WEBVTT - Crypto in your 401(k)

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

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<v Speaker 1>and this is Bloomberg Crypto, a new daily Bloomberg I

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<v Speaker 1>Heart podcast. It's Tuesday, June seven. Fidelity is one of

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<v Speaker 1>the largest investment managers in the world. The firm made

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<v Speaker 1>headlines when it announced its intention to offer clients the

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<v Speaker 1>ability to invest in crypto through their four oh one

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<v Speaker 1>key retirement accounts. In such a volatile environment, is it

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<v Speaker 1>a risky bet to add digital assets to your retirement plan?

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<v Speaker 1>Today Bloomberg Report Susan Woolly joins me to talk about

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<v Speaker 1>the recent history of four oh one ks and crypto

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<v Speaker 1>and why the US Labor Department is less than enthusiastic

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<v Speaker 1>about fidelities. Move Susanne, so good to have you here.

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<v Speaker 1>It's not often that I get to talk to someone

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<v Speaker 1>who covers a sort of a more predictable end of

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<v Speaker 1>the market versus the complete chaos of crypto old times.

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<v Speaker 1>And really that's what I want to ask you today.

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<v Speaker 1>You know, Fidelity one of the largest investment managers in

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<v Speaker 1>the world, not an organization that you naturally think of

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<v Speaker 1>when it comes to running towards risk, and recently announced

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<v Speaker 1>that they were going to allow people to have exposure

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<v Speaker 1>to crypto in there. For one case, why it is

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<v Speaker 1>very weird big picture to have like one of the largest,

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<v Speaker 1>the largest FUR one K plan administrator offering a product

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<v Speaker 1>that lets you have crypto in your four oh one K,

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<v Speaker 1>which is a workplace savings plan that you're supposed to have.

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<v Speaker 1>You know, prudent investments in that have to be monitored

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<v Speaker 1>and they have to be in the best interests of participants.

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<v Speaker 1>They tend to be well vetted stock and bond funds

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<v Speaker 1>and mutual and money market funds, things like that. So

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<v Speaker 1>to have crypto come into the mix doesn't seem what

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<v Speaker 1>you would expect. It's it's it's pretty wild. Actually to

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<v Speaker 1>have Fidelity jump in it seems kind of crazy on

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<v Speaker 1>the face of it, but when you look a little

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<v Speaker 1>deeper into Fidelity, they've been one of the financial services

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<v Speaker 1>companies in this space that has actually moved into crypto

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<v Speaker 1>faster than others. They have the digital assets on they do,

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<v Speaker 1>and they've been sort of exploring the crypto space since eighteen,

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<v Speaker 1>which is early adopter by institutional standards, so respect So,

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<v Speaker 1>if I I am a person with a four oh

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<v Speaker 1>one key, thank you Bloomberg um, and I say, Okay,

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<v Speaker 1>under what circumstances would it make sense for me to

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<v Speaker 1>opt into something like this? It very much depends on

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<v Speaker 1>how comfortable you are about crypto, which I would imagine

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<v Speaker 1>is high comfortable. Um. Depends how comfortable one is with

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<v Speaker 1>crypto and your knowledge of crypto, your ability to take risk. UM.

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<v Speaker 1>I would argue, your your age, because crypto is so

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<v Speaker 1>can be so volidile that if you're approaching retirement, putting

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<v Speaker 1>a chunk of your money and crypto would be taking

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<v Speaker 1>a big gamble. A lot of financial advisors suggest maybe,

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<v Speaker 1>if you're going to do it, maybe one to five percent.

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<v Speaker 1>If you talk to advisors who are sort of much

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<v Speaker 1>more into the crypto space, they might say ten percent.

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<v Speaker 1>Right right. Again, that risk tolerance, what are some of

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<v Speaker 1>the other risky or let's say volatile assets that have

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<v Speaker 1>historically been included in these sorts of retirement savings accounts.

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<v Speaker 1>You could argue that a lot of the equity funds

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<v Speaker 1>in retirement accounts now are pretty risky. Because we've seen

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<v Speaker 1>even the SMP funds where people think that they're diversified

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<v Speaker 1>among five hundred stocks, A good chunk of that index

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<v Speaker 1>is in the megacap tech stocks like Amazon on Facebook

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<v Speaker 1>which have been hammered. So that is supposedly a safe

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<v Speaker 1>and diversified investment. Right now it doesn't feel that way.

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<v Speaker 1>But generally in a four one K plan you have

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<v Speaker 1>pretty plain vanilla. You've got your stuck all different flavors

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<v Speaker 1>of you know, stock funds, you've got different kinds of

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<v Speaker 1>bond funds, you've got money funds, you've got maybe an

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<v Speaker 1>emerging markets fund, some international funds for sprinkling of flavor,

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<v Speaker 1>little sprinkling of flavor, but really nothing like crypto. There's

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<v Speaker 1>been some talk of maybe getting private equity. Private equity

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<v Speaker 1>firms have wanted to get their toe hold in four

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<v Speaker 1>one K land, and that's something to keep an eye on.

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<v Speaker 1>So Fidelity is i would say, a first mover in

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<v Speaker 1>the big institutional space, but there have certainly been much

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<v Speaker 1>smaller providers who have been trying to offer similar things.

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<v Speaker 1>What about fidelities offering seems to you to kind of

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<v Speaker 1>thread that needle of providing some exposure to risk in

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<v Speaker 1>potential return but also a degree of stability. Well, the

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<v Speaker 1>way Fidelity has created the product, the individual company, the

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<v Speaker 1>plant sponsor of the four one k can decide they

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<v Speaker 1>can allow what people to put up to of their

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<v Speaker 1>balance in crypto. It's unlikely that many funds will do

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<v Speaker 1>that what some of the smaller providers have done. Um

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<v Speaker 1>there's a company and much smaller for and cab administrator

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<v Speaker 1>called for us all dot Com. They will allow people

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<v Speaker 1>to put up to five percent. You can transfer five

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<v Speaker 1>percent of your balance in and then five percent of

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<v Speaker 1>your contributions from then on can go into crypto. There's

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<v Speaker 1>a lot of education around this, obviously, because plant sponsors

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<v Speaker 1>have a fiduciary duty to be sure not making stupid

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<v Speaker 1>decisions exactly. So there's a lot of for us ALL,

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<v Speaker 1>for example, I think you have to go through an

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<v Speaker 1>interactive quiz before your you know, air quotes allowed invest

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<v Speaker 1>in crypto. So it's like informed consent essentially, exactly, got it.

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<v Speaker 1>One of my other questions about this is I noticed

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<v Speaker 1>that the Department of Labor was not super keen yes

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<v Speaker 1>about this headline from FINALSI why the Department of Labor?

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<v Speaker 1>I mean they're the ones that enforced this law called ORISSA,

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<v Speaker 1>the Employee Retirement Security Income Act. And ORISSA is the

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<v Speaker 1>law that says you have to have prudent you know,

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<v Speaker 1>non speculative assets, and they are I mean, what they

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<v Speaker 1>are saying is they think crypto is speculative and vol

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<v Speaker 1>at all. There's no broadly accepted methodology for how to

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<v Speaker 1>value it, you know, unlike stocks and bonds, which have

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<v Speaker 1>methodologies and academics have been studying them for decades and decades. Um,

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<v Speaker 1>it's only been around for like thirteen years exactly. So

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<v Speaker 1>they are sort of saying, like, give me your argument

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<v Speaker 1>for why this is prudent. And they've been very surprisingly

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<v Speaker 1>sort of aggressive and coming out against like in regulators speak, well,

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<v Speaker 1>regulators speak okay, yes, okay, okay. So they had said

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<v Speaker 1>they have grave concern right, which is the equivalence of

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<v Speaker 1>aggressive yes in a regulatory just sort of like yeah,

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<v Speaker 1>you're like, whoa regulator head on fire and got it?

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<v Speaker 1>Got it? Fascinating. So, speaking of head on fire, if

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<v Speaker 1>your you know, friends and family were to say, hey,

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<v Speaker 1>I have the ability to put crypto in my four

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<v Speaker 1>oh one K, what does that mean in practice? Like

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<v Speaker 1>what would that look like for them if they were

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<v Speaker 1>to go through the tutorial and then say yes, well

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<v Speaker 1>with fidelities product, it'll be listed. Um, if first your

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<v Speaker 1>company has to decide that they're going to let you

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<v Speaker 1>get into crypto, and that is a big decision for them.

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<v Speaker 1>Got it. So it's actually you would have to if

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<v Speaker 1>you really wanted it, you'd have to lobby whoever your

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<v Speaker 1>company's benefits manager and hope that your benefits managers into

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<v Speaker 1>crypto or son or daughter this into crypto. You know,

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<v Speaker 1>So you would go in and with Fidelity they create

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<v Speaker 1>a digits called a Digital Assets account and they basically

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<v Speaker 1>like create an account for your plan and you kind

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<v Speaker 1>of get units in that plan, but it's all you daily. Um.

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<v Speaker 1>They have some money market funds as part of it,

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<v Speaker 1>so they can settle daily trades and you would so

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<v Speaker 1>you would see it if you went into your foe

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<v Speaker 1>own K providers website offering, you'd see Okay, my stuck

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<v Speaker 1>what up this? And my big kind went up that

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<v Speaker 1>you know, it was along with everything else. Got it?

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<v Speaker 1>And just as a as a final question, you know,

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<v Speaker 1>Fidelity is obviously one of the biggest and most established

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<v Speaker 1>players in the space we talked about for us all.

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<v Speaker 1>Do you see other of the major institutional providers kind

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<v Speaker 1>of following in their footsteps or do you think we're

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<v Speaker 1>still they're still an await and see. I think there's

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<v Speaker 1>still no wait and see. I think that Fidelity is

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<v Speaker 1>having conversations with the d OL and apartmatively the Department

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<v Speaker 1>of labor Um. We'll see how that goes. Senator Warren

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<v Speaker 1>is dead set against this um exactly. Yes, there's a

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<v Speaker 1>lot of countries, so I think people are going to

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<v Speaker 1>wait and see because this is a very conservative industry

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<v Speaker 1>and crypto has seen, as you know, the opposite, Yes,

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<v Speaker 1>the as folks like to call it, the wild West

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<v Speaker 1>of crypto. Well, thank you, Suzanne. That was so helpful.

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<v Speaker 1>I feel like I have a much better understanding of

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<v Speaker 1>what this might mean for me. You can find more

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<v Speaker 1>of Susan's reporting on the Bloomberg Terminal, on Bloomberg dot

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<v Speaker 1>com and on Twitter at get This at wealth Watch.

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<v Speaker 1>Thank you. On the next episode of Bloomberg Crypto, we

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<v Speaker 1>tackle celebrities and n f t s. Should you put

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<v Speaker 1>your trust in movie stars, pop singers and athletes when

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<v Speaker 1>it comes to non fungible tokens? What are some of

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<v Speaker 1>the legal questions? And play with the celebrity endorsements. Tomorrow

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<v Speaker 1>a chat with Bloomberg report to missy igofa Bolo. I'm

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<v Speaker 1>Stacy Marie Ishmael and This is Bloomberg. Crypto, a daily

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<v Speaker 1>podcast from Bloomberg and I Heeart Radio. From more shows

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<v Speaker 1>from I Heeart Radio, visit the I Heart Radio app,

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<v Speaker 1>Apple Podcasts, or wherever you get your podcasts. Email your comments, questions,

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<v Speaker 1>or suggestions to Crypto at Bloomberg dot net. Follow us

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<v Speaker 1>on Twitter at Crypto. The pre user and editor of

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<v Speaker 1>this episode is Vicky Vergelina. Our engineer is Desto wonder

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<v Speaker 1>At original music by Leo Sidron. Bloomberg's head of Podcasts

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<v Speaker 1>is Francesca Leavy