Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Thursday, December twenty two. Two was supposed
Speaker 1: to be the year of crypto regulation. Multiple CEOs, venture capitalists,
Speaker 1: trade groups for the industry. They had all hired lawyers,
Speaker 1: on lobbyists and prepared policy papers, blog posts, tweet threads
Speaker 1: over and over again. One thing was clear. They were
Speaker 1: all hoping for quote regulatory clarity. In the US, the
Speaker 1: Biden administration announced an executive order too much fanfare that
Speaker 1: called for a national policy on digital assets. It required
Speaker 1: federal agency is to get their digital asset policies in order,
Speaker 1: but it lacked either teeth or specifics. Individual US lawmakers
Speaker 1: across the political spectrum proposed their own bills on crypto
Speaker 1: asset regulation, some of which competed with or even contradicted
Speaker 1: each other. And against this backdrop, things were going mostly
Speaker 1: poorly for investors in the industry. Token prices plunged in value.
Speaker 1: One buzzy crypto company after another filed for bankruptcy, including FTX,
Speaker 1: which had sought to position itself as exceptional in every way,
Speaker 1: and it's now a former CEO, Sam Bankman Freed, has
Speaker 1: been arrested and is facing allegations of fraud and other crimes.
Speaker 1: So will three be the year the crypto gets regulated?
Speaker 1: He a source out where we are and to look
Speaker 1: at head at what we're likely to see our Bloomberg reports.
Speaker 1: Allison Verse Brull. You know a lot of people that
Speaker 1: took money from Sam Bateman Freed are getting tough questions
Speaker 1: from reporters saying, you know, what do you plan to
Speaker 1: do with that money? Like did you did you veted?
Speaker 1: And and all of these other, you know, questions that
Speaker 1: they likely don't want to have to answer in their
Speaker 1: daily in their daily life. And Bill Allison, he allegedly
Speaker 1: used other people to donate money. And this was two
Speaker 1: campaigns and to party committees which have contribution limits. You
Speaker 1: can only give so much money. It's twenty now, Allison, Bill,
Speaker 1: welcome to the show. Bill, how are you doing? I'm
Speaker 1: doing great. I'm Bill Allison. I cover campaign finance for
Speaker 1: Bloomberg News. Allison, you've been on the show a bunch
Speaker 1: of times. When keeping you busy? What's happening in your world?
Speaker 1: So I'm Alison versus Brilla. I cover crypto regulation for
Speaker 1: Bloomberg News and it definitely has been a busy couple
Speaker 1: of months. Is also going to be a busy year,
Speaker 1: you know. Certainly. I think we're now going to expect
Speaker 1: a lot of talk about cryptopod polley and what should
Speaker 1: be done next, um. You know. Noteworthy, the Financial Stability
Speaker 1: Oversight Council, which is led by the Treasury Department, recently
Speaker 1: put out its h annual report and a big focus
Speaker 1: of that was cryptocurrencies, and so there were kind of
Speaker 1: two takeaways from that. First, uh, the Oversight Council said
Speaker 1: that they wanted different agencies to kind of use their
Speaker 1: existing authorities and enforced existing laws in the crypto space.
Speaker 1: And then they also said, look, we have a lot
Speaker 1: of gaps in this space as well where we need
Speaker 1: Congress to step in, UM. One of those being providing
Speaker 1: authority to a federal agency to oversee cryptocurrencies that aren't securities. UM.
Speaker 1: So you know, I think we're expecting those talks to continue.
Speaker 1: Will definitely expect more conversations about stable coin regulation, for instance.
Speaker 1: I think what remains to be seen is is what
Speaker 1: can actually get done. Well. I'm glad that you mentioned
Speaker 1: that because there have been so many reports, there have
Speaker 1: been white papers, there have been executive orders, there have
Speaker 1: been requests for comment, there have been like how about
Speaker 1: we have a hearing, and I'm not sure very many
Speaker 1: things have actually happened. Well, it's you know, it's it's
Speaker 1: interesting because one of the bills that seem to have
Speaker 1: a lot of momentum before f t x's collapse was
Speaker 1: this bill from Senators Uh Stabino and step Senators Bozeman
Speaker 1: that would have given the Commodity Features Trading Commission more
Speaker 1: power to oversee cryptocurrencies. Uh Senate Agriculture Committee Chairwoman Debbie
Speaker 1: Statement Now and the committee's top Republican John Bozeman dropping
Speaker 1: a brand new bill this morning that would give the
Speaker 1: Commodities Futures in Trading Commission more regulatory authority to oversee
Speaker 1: the crypto market and regulate bitcoin and ether as commodities. Now,
Speaker 1: this bill, and the issue with that bill, of course,
Speaker 1: was that ft S is former CEO Sam Bateman. Freed
Speaker 1: was a vocal supporter of that. He was constant only
Speaker 1: on the hill talking about the need for that legislation.
Speaker 1: And so, you know, regardless of maybe the merits of
Speaker 1: the bill. Um, there are a lot of folks who
Speaker 1: see that as tainted. Why have your members vote on
Speaker 1: a bill that could put them in a tough political position, Um,
Speaker 1: given how how close to the effort Sam Bankman Freed was.
Speaker 1: So you know that that bill of course kind of
Speaker 1: fell apart for for those reasons, though, I know that
Speaker 1: those senators are still keen on trying to do something
Speaker 1: in that space. So maybe it's as simple as saying,
Speaker 1: we went back to the drawing board. Um, we have
Speaker 1: looked at the bill, We've tightened provisions to make sure
Speaker 1: that it's a stronger bill, and we still feel like
Speaker 1: we need to give the CFTC this authority. So we're
Speaker 1: moving forward with that, and then on other bills. You know,
Speaker 1: the stable Coin bill that the House was drafting that
Speaker 1: was never actually formally introduced. There were a number of
Speaker 1: challenge challenges. That was a big bill. UM. There were
Speaker 1: disagreements about the role of state regulators versus federal regulators. UM.
Speaker 1: I think that those types of disagreements are going to
Speaker 1: continue into next year. And now we'll have you know,
Speaker 1: the House and Republican control, so kind of a different conversation.
Speaker 1: New dynamics too, to you know, navigate. So it'll be
Speaker 1: an interesting going back to that idea of the politics
Speaker 1: of all of this. You know, I think going into
Speaker 1: the beginning of two there was this idea that all
Speaker 1: of the Dems were anti crypto and all of the
Speaker 1: Republicans were pro crypto. Has that been true? No, I
Speaker 1: would say that. You know, throughout the last year, we
Speaker 1: saw more Democrats kind of coming on board. We saw
Speaker 1: Senator Corey Booker talking about crypto a lot more. We
Speaker 1: saw um, Senator Kerson Gillibrand from New York. She was
Speaker 1: actually a bipartisan co sponsor on a bill with Republican
Speaker 1: Cynthia Lummis. So there were Democrats that were coming and saying, um,
Speaker 1: you know, look, we think there are are benefits to cryptocurrency.
Speaker 1: And then of course all of these failures in the market,
Speaker 1: the declines and token prices, um. You know, FTX was
Speaker 1: not the only company to go bankrupt. Those have caused
Speaker 1: some problems. And you know what I hear now, I
Speaker 1: was talking to a lobbyists recently who represents a lot
Speaker 1: of these crypto firms, and basically, you know, that person
Speaker 1: was saying that there's a lot more skepticism around around lawmakers,
Speaker 1: probably why you're not seeing a ton of them coming
Speaker 1: out and being um especially on the Democratic side, like
Speaker 1: avid crypto supporters at this point. Uh So, I think
Speaker 1: that will be interesting to see if this does become
Speaker 1: more of a partisan issue going inte than it was
Speaker 1: becoming towards the end of Bill. I want to ask
Speaker 1: you about I don't know if it's your personal favorite topic,
Speaker 1: but it's certainly your professional favorite topic, which is which
Speaker 1: is cow paiin finance? Because this was a thing where,
Speaker 1: you know, we got into the mid term cycle and
Speaker 1: you and others were publishing stories about the fact that
Speaker 1: donations from crypto affiliated you know, political entities were record breaking.
Speaker 1: They were like, defense, whatever, we've got this. We're crypto,
Speaker 1: we have opinions, and we have money to spend. We
Speaker 1: now have this interesting cork where Sandbag when freed. Among
Speaker 1: the various charges that he's facing, and he has not
Speaker 1: been convicted of any of them, and he's certainly been
Speaker 1: accused of a lot have to do with campaign finance violations,
Speaker 1: there's possibly three things that he could be in trouble for.
Speaker 1: The indictment goes to two. One is is that he
Speaker 1: allegedly used other people to donate money, and this was
Speaker 1: to campaigns and two party committees, which have contribution limits.
Speaker 1: You can only give so much money. It's tars now,
Speaker 1: and a lot of times when you have campaign finance
Speaker 1: laws being broken, it's somebody who uses five or six
Speaker 1: buddies to all give the maximum to a campaign and
Speaker 1: he's paying for it out of his own pocket, and
Speaker 1: you know, so that's that's you know, violation number one.
Speaker 1: Number two is the indictment alleges that he was using
Speaker 1: corporate money to actually pay for that, and politicians cannot
Speaker 1: accept corporate money in any way, shape or form. So
Speaker 1: if this proves to be true, there's gonna be a
Speaker 1: lot of campaigns and party committees that are writing refund
Speaker 1: checks to ft X because they're not allowed to take
Speaker 1: that money. And then a third possibility is, you know
Speaker 1: ft X is a sprawling international company with all kinds
Speaker 1: of different incorporated divisions. Some of this may be foreign money,
Speaker 1: which is also illegal for for US campaigns and superpacks
Speaker 1: to take. So there's there's just the number of potential
Speaker 1: violations are are are huge based on what the indictment
Speaker 1: is saying. So, Allison, going back to your point about
Speaker 1: you know, politicians being like, I don't know if I
Speaker 1: want to be associated with this guy. Is some of
Speaker 1: these alleged campaign violations, is like, is that a consideration
Speaker 1: for any of the folks who were saying sponsors or
Speaker 1: supporters of any of these bills. You know, you have
Speaker 1: to think that it it factors into their decisions. A
Speaker 1: lot of them are getting you know, a lot of
Speaker 1: people that took money from Sam Bringman Freed are getting
Speaker 1: tough questions from reporters saying, you know, what do you
Speaker 1: plan to do with that money? Like did you did
Speaker 1: you veted and and all of these other, you know,
Speaker 1: questions that they likely don't want to have to answer
Speaker 1: in their daily in their daily life. Um So, yeah,
Speaker 1: you gotta think that this is going to factor into
Speaker 1: how they feel about the crypto industry, how close they
Speaker 1: want to get to the crypto industry going forward. Obviously
Speaker 1: this past year there have been a lot of investigations
Speaker 1: opened on crypto firms. We have all of these allegations
Speaker 1: of fraud, so you know, it's it's definitely something that
Speaker 1: these lawmakers I think are going to be considering as
Speaker 1: they move forward. Up next, you'll hear more from Bloomberg
Speaker 1: Reports is Allison Verse Brull and Bill Allison. We'll be
Speaker 1: right back, Bill. Has there ever been a case I know,
Speaker 1: you know we've even mentioned on this podcast, like Enron
Speaker 1: is an example of an entity that had a lot
Speaker 1: of people associated with it who were big political givers
Speaker 1: or influential in some way. But is there like a
Speaker 1: course correction where politicians would be like crypto money absolutely not,
Speaker 1: thank you goodbye? Or are they going to realize that
Speaker 1: campaigns are expensive? And if there's another crypto company the
Speaker 1: want to, you know, that has a CEO that wants
Speaker 1: to give them money, they'll at least take the meeting. Yeah,
Speaker 1: you know, with politics, you know, as long as you
Speaker 1: haven't been indicted yet, they'll say your money. And you
Speaker 1: know we already see Tom emer out. It was a
Speaker 1: very powerful Republican talking about crypto regulation and he's and
Speaker 1: his his argument is basically that f t X is
Speaker 1: all about Sam Bank and Freed. It's all about you know,
Speaker 1: it's this one person, it's the one bad Apple or
Speaker 1: bad Egg, and that the industry. You know that what
Speaker 1: you need is the kind of regulatory frame work that
Speaker 1: you know, Sam bankman Free was talking about what is
Speaker 1: very kind of decentralized, regular story oversight. And so I
Speaker 1: think that you know, you're going to see politicians who
Speaker 1: are not going to be afraid, you know, for ideological
Speaker 1: reasons to embrace people in the crypto industry. And you know,
Speaker 1: I think the other thing is that as we get
Speaker 1: further along and this becomes you know, the bankruptcy case
Speaker 1: will be about Sam Bankman Freed and f t X,
Speaker 1: and but other companies I think will probably be able
Speaker 1: to distance themselves from that that. You know, it's it's
Speaker 1: you know, just because Enron collapse did not mean that
Speaker 1: every single energy company stopped giving or politicians stop taking
Speaker 1: money from every single energy company. Uh, it's it really is,
Speaker 1: you know. In some ways, you know, because he becomes
Speaker 1: such a big story, it gives a little bit of
Speaker 1: cover to everybody else that that's where the attention is,
Speaker 1: and they can go about things, probably in a more
Speaker 1: quiet way, but they'll still be giving money. I would think,
Speaker 1: now Allison, US regulation is new tour previously parochial in
Speaker 1: the sense of folks tend to make decisions through a
Speaker 1: lens of you know, national security or what's good for
Speaker 1: the US or like the U s economic system, and
Speaker 1: every single country has kind of a similar perspective on
Speaker 1: how they do things. The US just happens to be
Speaker 1: one of the larger um players in that ecosystem. There's
Speaker 1: this increasing drumbeat though from other countries and other regulators
Speaker 1: that the key for crypto is global coordination, that it
Speaker 1: sort of makes no sense for the UK to have
Speaker 1: one way of doing things, for France to have another
Speaker 1: way in for the US to have a third. What
Speaker 1: do you see the prospects of something like that? You know,
Speaker 1: I would say that a lot of these agencies would
Speaker 1: probably say that these conversations happen right now. I mean,
Speaker 1: I don't know about the prospects for some sort of
Speaker 1: big global framework, but there are you know, there are
Speaker 1: conversations that happened behind the scenes as much as they
Speaker 1: can under you know, information sharing agreements between different countries.
Speaker 1: Right Yeah, I mean I think that's probably a conversation
Speaker 1: that's happening right now. We'll see if you know, groups
Speaker 1: like like f STOCK start talking more and more about
Speaker 1: is the Financial Stability Oversight Council UM. So they're the
Speaker 1: ones that just put out this annual report and they're
Speaker 1: made up of all sort of the major us UH
Speaker 1: financial regulators, including you know, the Security the heads of
Speaker 1: the Securities and Exchange Commission, the heads of the Commodity
Speaker 1: Features Trading Commission, UM, Treasury FED. So you know, it's
Speaker 1: it's something that I definitely expect to be a continued
Speaker 1: conversation UM and we'll have to see where that lands.
Speaker 1: So that f stock report that you mentioned, they mentioned
Speaker 1: the word crypto nearly a hundred times, which is I mean,
Speaker 1: I cover crypto and even so that strikes me as
Speaker 1: a lot. But are there are other players who have
Speaker 1: kind of opinions in this area that we should be
Speaker 1: paying attention to. So, you know, I think it's important
Speaker 1: to note that there are questions about what to do
Speaker 1: on a global scale. Obviously cryptocurrency as a globe business. UM.
Speaker 1: Even if you have an exchange that's based in the Bahamas,
Speaker 1: for instance, like FTX, it doesn't necessarily mean that you
Speaker 1: can't have customers from other countries like the US UM
Speaker 1: somehow be able to access that UM and so I
Speaker 1: think I will know, you know, in October actually of
Speaker 1: this year, the Financial Stability Board, which includes UH different countries,
Speaker 1: had published a proposed framework for international regulation of crypto
Speaker 1: asset activities. Uh the US is involved uh in in
Speaker 1: the FSB, So you know, we'll have to see if
Speaker 1: there's more discussion about global efforts, about global coordination going
Speaker 1: into next year bill. On the other hand, you know,
Speaker 1: campaign finances by definition of very local set of considerations,
Speaker 1: it almost doesn't matter whatever the Canadians are up to.
Speaker 1: What are some of the ways in which you know,
Speaker 1: these laws might get, if not tightened, at least screw
Speaker 1: sized to avoid some of the shall always say ft
Speaker 1: X effect that we've seen this year. One of the
Speaker 1: things that Sam bankman Fried has claimed, and you know,
Speaker 1: I'm not sure that the data supports it, but he
Speaker 1: said that he poured in a lot of dark money
Speaker 1: and these are undisclosed contributions to Republicans, right, that he
Speaker 1: basically gave as much to Republicans and as he did
Speaker 1: to Democrats. And it's very hard to prove, you know,
Speaker 1: from the standpoint of being a report or whether it
Speaker 1: happened or not. But you know, there are bank transfers,
Speaker 1: there are records that he has. If this does come
Speaker 1: to come out to be proven, you may see a
Speaker 1: bigger effort to disclose donations that you know, nonprofits that
Speaker 1: spend on politics will have to disclose the donors are
Speaker 1: their major donors. And there's been a bill that's been
Speaker 1: kicking around. I think since would do that. Uh, maybe
Speaker 1: we'll finally get some impetus to do that and have
Speaker 1: a little more disclosure. But I don't think you're going
Speaker 1: to see, like, you know, anybody trying to shut down superpacks,
Speaker 1: although you know a lot of people would like to,
Speaker 1: but the problem is you have a Supreme Court decision
Speaker 1: that prevents that from happening. All Right, Bill Allison, thank
Speaker 1: you so much for being on the show. It's always
Speaker 1: a pleasure to have you on. Thank you. Thanks for
Speaker 1: having us. You can find more of their reporting on
Speaker 1: the Bloomberg terminal and on Bloomberg dot com. For more,
Speaker 1: be sure to check out or twice weekly newsletter, which
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