WEBVTT - The Year in Crypto Regulations

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<v Speaker 1>This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,

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<v Speaker 1>and I'm Stacy Marie Ishmael, Managing editor of Crypto for

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

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<v Speaker 1>to be the year of crypto regulation. Multiple CEOs, venture capitalists,

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<v Speaker 1>trade groups for the industry. They had all hired lawyers,

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<v Speaker 1>on lobbyists and prepared policy papers, blog posts, tweet threads

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<v Speaker 1>over and over again. One thing was clear. They were

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<v Speaker 1>all hoping for quote regulatory clarity. In the US, the

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<v Speaker 1>Biden administration announced an executive order too much fanfare that

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<v Speaker 1>called for a national policy on digital assets. It required

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<v Speaker 1>federal agency is to get their digital asset policies in order,

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<v Speaker 1>but it lacked either teeth or specifics. Individual US lawmakers

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<v Speaker 1>across the political spectrum proposed their own bills on crypto

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<v Speaker 1>asset regulation, some of which competed with or even contradicted

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<v Speaker 1>each other. And against this backdrop, things were going mostly

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<v Speaker 1>poorly for investors in the industry. Token prices plunged in value.

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<v Speaker 1>One buzzy crypto company after another filed for bankruptcy, including FTX,

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<v Speaker 1>which had sought to position itself as exceptional in every way,

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<v Speaker 1>and it's now a former CEO, Sam Bankman Freed, has

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<v Speaker 1>been arrested and is facing allegations of fraud and other crimes.

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<v Speaker 1>So will three be the year the crypto gets regulated?

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<v Speaker 1>He a source out where we are and to look

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<v Speaker 1>at head at what we're likely to see our Bloomberg reports.

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<v Speaker 1>Allison Verse Brull. You know a lot of people that

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<v Speaker 1>took money from Sam Bateman Freed are getting tough questions

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<v Speaker 1>from reporters saying, you know, what do you plan to

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<v Speaker 1>do with that money? Like did you did you veted?

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<v Speaker 1>And and all of these other, you know, questions that

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<v Speaker 1>they likely don't want to have to answer in their

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<v Speaker 1>daily in their daily life. And Bill Allison, he allegedly

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<v Speaker 1>used other people to donate money. And this was two

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<v Speaker 1>campaigns and to party committees which have contribution limits. You

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

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

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<v Speaker 1>doing great. I'm Bill Allison. I cover campaign finance for

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

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

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<v Speaker 1>So I'm Alison versus Brilla. I cover crypto regulation for

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<v Speaker 1>Bloomberg News and it definitely has been a busy couple

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<v Speaker 1>of months. Is also going to be a busy year,

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<v Speaker 1>you know. Certainly. I think we're now going to expect

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<v Speaker 1>a lot of talk about cryptopod polley and what should

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<v Speaker 1>be done next, um. You know. Noteworthy, the Financial Stability

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<v Speaker 1>Oversight Council, which is led by the Treasury Department, recently

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<v Speaker 1>put out its h annual report and a big focus

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<v Speaker 1>of that was cryptocurrencies, and so there were kind of

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<v Speaker 1>two takeaways from that. First, uh, the Oversight Council said

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<v Speaker 1>that they wanted different agencies to kind of use their

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<v Speaker 1>existing authorities and enforced existing laws in the crypto space.

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<v Speaker 1>And then they also said, look, we have a lot

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<v Speaker 1>of gaps in this space as well where we need

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<v Speaker 1>Congress to step in, UM. One of those being providing

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

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

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<v Speaker 1>Will definitely expect more conversations about stable coin regulation, for instance.

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<v Speaker 1>I think what remains to be seen is is what

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<v Speaker 1>can actually get done. Well. I'm glad that you mentioned

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<v Speaker 1>that because there have been so many reports, there have

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<v Speaker 1>been white papers, there have been executive orders, there have

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<v Speaker 1>been requests for comment, there have been like how about

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<v Speaker 1>we have a hearing, and I'm not sure very many

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<v Speaker 1>things have actually happened. Well, it's you know, it's it's

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<v Speaker 1>interesting because one of the bills that seem to have

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<v Speaker 1>a lot of momentum before f t x's collapse was

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<v Speaker 1>this bill from Senators Uh Stabino and step Senators Bozeman

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<v Speaker 1>that would have given the Commodity Features Trading Commission more

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<v Speaker 1>power to oversee cryptocurrencies. Uh Senate Agriculture Committee Chairwoman Debbie

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<v Speaker 1>Statement Now and the committee's top Republican John Bozeman dropping

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<v Speaker 1>a brand new bill this morning that would give the

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<v Speaker 1>Commodities Futures in Trading Commission more regulatory authority to oversee

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<v Speaker 1>the crypto market and regulate bitcoin and ether as commodities. Now,

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<v Speaker 1>this bill, and the issue with that bill, of course,

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<v Speaker 1>was that ft S is former CEO Sam Bateman. Freed

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<v Speaker 1>was a vocal supporter of that. He was constant only

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<v Speaker 1>on the hill talking about the need for that legislation.

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<v Speaker 1>And so, you know, regardless of maybe the merits of

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<v Speaker 1>the bill. Um, there are a lot of folks who

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<v Speaker 1>see that as tainted. Why have your members vote on

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<v Speaker 1>a bill that could put them in a tough political position, Um,

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<v Speaker 1>given how how close to the effort Sam Bankman Freed was.

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<v Speaker 1>So you know that that bill of course kind of

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<v Speaker 1>fell apart for for those reasons, though, I know that

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<v Speaker 1>those senators are still keen on trying to do something

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<v Speaker 1>in that space. So maybe it's as simple as saying,

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<v Speaker 1>we went back to the drawing board. Um, we have

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<v Speaker 1>looked at the bill, We've tightened provisions to make sure

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<v Speaker 1>that it's a stronger bill, and we still feel like

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<v Speaker 1>we need to give the CFTC this authority. So we're

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<v Speaker 1>moving forward with that, and then on other bills. You know,

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<v Speaker 1>the stable Coin bill that the House was drafting that

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<v Speaker 1>was never actually formally introduced. There were a number of

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<v Speaker 1>challenge challenges. That was a big bill. UM. There were

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<v Speaker 1>disagreements about the role of state regulators versus federal regulators. UM.

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<v Speaker 1>I think that those types of disagreements are going to

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

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<v Speaker 1>the House and Republican control, so kind of a different conversation.

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

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<v Speaker 1>an interesting going back to that idea of the politics

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<v Speaker 1>of all of this. You know, I think going into

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<v Speaker 1>the beginning of two there was this idea that all

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<v Speaker 1>of the Dems were anti crypto and all of the

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<v Speaker 1>Republicans were pro crypto. Has that been true? No, I

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<v Speaker 1>would say that. You know, throughout the last year, we

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<v Speaker 1>saw more Democrats kind of coming on board. We saw

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<v Speaker 1>Senator Corey Booker talking about crypto a lot more. We

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<v Speaker 1>saw um, Senator Kerson Gillibrand from New York. She was

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<v Speaker 1>actually a bipartisan co sponsor on a bill with Republican

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<v Speaker 1>Cynthia Lummis. So there were Democrats that were coming and saying, um,

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<v Speaker 1>you know, look, we think there are are benefits to cryptocurrency.

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<v Speaker 1>And then of course all of these failures in the market,

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<v Speaker 1>the declines and token prices, um. You know, FTX was

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<v Speaker 1>not the only company to go bankrupt. Those have caused

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<v Speaker 1>some problems. And you know what I hear now, I

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<v Speaker 1>was talking to a lobbyists recently who represents a lot

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<v Speaker 1>of these crypto firms, and basically, you know, that person

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<v Speaker 1>was saying that there's a lot more skepticism around around lawmakers,

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<v Speaker 1>probably why you're not seeing a ton of them coming

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<v Speaker 1>out and being um especially on the Democratic side, like

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<v Speaker 1>avid crypto supporters at this point. Uh So, I think

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<v Speaker 1>that will be interesting to see if this does become

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<v Speaker 1>more of a partisan issue going inte than it was

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<v Speaker 1>becoming towards the end of Bill. I want to ask

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

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<v Speaker 1>but it's certainly your professional favorite topic, which is which

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<v Speaker 1>is cow paiin finance? Because this was a thing where,

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<v Speaker 1>you know, we got into the mid term cycle and

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<v Speaker 1>you and others were publishing stories about the fact that

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<v Speaker 1>donations from crypto affiliated you know, political entities were record breaking.

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

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<v Speaker 1>we have opinions, and we have money to spend. We

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<v Speaker 1>now have this interesting cork where Sandbag when freed. Among

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<v Speaker 1>the various charges that he's facing, and he has not

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<v Speaker 1>been convicted of any of them, and he's certainly been

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<v Speaker 1>accused of a lot have to do with campaign finance violations,

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

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<v Speaker 1>The indictment goes to two. One is is that he

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<v Speaker 1>allegedly used other people to donate money, and this was

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<v Speaker 1>to campaigns and two party committees, which have contribution limits.

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

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<v Speaker 1>and a lot of times when you have campaign finance

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<v Speaker 1>laws being broken, it's somebody who uses five or six

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<v Speaker 1>buddies to all give the maximum to a campaign and

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<v Speaker 1>he's paying for it out of his own pocket, and

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<v Speaker 1>you know, so that's that's you know, violation number one.

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<v Speaker 1>Number two is the indictment alleges that he was using

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<v Speaker 1>corporate money to actually pay for that, and politicians cannot

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<v Speaker 1>accept corporate money in any way, shape or form. So

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<v Speaker 1>if this proves to be true, there's gonna be a

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<v Speaker 1>lot of campaigns and party committees that are writing refund

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<v Speaker 1>checks to ft X because they're not allowed to take

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<v Speaker 1>that money. And then a third possibility is, you know

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<v Speaker 1>ft X is a sprawling international company with all kinds

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<v Speaker 1>of different incorporated divisions. Some of this may be foreign money,

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<v Speaker 1>which is also illegal for for US campaigns and superpacks

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<v Speaker 1>to take. So there's there's just the number of potential

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<v Speaker 1>violations are are are huge based on what the indictment

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<v Speaker 1>is saying. So, Allison, going back to your point about

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<v Speaker 1>you know, politicians being like, I don't know if I

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<v Speaker 1>want to be associated with this guy. Is some of

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<v Speaker 1>these alleged campaign violations, is like, is that a consideration

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<v Speaker 1>for any of the folks who were saying sponsors or

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<v Speaker 1>supporters of any of these bills. You know, you have

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<v Speaker 1>to think that it it factors into their decisions. A

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<v Speaker 1>lot of them are getting you know, a lot of

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<v Speaker 1>people that took money from Sam Bringman Freed are getting

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<v Speaker 1>tough questions from reporters saying, you know, what do you

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<v Speaker 1>plan to do with that money? Like did you did

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<v Speaker 1>you veted and and all of these other, you know,

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<v Speaker 1>questions that they likely don't want to have to answer

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<v Speaker 1>in their daily in their daily life. Um So, yeah,

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<v Speaker 1>you gotta think that this is going to factor into

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<v Speaker 1>how they feel about the crypto industry, how close they

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<v Speaker 1>want to get to the crypto industry going forward. Obviously

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<v Speaker 1>this past year there have been a lot of investigations

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<v Speaker 1>opened on crypto firms. We have all of these allegations

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<v Speaker 1>of fraud, so you know, it's it's definitely something that

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<v Speaker 1>these lawmakers I think are going to be considering as

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

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<v Speaker 1>Reports is Allison Verse Brull and Bill Allison. We'll be

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<v Speaker 1>right back, Bill. Has there ever been a case I know,

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<v Speaker 1>you know we've even mentioned on this podcast, like Enron

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<v Speaker 1>is an example of an entity that had a lot

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<v Speaker 1>of people associated with it who were big political givers

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<v Speaker 1>or influential in some way. But is there like a

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<v Speaker 1>course correction where politicians would be like crypto money absolutely not,

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<v Speaker 1>thank you goodbye? Or are they going to realize that

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<v Speaker 1>campaigns are expensive? And if there's another crypto company the

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<v Speaker 1>want to, you know, that has a CEO that wants

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

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<v Speaker 1>you know, with politics, you know, as long as you

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

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<v Speaker 1>know we already see Tom emer out. It was a

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<v Speaker 1>very powerful Republican talking about crypto regulation and he's and

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<v Speaker 1>his his argument is basically that f t X is

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<v Speaker 1>all about Sam Bank and Freed. It's all about you know,

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<v Speaker 1>it's this one person, it's the one bad Apple or

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<v Speaker 1>bad Egg, and that the industry. You know that what

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<v Speaker 1>you need is the kind of regulatory frame work that

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<v Speaker 1>you know, Sam bankman Free was talking about what is

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<v Speaker 1>very kind of decentralized, regular story oversight. And so I

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<v Speaker 1>think that you know, you're going to see politicians who

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<v Speaker 1>are not going to be afraid, you know, for ideological

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<v Speaker 1>reasons to embrace people in the crypto industry. And you know,

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<v Speaker 1>I think the other thing is that as we get

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<v Speaker 1>further along and this becomes you know, the bankruptcy case

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<v Speaker 1>will be about Sam Bankman Freed and f t X,

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<v Speaker 1>and but other companies I think will probably be able

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<v Speaker 1>to distance themselves from that that. You know, it's it's

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<v Speaker 1>you know, just because Enron collapse did not mean that

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<v Speaker 1>every single energy company stopped giving or politicians stop taking

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

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<v Speaker 1>you know. In some ways, you know, because he becomes

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<v Speaker 1>such a big story, it gives a little bit of

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<v Speaker 1>cover to everybody else that that's where the attention is,

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<v Speaker 1>and they can go about things, probably in a more

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

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<v Speaker 1>now Allison, US regulation is new tour previously parochial in

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<v Speaker 1>the sense of folks tend to make decisions through a

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<v Speaker 1>lens of you know, national security or what's good for

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<v Speaker 1>the US or like the U s economic system, and

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<v Speaker 1>every single country has kind of a similar perspective on

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<v Speaker 1>how they do things. The US just happens to be

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<v Speaker 1>one of the larger um players in that ecosystem. There's

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<v Speaker 1>this increasing drumbeat though from other countries and other regulators

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<v Speaker 1>that the key for crypto is global coordination, that it

0:13:29.160 --> 0:13:31.280
<v Speaker 1>sort of makes no sense for the UK to have

0:13:31.320 --> 0:13:33.200
<v Speaker 1>one way of doing things, for France to have another

0:13:33.240 --> 0:13:35.480
<v Speaker 1>way in for the US to have a third. What

0:13:35.559 --> 0:13:39.280
<v Speaker 1>do you see the prospects of something like that? You know,

0:13:39.840 --> 0:13:42.080
<v Speaker 1>I would say that a lot of these agencies would

0:13:42.120 --> 0:13:46.000
<v Speaker 1>probably say that these conversations happen right now. I mean,

0:13:46.040 --> 0:13:48.000
<v Speaker 1>I don't know about the prospects for some sort of

0:13:48.080 --> 0:13:53.520
<v Speaker 1>big global framework, but there are you know, there are

0:13:53.600 --> 0:13:55.880
<v Speaker 1>conversations that happened behind the scenes as much as they

0:13:55.880 --> 0:13:59.240
<v Speaker 1>can under you know, information sharing agreements between different countries.

0:13:59.760 --> 0:14:02.680
<v Speaker 1>Right Yeah, I mean I think that's probably a conversation

0:14:02.720 --> 0:14:05.640
<v Speaker 1>that's happening right now. We'll see if you know, groups

0:14:05.720 --> 0:14:09.040
<v Speaker 1>like like f STOCK start talking more and more about

0:14:09.320 --> 0:14:12.800
<v Speaker 1>is the Financial Stability Oversight Council UM. So they're the

0:14:12.800 --> 0:14:14.720
<v Speaker 1>ones that just put out this annual report and they're

0:14:14.720 --> 0:14:17.720
<v Speaker 1>made up of all sort of the major us UH

0:14:17.880 --> 0:14:22.000
<v Speaker 1>financial regulators, including you know, the Security the heads of

0:14:22.040 --> 0:14:24.960
<v Speaker 1>the Securities and Exchange Commission, the heads of the Commodity

0:14:25.000 --> 0:14:30.080
<v Speaker 1>Features Trading Commission, UM, Treasury FED. So you know, it's

0:14:30.120 --> 0:14:33.000
<v Speaker 1>it's something that I definitely expect to be a continued

0:14:33.080 --> 0:14:35.920
<v Speaker 1>conversation UM and we'll have to see where that lands.

0:14:36.480 --> 0:14:39.080
<v Speaker 1>So that f stock report that you mentioned, they mentioned

0:14:39.520 --> 0:14:43.920
<v Speaker 1>the word crypto nearly a hundred times, which is I mean,

0:14:43.920 --> 0:14:46.320
<v Speaker 1>I cover crypto and even so that strikes me as

0:14:46.360 --> 0:14:48.840
<v Speaker 1>a lot. But are there are other players who have

0:14:48.920 --> 0:14:50.680
<v Speaker 1>kind of opinions in this area that we should be

0:14:50.680 --> 0:14:54.000
<v Speaker 1>paying attention to. So, you know, I think it's important

0:14:54.000 --> 0:14:56.720
<v Speaker 1>to note that there are questions about what to do

0:14:56.960 --> 0:15:01.600
<v Speaker 1>on a global scale. Obviously cryptocurrency as a globe business. UM.

0:15:01.640 --> 0:15:04.800
<v Speaker 1>Even if you have an exchange that's based in the Bahamas,

0:15:04.840 --> 0:15:07.960
<v Speaker 1>for instance, like FTX, it doesn't necessarily mean that you

0:15:08.000 --> 0:15:12.200
<v Speaker 1>can't have customers from other countries like the US UM

0:15:12.320 --> 0:15:15.280
<v Speaker 1>somehow be able to access that UM and so I

0:15:15.360 --> 0:15:17.960
<v Speaker 1>think I will know, you know, in October actually of

0:15:18.000 --> 0:15:23.080
<v Speaker 1>this year, the Financial Stability Board, which includes UH different countries,

0:15:23.280 --> 0:15:27.120
<v Speaker 1>had published a proposed framework for international regulation of crypto

0:15:27.240 --> 0:15:31.760
<v Speaker 1>asset activities. Uh the US is involved uh in in

0:15:32.040 --> 0:15:34.640
<v Speaker 1>the FSB, So you know, we'll have to see if

0:15:34.640 --> 0:15:39.960
<v Speaker 1>there's more discussion about global efforts, about global coordination going

0:15:39.960 --> 0:15:45.520
<v Speaker 1>into next year bill. On the other hand, you know,

0:15:45.600 --> 0:15:51.880
<v Speaker 1>campaign finances by definition of very local set of considerations,

0:15:51.880 --> 0:15:54.120
<v Speaker 1>it almost doesn't matter whatever the Canadians are up to.

0:15:54.680 --> 0:15:57.120
<v Speaker 1>What are some of the ways in which you know,

0:15:57.280 --> 0:15:59.960
<v Speaker 1>these laws might get, if not tightened, at least screw

0:16:00.080 --> 0:16:03.600
<v Speaker 1>sized to avoid some of the shall always say ft

0:16:03.840 --> 0:16:06.240
<v Speaker 1>X effect that we've seen this year. One of the

0:16:06.240 --> 0:16:09.080
<v Speaker 1>things that Sam bankman Fried has claimed, and you know,

0:16:09.160 --> 0:16:11.040
<v Speaker 1>I'm not sure that the data supports it, but he

0:16:11.120 --> 0:16:13.280
<v Speaker 1>said that he poured in a lot of dark money

0:16:13.320 --> 0:16:16.760
<v Speaker 1>and these are undisclosed contributions to Republicans, right, that he

0:16:16.800 --> 0:16:19.080
<v Speaker 1>basically gave as much to Republicans and as he did

0:16:19.080 --> 0:16:23.360
<v Speaker 1>to Democrats. And it's very hard to prove, you know,

0:16:23.440 --> 0:16:25.680
<v Speaker 1>from the standpoint of being a report or whether it

0:16:25.720 --> 0:16:28.440
<v Speaker 1>happened or not. But you know, there are bank transfers,

0:16:28.480 --> 0:16:30.800
<v Speaker 1>there are records that he has. If this does come

0:16:30.840 --> 0:16:33.560
<v Speaker 1>to come out to be proven, you may see a

0:16:33.680 --> 0:16:38.240
<v Speaker 1>bigger effort to disclose donations that you know, nonprofits that

0:16:38.320 --> 0:16:41.640
<v Speaker 1>spend on politics will have to disclose the donors are

0:16:41.680 --> 0:16:43.880
<v Speaker 1>their major donors. And there's been a bill that's been

0:16:43.960 --> 0:16:47.600
<v Speaker 1>kicking around. I think since would do that. Uh, maybe

0:16:47.600 --> 0:16:49.400
<v Speaker 1>we'll finally get some impetus to do that and have

0:16:49.440 --> 0:16:51.320
<v Speaker 1>a little more disclosure. But I don't think you're going

0:16:51.360 --> 0:16:54.240
<v Speaker 1>to see, like, you know, anybody trying to shut down superpacks,

0:16:54.280 --> 0:16:56.280
<v Speaker 1>although you know a lot of people would like to,

0:16:56.320 --> 0:16:58.200
<v Speaker 1>but the problem is you have a Supreme Court decision

0:16:58.240 --> 0:17:02.320
<v Speaker 1>that prevents that from happening. All Right, Bill Allison, thank

0:17:02.360 --> 0:17:03.880
<v Speaker 1>you so much for being on the show. It's always

0:17:03.880 --> 0:17:06.000
<v Speaker 1>a pleasure to have you on. Thank you. Thanks for

0:17:06.040 --> 0:17:08.560
<v Speaker 1>having us. You can find more of their reporting on

0:17:08.560 --> 0:17:11.440
<v Speaker 1>the Bloomberg terminal and on Bloomberg dot com. For more,

0:17:11.680 --> 0:17:14.040
<v Speaker 1>be sure to check out or twice weekly newsletter, which

0:17:14.080 --> 0:17:22.000
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0:17:32.560 --> 0:17:35.440
<v Speaker 1>your comments, questions, or suggestions for the show to Crypto

0:17:35.480 --> 0:17:41.919
<v Speaker 1>at Bloomberg dot net. The supervising producer of Bloomberg. Crypto

0:17:42.040 --> 0:17:45.240
<v Speaker 1>is Vicky very Galina. Our senior producer is Janet Babin.

0:17:45.880 --> 0:17:49.520
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<v Speaker 1>producers are Ty Butler and Moses on Them. Desta wonder

0:17:53.359 --> 0:17:59.040
<v Speaker 1>At is our engineer. Original music by Leo Sidron. I'm

0:17:59.080 --> 0:18:01.280
<v Speaker 1>Stacy Mariashma. We'll be back tomorrow