speaker 1: how they do things. The US just happens to be

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Speaker 1: one of the larger um players in that ecosystem. There's

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Speaker 1: this increasing drumbeat though from other countries and other regulators

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Speaker 1: that the key for crypto is global coordination, that it

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Speaker 1: sort of makes no sense for the UK to have

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Speaker 1: one way of doing things, for France to have another

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Speaker 1: way in for the US to have a third. What

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Speaker 1: do you see the prospects of something like that? You know,

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Speaker 1: I would say that a lot of these agencies would

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Speaker 1: probably say that these conversations happen right now. I mean,

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Speaker 1: I don't know about the prospects for some sort of

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Speaker 1: big global framework, but there are you know, there are

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Speaker 1: conversations that happened behind the scenes as much as they

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Speaker 1: can under you know, information sharing agreements between different countries.

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Speaker 1: Right Yeah, I mean I think that's probably a conversation

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Speaker 1: that's happening right now. We'll see if you know, groups

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Speaker 1: like like f STOCK start talking more and more about

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Speaker 1: is the Financial Stability Oversight Council UM. So they're the

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Speaker 1: ones that just put out this annual report and they're

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Speaker 1: made up of all sort of the major us UH

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Speaker 1: financial regulators, including you know, the Security the heads of

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Speaker 1: the Securities and Exchange Commission, the heads of the Commodity

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Speaker 1: Features Trading Commission, UM, Treasury FED. So you know, it's

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Speaker 1: it's something that I definitely expect to be a continued

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Speaker 1: conversation UM and we'll have to see where that lands.

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Speaker 1: So that f stock report that you mentioned, they mentioned

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Speaker 1: the word crypto nearly a hundred times, which is I mean,

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Speaker 1: I cover crypto and even so that strikes me as

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Speaker 1: a lot. But are there are other players who have

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Speaker 1: kind of opinions in this area that we should be

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Speaker 1: paying attention to. So, you know, I think it's important

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Speaker 1: to note that there are questions about what to do

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Speaker 1: on a global scale. Obviously cryptocurrency as a globe business. UM.

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Speaker 1: Even if you have an exchange that's based in the Bahamas,

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Speaker 1: for instance, like FTX, it doesn't necessarily mean that you

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Speaker 1: can't have customers from other countries like the US UM

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Speaker 1: somehow be able to access that UM and so I

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Speaker 1: think I will know, you know, in October actually of

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Speaker 1: this year, the Financial Stability Board, which includes UH different countries,

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Speaker 1: had published a proposed framework for international regulation of crypto

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Speaker 1: asset activities. Uh the US is involved uh in in

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Speaker 1: the FSB, So you know, we'll have to see if

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Speaker 1: there's more discussion about global efforts, about global coordination going

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Speaker 1: into next year bill. On the other hand, you know,

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Speaker 1: campaign finances by definition of very local set of considerations,

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Speaker 1: it almost doesn't matter whatever the Canadians are up to.

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Speaker 1: What are some of the ways in which you know,

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Speaker 1: these laws might get, if not tightened, at least screw

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Speaker 1: sized to avoid some of the shall always say ft

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Speaker 1: X effect that we've seen this year. One of the

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Speaker 1: things that Sam bankman Fried has claimed, and you know,

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Speaker 1: I'm not sure that the data supports it, but he

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Speaker 1: said that he poured in a lot of dark money

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Speaker 1: and these are undisclosed contributions to Republicans, right, that he

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Speaker 1: basically gave as much to Republicans and as he did

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Speaker 1: to Democrats. And it's very hard to prove, you know,

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Speaker 1: from the standpoint of being a report or whether it

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Speaker 1: happened or not. But you know, there are bank transfers,

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Speaker 1: there are records that he has. If this does come

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Speaker 1: to come out to be proven, you may see a

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Speaker 1: bigger effort to disclose donations that you know, nonprofits that

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Speaker 1: spend on politics will have to disclose the donors are

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Speaker 1: their major donors. And there's been a bill that's been

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Speaker 1: kicking around. I think since would do that. Uh, maybe

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Speaker 1: we'll finally get some impetus to do that and have

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Speaker 1: a little more disclosure. But I don't think you're going

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Speaker 1: to see, like, you know, anybody trying to shut down superpacks,

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Speaker 1: although you know a lot of people would like to,

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Speaker 1: but the problem is you have a Supreme Court decision

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Speaker 1: that prevents that from happening. All Right, Bill Allison, thank

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Speaker 1: you so much for being on the show. It's always

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Speaker 1: a pleasure to have you on. Thank you. Thanks for

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Speaker 1: having us. You can find more of their reporting on

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Speaker 1: Stacy Mariashma. We'll be back tomorrow