Bloomberg Crypto Full Show (12/13/2022)
MATT: LIVE FROM BLOOMBERG'S WORLD HEADQUARTERS IN NEW YORK CITY I AM MATT MILLER. KAILEY: AND I'M KAILEY LEINZ. WELCOME TO BLOOMBERG CRYPTO, SHAPING THE WORLD OF DECENTRALIZED FINANCE. MATT: GROSSLY INEXPERIENCED AND UNSOPHISTICATED, HOW THE APHID -- FTX EEO DESCRIBE SAM BANKMAN-FRIED ADDING THERE IS NO SEPARATION BETWEEN THE EXCHANGE AND ALAMEDA. KAILEY:
THE DOJ CHARGES BANKMAN-FRIED WITH H CRIMINAL COUNTS INCLUDING CONSPIRACY, WIRE FRAUD, AND CAMPAIGN FINANCE VIOLATIONS. WE WILL HAVE THE LATEST AFTER HIS ARREST IN THE BAHAMAS. MATT: REGULATORS ALLEGE FRAUD, MORE ON THE CIVIL CASES FILED BY THE SEC AND CFTC TODAY. KAILEY: ALL OF THAT IS AHEAD AND CLEARLY A MASSIVE DAY FOR SAM BANKMAN-FRIED AND CRYPTO AND A BIG MACRO DAY CONSIDERING WE GOT COOLER THAN EXPECTED NOVEMBER CPI DATA OUT EARLIER THIS MORNING. INFLUENCE ON THE INFLUENCE -- THE INFLUENCE ON THE EQUITY MARKET SEEMS TO BE WANING AS THE DAY GOES.
THE NASDAQ WAS UP 3.9% NOW UP ONLY .5%. THE MOVE IS HOLDING FIRMLY IN THE BOND MARKET BUT THE TWO YEAR YIELD DOWN MORE THAN 16 BASIS POINTS AROUND 421. THE MOVE IS HOLDING IN CRYPTO, BITCOIN HIGHER BY 2.6% ON THE DAY, VERY CLOSE TO 18,000 EARLIER.
RIGHT NOW TRADING AT $17,630 OR SO. NOTE THE BREAK BETWEEN DIGITAL ASSETS, CRYPTOCURRENCIES WHO RETIRE ON THE DAY AND EXCHANGE COINBASE DOWN ABOUT 6.3%. THERE IS CONCERN AROUND EXCHANGES AND PEOPLE WANTING TO PULL THEIR MONEY OUT GIVEN THE ALLEGATIONS OF WHAT HAPPENED AT FTX AND WE KNOW BINANCE HAS BEEN DEALING WITH ISSUES SURROUNDING THAT. THEY HAVE SEEN BILLIONS OF
DOLLARS OF MONEY PULLED OUT. MATT: MASSIVE COMPLIANCE COSTS ARE COMING LESS GET MORE OF THE COLLAPSE OF FTX AND THE AFTERMATH. TEAM COVERAGE FOR YOU FROM BLOOMBERG SONALI BASAK IS ON CAPITOL HILL AND LAURA DAVIDSON AND BEN BOEHNER AND JOINING US FROM WASHINGTON, D.C. AS WELL. LET'S START WITH WHAT WE HEARD FROM JOHN J RAY, WHAT TO EAT HAD TO SAY BEFORE THE HOUSE FINANCIAL SERVICES COMMITTEE TODAY. >> THE FTX GROUP COLLAPSE IS FROM ABSOLUTE CONCENTRATION OF CONTROL AND THE HANDS OF A SMALL GROUP OF GROSSLY INEXPERIENCED AND UNSOPHISTICATED INDIVIDUALS.
FAILED TO IMPLEMENT VIRTUALLY ANY OF THE SYSTEMS OR CONTROLS NECESSARY FOR COMPANY ENTRUSTED WITH OTHER PEOPLE'S MONEY OR ASSETS. MATT: LET'S KICK IT OFF WITH OUR GLOBAL FINANCE CORRESPONDENT. YOU ARE ON CAPITOL HILL. TELL US HOW IT IS GOING. SONALI:
EXTRAORDINARY. AND -- A NEXT ORDINARY AMOUNT OF DETAIL TODAY AS WELL AS THE AFFIDAVIT UNSEALED AND FCC COMPLAINS AND TESTIMONY OF JOHN RAY. AMONG THE THINGS YOU HEAR HIM SAY IS DISPUTING THE THING SAM BANKMAN-FRIED HAS BEEN SAYING, ONE THING BEING IT WOULD BE SPECULATIVE TO SAY FTX U.S. CUSTOMERS WOULD GET THEIR ASSETS BACK ON A ONE-TO-ONE BASIS. HE ALSO SAYS SOMETHING THAT A LOT OF PEOPLE IN THE CRYPTO INDUSTRY WOULD SAY IS HE DOES NOT THINK THIS WOULD HAVE MATTERED WHERE THE COMPANY WAS LOCATED. THERE WAS SUCH LITTLE OVERSIGHT OF THE COMPANY TO BEGIN WITH.
AS WE DISPUTE WHAT THE PROPER OVERSIGHT WOULD BE IN THE UNITED STATES, THAT IS A REALLY BIG STATEMENT TO HEAR FROM HIM AS WELL BUT HE SAYS OF COURSE OVERSIGHT IS NEEDED. THAT IS PART OF THE REASONS THESE HEARINGS HAPPEN BECAUSE TO -- IN ORDER TO PROTECT CUSTOMERS THAT LOST MONEY IN THE DEBACLE BUT WE'VE BEEN TALKING ABOUT ON THE SHOW OVER AND OVER, THERE ARE A HANDFUL, HALF A DOZEN OR SO, BANKRUPTCIES UNDERWAY. SOME MORE CUSTOMER MONEY TO BE LOST IN THIS INDUSTRY, FRONT OR NO FRAUD. KAILEY: ON THE TOPIC OF OVERSIGHT, WHAT DID YOU MAKE OF THE LANGUAGE SOME OF THE LAWMAKERS WERE USING AROUND REGULATION AND ROLES OF THE SEC AND CFTC? SONALI: I THINK IT IS INTERESTING AND WE WILL GET INTO THAT WITH A LAWMAKER SOON AS WELL BECAUSE THERE IS A DISPUTE HERE ABOUT HOW THE SEC HANDLES THE CRYPTO INDUSTRY. REGULATION BY ENFORCEMENT. FROM THE SEC'S POINT OF VIEW,
THEY HAVE ALREADY GONE AFTER THE IDEA OF CERTAIN TOKENS ALREADY. FTT IS THE POSTER CHILD HERE OF TOKENS BEING SECURITIES ARE NOT SECURITIES AND HOW SOMETHING CAN GO WRONG THIS WAY. THAT IS NOT EVEN WHAT WAS UP FOR DISPUTE HERE. WHAT REALLY TODAY THE SEC COMPLAINT SURROUNDED AROUND WAS THE IDEA SAM BANKMAN-FRIED MISLED INVESTORS AND THAT THE TAKING OF FINES THAT EXISTED BETWEEN ALAMEDA AND FTX IN THE BROADER ISSUE IS THE FTT TOKEN. YOU SEE LAWMAKERS TALK TO JOHN RAY ABOUT THAT AND WHETHER FTX WOULD HAVE BEEN SOLVENT HAD FINANCE -- BINANCE NOT SOLD HER TOKENS AND HE SAID IT WOULD NOT HAVE BEEN ANYWAY. -- ANYWAYS.
KAILEY: SAM BANKMAN-FRIED APPEARED IN COURT FOR ARRAIGNMENT PROCEEDINGS AFTER HIS ARREST LATE YESTERDAY. HE SAID HE WILL NOT WAIVE HIS RIGHT TO AN EXTRADITION HEARING. INDICTMENT UNSEALED BY THE SOUTHERN DISTRICT COURT OF NEW YORK TODAY CHARGING HIM WITH H CRIMINAL COUNTS INCLUDING CONSPIRACY AND WIRE FRAUD.
LAURA DAVIDSON IS JOINING US FROM WASHINGTON WITH MORE. TELL US ABOUT THE DETAILS OF THESE ALLEGATIONS. >> THERE ARE EIGHT DIFFERENT CRIMINAL COUNTS AND SEVERAL OTHER -- SEVERAL OTHER CIVIL ACCOUNTS. THIS IS AN COOPERATION BETWEEN DIFFERENT GOVERNMENT AGENCIES AND THE U.S. GOVERNMENT AND BIKINI AND GOVERNMENT THAT HAVE BEEN COOPERATING ACROSS THE BOARD. SAM BANK WHEN FREED IS ENTITLED TO IT I TRADITION TRIAL BUT WHAT WE HAVE SEEN IS REALLY BOTH GOVERNMENTS IN LOCKSTEP TO TRY TO PURSUE THIS CASE. THE OTHER THING CLEAR-CUT THAT
YOU SEE THE DOTS CONNECTED ON CAPITOL HILL AS WELL AS SPELLED OUT IN CHARGES IS MONEY WENT INTO FTX, ALAMEDA, AND THERE WERE NO CONTROLS IN BETWEEN SO MONEY CAME IN, PEOPLE THOUGHT THEY WERE DEPOSITING MONEY INTO THEIR ACCOUNTS AND THAT ENDED UP SOMEWHERE ELSE, PERHAPS IT ALONE TO SPF OR OTHER TOP EXECUTIVES, OR PERHAPS ONE OF THE CHARGES ALLEGES THAT THEY WERE CAMPAIGN DONATIONS GOING TO POLITICIANS. MATT: DONATIONS IN THE TENS OF MILLIONS OF DOLLARS. SAM BACON FREAK GAVE DEMOCRATS $45 MILLION, HIS REPUBLICANS GAVE -- HIS LIEUTENANTS GAVE REPUBLICANS A LOT OF MONEY PAIRED WHAT WE KNOW ABOUT THE RECIPIENTS OF THE MONEY AND IF THEY WILL GIVE IT BACK? >> IF THEY ARE FOUND GUILTY OF THE CHARGES, IT MEANS ALL THE MONEY SPF AND OTHER TOP EXECUTIVES HAVE GIVEN, DONATED MOSTLY TO REPUBLICANS BACK IN 2019 AND 2020, ABOUT $84 MILLION, OUT THERE THAT WOULD POTENTIALLY BE CLAWED BACK.
IT IS A LONG AND ARDUOUS PROCESS BUT THIS WILL ENTANGLE FTX AS WELL AS IN BROAD SWATH POLITICIANS ON CAPITOL HILL THAT MAY HAVE TO PAY BACK MONEY. MATT: THANKS VERY MUCH, LAURA DAVIS, THEY'RE DOING THE REPORTING ON THE GROUND IN TERMS OF WHAT IS GOING ON WITH THE MONEY SPF AND HIS CRONIES GAVE TO POLITICIANS IN WASHINGTON. REGULATORS HAVE COME OUT WITH CRIMINAL CHARGES AGAINST BANKMAN-FRIED. THE SEC ACCUSED HIM OF DEFRAUDING INVESTORS OUT OF $1.8 BILLION THIS MORNING AND THE CFTC IS SUING BANKMAN-FRIED, FTX, AND ALAMEDA RESEARCH WERE VIOLATIONS OF FEDERAL COMMODITIES LAWS.
THE CFTC COMMISSIONER JOINED BLOOMBERG EARLIER. >> THESE POOLS OF CUSTOMER FUNDS WERE TREATED LIKE STASHES OF CASH AND USED TO DO ALL KINDS OF INAPPROPRIATE THINGS INCLUDING LEVERAGE PLAYS TO ACQUIRE COMPETITORS, ACQUISITIONS OF LAVISH BEACHFRONT HOMES, THIS IS THE ANTITHESIS OF ANYTHING PERMITTED IN REGULATED MARKETS. WE WILL TO THE FULL EXTENT PLAN TO ENFORCE THE LAW. MATT:
BEN BAIN JOINS US FROM WASHINGTON AS WELL. I'M NOT SURE IF I SAID REGULATORS FILED CRIMINAL CHARGES, THEY CANNOT DO THAT. THEY FILED CIVIL CHARGES. STILL VERY SERIOUS. WHAT WE KNOW ABOUT THE LAWSUITS? SONALI: THAT'S RIGHT -- BEN: THAT'S RIGHT, VERY SERIOUS AND IN LINE WITH WHAT CRIMINAL AUTHORITIES UNSEALED IN MANHATTAN. REGULATORS LAID OUT A PRETTY BUFF CASE.
I THINK YOU SHOULD READ WHAT THEY ARE SAYING WITH THE ALLEGED HAPPENED -- WHAT THEY ALLEGED HAPPENED. IT IS REMARKABLE THE EXTENT OF THE ALLEGATIONS THEY ARE SAYING. THEY TALK ABOUT THE WAY HE ESSENTIALLY WAS USING STASHES OF MONEY TO FUND A LAVISH LIFESTYLE . THIS IS KIND OF REALLY A REMARKABLE FALL FROM GRACE WE ARE SEEING ITS CAPSTONE WHICH IS LIKELY TO CONTINUE TO SPOOL OUT. IT IS WORTH RECALLING A LITTLE MORE THAN A MONTH AGO SAM BANKMAN-FRIED WAS THE DARLING OF THE CRYPTO INDUSTRY AND THE VANGUARD OF FINANCE. FTX WAS ON THE UNIFORMS OF UMPIRES AT MAJOR LEAGUE BASEBALL AND TODAY YOU HAVE AS YOU SHOWN THE SCREEN SEC CHAIR GARY GENSLER DESCRIBING A HOUSE OF CARDS AS HE SAID WHICH WAS A FOUNDATION OF DECEPTION. IT IS REMARKABLE. KAILEY:
AND YET -- AND THIS WAS POINTED OUT BY A REPUBLICAN FROM MINNESOTA DURING THE HEARINGS TODAY -- GARY GENSLER HAS MET WITH SAM BANKMAN-FRIED, THAT HE AND THE QUOTE FROM THE HEARING MET WITH FTX MORE THAN ANYONE ELSE IN THE INDUSTRY. HOW IS THE SEC GOING TO RECONCILE THIS WHEN THEY TALK ABOUT FRAUD THEY SAY HAS BEEN HAPPENING OVER THE COURSE OF YEARS AT THE SAME TIME WHEN THEY HAVE BEEN IN CONVERSATIONS WITH FTX FOR YEARS? BEN: DEFINITELY THERE'S A LOT OF TOUGH QUESTIONS GARY GENSLER AND OTHER REGULATORS WILL HAVE TO ANSWER TO A POINT, PARTICULARLY AS REPUBLICANS TAKE OVER THE HOUSE OF REPRESENTATIVES IN WASHINGTON NEXT MONTH. THIS IS ALREADY A POLITICAL ISSUE. THE IDEA OF SAM BANKMAN-FRIED AND FTX HAVING A FOOTPRINT EXCLUSIVELY AT THE SEC JUST IS NOT CORRECT THOUGH. IT WAS -- THEY WERE MEETING FREQUENTLY WITH REGULATORS. THE CFTC AND HAS LAURA WAS DISCUSSING EARLIER, THERE WERE EXTENSIVE POLITICAL DONATIONS TO BOTH PARTIES COMING FROM EXECUTIVES AT FTX AND FROM POLITICAL CAMPAIGN DONATIONS REALLY COMING FROM VARIOUS ORGANIZATIONS ASSOCIATED WITH FTX. FTX AND SAM BANKMAN-FRIED DID
QUITE A JOB CHARMING WASHINGTON. AND CERTAINLY THE SEC DID HAVE MEETINGS WITH THEM BUT I DID NOT THINK IT WAS JUST THE SEC PERHAPS GIVING THEM AN EAR. MATT: THANKS VERY MUCH, BEN BAIN , REPORTING FROM WASHINGTON DC ON ISSUES SURROUNDING REGULATORS. COMING UP, CRYPTO REGULATION
ADVOCATE, HEAD OF NONPROFIT BLOCKCHAIN ORGANIZATION STELLAR DEVELOPMENT FOUNDATION, SITS DOWN WITH US TO TALK ABOUT WHAT SHE THINKS NEEDS TO BE DONE IN THE FUTURE. KAILEY: WE WILL ALSO GET THE TAKE LIVE FROM CAPITOL HILL WITH REPUBLICAN REPRESENTATIVE FRANK LUCAS OF OKLAHOMA. MATT: PLUS TO ACCESS THE LATEST DATA AND NEWS ON CRYPTO, CHECK OUT KAILEY: THIS IS BLOOMBERG CRYPTO, I AM KAILEY LEINZ WITH MATT MILLER. LET'S GET BACK TO CAPITOL HILL WHERE SHE AND ALI BOSTIC IS JOINED BY REPUBLICAN REPRESENTATIVE FRANK LUCAS OF OKLAHOMA. OVER TO YOU. SONALI: THANK YOU SO MUCH FOR YOUR TIME, REPRESENTED, THINK YOU FOR JOINING ME. SOMETHING I WONDER ABOUT IS,
WHEN YOU LISTEN TO THE HEARING TESTIMONY OF JOHN RAY, THE NEW CEO OF FTX, ARE YOU FIND AND YOU COULD FIND CLOSURE FOR YOUR CONSTITUENTS OR PATH FORWARD? REP. LUCAS: I WISH I COULD SAY THAT BUT THIS IS A MULTIBILLION DOLLAR COMPANY THAT WILL CONTINUE. WHEN THE BOOKING SYSTEM WAS POINTED OUT TO BE READ RENT -- FREEDOM ENTRY, WE NEED -- WHEN HE DISCUSSED BACK ABOARD MEMBERSHIP, THE ABILITY OF THE CEO TO LOAN HIMSELF MONEY OUT OF THE COMPANY, IT WAS HORRIFYING. THAT IS WHAT THIS HEARING IS ABOUT. GETTING TO THE BOTTOM OF THE MASS SO WE CAN FIGURE HOW TO MAKE SURE FROM CONGRESS'S PERSPECTIVE HOW THIS DOES NOT HAPPEN AGAIN AREA SONALI: HAS IT CHANGED YOUR VIEW OF THE CRYPTO INDUSTRY OR DO YOU VIEW THIS AS A ONE-OFF EVENT? REP. LUCAS:
I HAVE ALWAYS BEEN SUSPICIOUS OF CRYPTO NOT FROM THE PERSPECTIVE OF THE PROFESSIONAL INVESTORS BUT THERE ARE A LOT OF LITTLE PEOPLE WHO PUT THEIR MONEY INTO THIS THAT HAVE BEEN PULLED IN. I SAID IN 32 TO MEETINGS, ONLY INVEST THE MONEY THEY DON'T NEED. IT IS THE WILD WEST IN CRYPTO. THERE WAS A GUNFIGHT AND INVESTORS MAY HAVE LOST. SONALI: YOU ASKED WHY CERTAIN ASSETS WERE LEFT OUT OF BANKRUPTCY. YOU FEEL THOSE ASSETS SHOULD
HAVE BEEN INCLUDED? REP. LUCAS: ULTIMATELY THE INVESTORS WILL WANT AS MUCH OF THEIR MONEY BACK AS THEY COULD GET. WHEN MR. RAY COULD IDENTIFY $1 MILLION THEY TIED DOWN, BUT IF PUBLIC REPORTS ARE READILY, THAT MEANS $6 MILLION TO $7 MILLION HAVE NOT BEEN ACCOUNTED FOR. I WANT TO KNOW ABOUT THE
INTERNATIONAL NATURE, 100 SOME ENTERPRISES AROUND THE WORLD IN FTX. WOULD PRUDE REGULATORS PERHAPS IN THE UNITED STATES AND OTHER COUNTRIES HAVE ASSETS AND COUNTRIES WERE PERHAPS THE REGULATION WANTED TO DROP ON THAT? THOSE ARE QUESTIONS I WANT TO BE ANSWERED BUT THERE ARE PEOPLE THAT MAY BE PUT REAL MONEY INTO THIS THAT NOW APPEARS TO HAVE BEEN A FRAUD. SONALI: AMONG YOUR PEERS, THERE SEEMS TO BE A DEBATE ABOUT THE ROLE OF THE SEC WHEN IT COMES TO ENFORCEMENT OF THE CRYPTO INDUSTRY AND LAYING OUT THE RULES OF THE LAND. WHAT DO YOU FEEL IS THE RIGHT
ROLE FOR THE SEC VERSUS THE CFTC AS YOU ALSO PREVIOUSLY SPENT TIME ON THE AGRICULTURAL COMMITTEE? REP. LUCAS: I CHAIR THE COMMITTEE WHEN WE HAD THE SENATOR UNDER OATH ABOUT HIS DEBACLE. THE CFTC IS A PROACTIVE IDENTITY. YOU COME TO THEM WITH IDEAS AND CONCEPTS AND THEY PROACTIVELY MAKE RULES AND REGULATIONS. SECURITIES EXCHANGE COMMISSION IS REACTIVE, THEY COME IN AFTER THE FACT, TO DIFFERENT CULTURES AND PERSPECTIVES. WE WILL SEE WHEN THIS SORTS OUT INCOME AND CHAIRMAN OF THE FINANCIAL SERVICES COMMITTEE IS FOCUSED TO -- FOCUSED ON BRINGING ORDER TO THE CRYPTO INDUSTRY.
WE WILL SEE WHAT FORM THAT TAKES BUT IT INVOLVES AGGIE AND FINANCIAL SERVICES AND WE WILL ENSURE THIS KIND OF MESS CAN HAPPEN AGAIN -- CAN'T HAPPEN AGAIN. SONALI: DO YOU THINK THESE RULES COULD BE SORTED OUT IN NEAR TERM WHEN EVEN COMMITTEE MEMBERS ARE DISPUTING ON THE ROLE OF THE SEC? REP. LUCAS: YOU SAW THE FUNDAMENTAL DISAGREEMENT. PART OF MY COLLEAGUES BELIEVE CRYPTO SHOULD BE BANNED. PART OF MY COLLEAGUES ON THE
COMMITTEE BELIEVE IT IS THE FUTURE OF COMMERCE, THE STANDARD OF CURRENCY. I'M NOT SURE WHERE WE FALL YET IN THAT PROCESS BUT CRYPTO IS NOT GOING AWAY. IT HAS TAKEN A BIG HIT THANKS TO THE FOLKS AT FTX. SONALI: YOU AND SOME YOUR PEERS TOLD ME THEY REMEMBER SAM BANKMAN-FRIED WALKING THROUGH THESE HALLS FAIRLY OFTEN. YOU HAVE BEEN HEARING THAT PRETTY RECENTLY AND SOME MEMBERS HAVE TAKEN POLITICAL DONATIONS FROM SAM BANKMAN-FRIED. REP. LUCAS: AT THE TIME THOSE CONTRIBUTIONS WOULD BE GIVEN AND I DON'T BELIEVE I RECEIVED ANY OF THOSE.
HE WAS THE WONDER BOY CRYPTO, THE WONDER OF MODERN FINANCE AND TOLD EVERYONE HE CREATED A SYSTEM THAT CANNOT FAIL AND THAT WOULD ONLY WORK LIKE MOST WONDER BOYS, HE IS UNDER ARREST NOW. SONALI: WHAT DO YOU THINK THOSE COMMITTEE MEMBERS SHOULD DO WITH THE FUNDS? KAILEY: I CAN'T ANSWER -- REP. LUCAS: I CAN'T ANSWER THAT QUESTION. IF IT WAS GIVEN IN GOOD FAITH, THAT IS A DECISION THEY HAVE TO MAKE. BUT WE HAVE TO BE PRUDENT ABOUT
PUBLIC OFFICIALS ABOUT THE HELP WE RECEIVE. SONALI: BACK TO YOU. KAILEY: SONALI BASAK WITH FRANK LUCAS, THANK YOU BOTH SO MUCH. LET'S HEAD FROM CAPITOL HILL TO THE BAHAMAS. FRANK BANKMAN-FRIED -- SAM BANKMAN-FRIED APPEARED IN COURT. OUR BANKING REGULATOR WAS IN THE ROOM. WHAT DID WE LEARN FROM THE
PROCEEDINGS? >> MUCH OF WHAT WE SAW TODAY DURING THE INITIAL PART OF THE ARRAIGNMENT WAS THE LAWYERS FOR THE U.S. GOVERNMENT AND SAM BANKMAN-FRIED DISCUSS WHETHER AT THIS JUNCTURE HE WOULD BE A FLIGHT RISK. THERE WAS MUCH DEBATE, FIREWORKS EVEN AROUND WHETHER IT WAS APPROPRIATE TO HAVE HIM BE CONSIDERED FOR BAIL. LAWYERS ON BOTH SIDES PRESENTED THEIR CASE. BANKMAN-FRIED TESTIFIED TO SAY HE IN HIS OWN VIEW WOULD RELINQUISH HIS RIGHT TO AN EXTRADITION, AND WE ARE LEARNING TO FIND OUT WHAT THIS WILL MEAN. WILL HE FIGHT AN EXTRA EDITION?
THE COURT IS NOW ADJOURNED FOR AN HOUR AND WE WILL CONTINUE TO HEAR MORE FROM THAT. MATT: YOU WILL CONTINUE TO REPORT THEN FOR US FROM THE BAHAMAS. HE THEY'RE TALKING TO US IN A RECESS OF THE ARRAIGNMENT HEARING. JOINING US TO TALK ABOUT REGULATION IS DONAL DIXON, CEO AND EXECUTIVE DIRECTOR OF STELLAR DEVELOPMENT FOUNDATION, A NONPROFIT ORGANIZATION BUILDING THE INTERNET FOR PAYMENTS USING BLOCKCHAIN TECHNOLOGY. SHE HAS BEEN A PROMINENT
ADVOCATE FOR A MORE GREEN, MORE TRANSPARENT AND SAFER CRYPTO MARKET. SHE HAS PREVIOUSLY TESTIFIED ON THE HILL AT THE SAME TIME AS SAME BEEN THE -- SAM BANKMAN-FRIED. OUT OF WASHINGTON, D.C. IS NATHAN DEAN, SENIOR U.S. POLICY ANALYST AT BLOOMBERG. LET ME ASK YOU WHAT YOU THINK THIS SITUATION MEANS WE NEED? IS IT MORE REGULATION? A LOT OF THIS APPEARS TO BE HAPPENING OUTSIDE OF THE SEC JURISDICTION AND A LOT OF CRIMES THAT HAVE BEEN COMMITTED, AT LEAST WHAT LOOKS LIKE THOSE CRIMES HOW JOHN J RABE DESCRIBED THEM, ARE ALREADY ILLEGAL. >> I THINK SO MUCH OF WHAT YOU SAID IS SPOT ON.
THE TRUTH OF THE MATTER, WHAT HAPPENED HERE AND WHAT MR. RAY FOCUSED ON WAS THE FACT THERE WAS A VIOLATION OF ALL OF THOSE TRIED-AND-TRUE CORPORATE FORMALITIES AND NECESSARY CONTROLS WE HAVE AND THAT WE NEED TO HAVE. WE DID NOT HAVE A FULL BOARD OVER THE WHOLE FTX GROUP. THERE ARE 70 CHALLENGES WITH WHAT HAPPENED HERE.
I HAVE TALKED TO -- I'VE SEEN HIGH SCHOOL BAKE SALES THAT HAVE BEEN SO MUCH MORE STRENGTHENED IN TERMS OF WHAT THEY PUT TOGETHER AND HOW THEY MANAGED ASSETS. WE CANNOT HAVE THAT IN A COMPANY OF THIS SIZE AND SCALE. THIS HAS NOTHING TO DO WITH CRYPTO AND BLOCKCHAIN AND YOU SEE A LOT OF THAT DISCUSSION HAPPENING TODAY. WE SAW EVEN CHAIRWOMAN WATERS RECOGNIZED THE DISTINCTION BETWEEN A LOT OF WHAT HAPPENED HERE WAS NOT ABOUT THE TECHNOLOGY. CONGRESSMAN MCHENRY AND OTHERS FOCUSED ON THE DISTINCTION BETWEEN DON'T THROW THIS TECHNOLOGY OUT JUST BECAUSE WE HAVE THIS ONE REALLY BAD ACTOR AND WE HAVE A TOTAL DISREGARD OF CORPORATE CONTROLS AND FORMALITIES. THIS IS WHAT I SEE. DO WE NEED MORE REGULATION?
WE DO HAVE GAPS AND WE HAVE BEEN ADVOCATING FOR REGULATION. WE WOULD LOVE TO SEE THE CFTC STEP UP AND TAKE A STRONGER ROLE. WE SUPPORTED THE LEGISLATION THAT WAS PUT TOGETHER ON THE SENATE SIDE ON THAT. WE WOULD ALSO LOVE TO SEE A CLEAR DISTINCTION BETWEEN WHAT IS A SECURITY, THEREFORE WHAT FALLS UNDER THE SEC JURISDICTION, AND WHAT IS A COMMODITY. WE DO NOT HAVE CLEAR RULES OF THE ROAD AND WE NEED IT. KAILEY:
MANY HAVE BEEN CALLING ON CONGRESS TO DESIGNATE WHAT THE RULES OF THE ROAD ARE. NATHAN, TO BRING YOU IN, WHAT WAS THE TAKE ON THE TONE OUT OF THIS AND HOW DOES IT PERHAPS INFLUENCED YOUR THINKING OF THE LIKELIHOOD OF CONGRESS GETTING THROUGH COPPER HINTS OF REGULATORY FRAMEWORK IN THE NEXT YEAR? NATHAN: INTO THE HEARING, MY BIGGEST QUESTION IS ARE WE GOING TO SEE DEMOCRATIC LAWMAKERS JOIN THE LIKES OF REPRESENTATIVE BRAD SHERMAN AND SAYING LET CRYPTO IMPLODE. WE SAW A LITTLE OF THAT, NOT ENOUGH FOR ME TO CHANGE MY THINKING ON WILL CONGRESS ATTEMPT LEGISLATION NEXT YEAR. THE PROBLEM IS THE DEMOCRATS WANT TO DO SOMETHING, REPUBLICANS WANT TO DO SOMETHING, BUT THAT IS DIFFERENT. I THINK THERE ARE PROVISIONS THAT CAN COME ABOUT NEXT YEAR. I DO NOT THINK THERE WILL BE A QUICK RESULT OF THIS BUT TO THEIR PRIOR POINTS, I THINK CONGRESS WILL COME IN AND SAY WE NEED TO DETERMINE WHAT IS A SECURITY VERSUS WHAT IS A COMMODITY. WE NEED TO ENSURE EXCHANGES AND
PLATFORMS HAVE A WAY TO REGISTER, WITH THE CFTC AND S.E.C.. THE SEC WILL MOST LIKELY ROUTINE CONTROL OF 99% OF THE TOKENS AND THERE NEEDS TO BE CUSTODY AND SEGREGATION OF ASSETS. THAT'S ONE THING JOHN RAISED MULTIPLE TIMES WHEN POLICYMAKERS ASKED THEM ON REGULATORY MATTERS IS SEGREGATION OF ASSETS. THAT REGULATION EXISTS WHETHER IT IS SEC OR CFTC BUT THEY HAVE TO SPIN IT FOR CRYPTO. MATT: IT WOULD NOT HAVE MATTERED ANYWAY FOR THE ASSETS FOR THE LION SHARE OF FTX.COM'S ASSETS WERE DEPOSITED FOR NON-US CUSTOMERS.
I WANT TO ASK ABOUT COINBASE. WE SAW THE SHARES FALL TODAY, SPECIFICALLY NOT ABOUT THE COMPANY BUT I THOUGHT OF YOUR NOTE ON COMPLIANCE COSTS. DO YOU THINK WE GOT ANY INDICATION TODAY FOR THOSE EXISTING U.S. ENTITIES REGULATED HERE HOW MUCH THEIR COMPLIANCE COSTS WILL GO UP? DONAL: WE ARE ESTIMATING IN THE TENS OF MILLIONS OF DOLLARS. -- NATHAN: WE ARE ESTIMATING IN THE TENS OF MILLIONS OF DOLLARS. IF YOU WANT TO CONVERSATION
WITH THE SEC, ONE HUNDRED $50,000 OR $250,000 WITH YOUR LEGAL COSTS. FOR THE MORE ESTABLISHED COMPANIES, THIS IS MORE OF A MANAGEABLE ISSUE, NOT MATERIAL. IF YOU TALK ABOUT COINBASE OR BINANCE IF THEY WANT TO CONVERSATION WITH THE SEC, THIS IS MANAGEABLE. THE PROBLEM IS FOR THE MOM-AND-POP STARTUPS.
I THINK THIS IS A LOT OF THE LEGISLATION WILL DO IS FAVOR INSTITUTIONAL, NOT FAVOR DECENTRALIZED OR MOM-AND-POP STARTUPS WITH THREE DEVELOPERS BECAUSE FROM THEIR POINT OF VIEW GOING TO TALK TO THE SEC AND PAYING $100,000 IS NOT SOMETHING THEY WANT TO DO WHEN THEY ARE IN THEIR EARLY STAGES OF A START UP. KAILEY: TO EXPAND ON THAT POINT, PROBABLY THE -- PART OF THE CRIMINAL ORGANIZATIONS ARE CAMPAIGN-FINANCE VIOLATIONS HE BROKE THE LAW WITH SOME OF THE POLITICAL DONATIONS HE MADE SO MANY OF DURING THE MIDTERMS ELECTION CYCLE IN 2022. HOW ARE YOU THINKING ABOUT THAT AND THE INFLUENCE IN WASHINGTON AND PERHAPS TRUST THAT NEEDS TO BE BUILT BACK CONSIDERING THIS MAN HAD AN INCREDIBLE AMOUNT OF INFLUENCE AND A LOT OF PEOPLE GOT BURNED? DONAL: THIS HAS BEEN A REALLY BIG CHALLENGE. IF YOU THINK ABOUT NEW TECHNOLOGY, IT HAPPENED IN THE EARLY DAYS OF THE WET -- WEB, YOU TAKE 20 STEPS FORWARD WITH POLICY AND REGULATION WHEN YOU MEET WITH REGULATORS AND ENGAGE AND SHARE INFORMATION AND SOMETHING LIKE THIS HAPPENS AND YOU TAKE 100 STEPS BACK. THIS IS PART OF WHAT WE NEED TO FOCUS ON AS AN INDUSTRY TO PAY ATTENTION TO THE NEEDS OF THE REGULATORY BODIES. I AM A BIG BELIEVER IN LEGISLATION, FOR FIGHTING FOR INNOVATION AND MAKING SURE WE DO NOT EXCLUDE THE MOM-AND-POP DEVELOPERS THAT YOU MENTION.
I THINK IT IS IMPORTANT WE ADVOCATE FOR THAT AND PAY ATTENTION TO NOT JUST MAKE GAINS IN THE SPACE. THIS IS WHAT WE WILL CONTINUE TO FIGHT FOR AND WILL CONTINUE TO ENGAGE. WE ARE EXCITED TO SEE THE BIPARTISAN WORK GOING ON HERE AND WE HOPE TO SEE IT AGAIN CONTINUING THROUGH THE YEAR. KAILEY:
THAT IS ALL WE HAVE TIME FOR BUT COME BACKING TALK TO US. THANK YOU TO DENELLE DIXON: AND ALSO TO BEN BAIN -- NATHAN DENA BLOOMBERG INTELLIGENCE. WHAT A DAY. MATT: AN INCREDIBLE DAY AND A LOT OF DRAMA, MAYBE NOT AS MUCH AS WE WOULD HAVE GOTTEN HAD SAM BANKMAN-FRIED BEEN ALLOWED TO TESTIFY SO THERE ARE A LOT OF QUESTIONS ABOUT THE TIMING OF THE ARREST AND FACT HE COULD NOT SPEAK IN FRONT OF CONGRESS PUBLICLY BUT CERTAINLY THERE WAS A LOT OF THEATER WITH CONGRESS AND JOHN RAY. KAILEY: MOORE THEATRE AT 2:00 P.M. EASTERN WHEN THE U.S. ATTORNEY FOR THE SOUTHERN
DISTRICT OF NEW YORK WILL HOLD A NEWS CONFERENCE OR DON'T MISS THAT LATER AND DON'T MISS BLOOMBERG CRYPTO NEXT WEEK, TUESDAY 1:00 P.M.
2022-12-17 03:23
