Does Crypto Need More Regulation? | Bloomberg Crypto 11/29/2022
MATT: WE ARE LIVE FROM BLOOMBERG'S WORLD HEADQUARTERS. KAILEY: WELCOME TO BLOOMBERG CRYPTO, A LOOK AT THE PEOPLE, TRANSACTIONS, AND TECHNOLOGY SHAPING THE WORLD OF DECENTRALIZED FINANCE. MATT: A PAINFUL MONTH DRAWS TO A CLOSE AS BLOCKFI IS THE LATEST TERM -- A LATEST TO COLLAPSE. KAILEY: THEN THERE IS THE BEAR CASE, A SKEPTIC TAKE, FORMER SEC OFFICIAL JOHN REED STARK TELLS US WHY IT COULD ULTIMATELY GO TO ZERO. MATT: PLUS EUROPE IS MAKING HEADWAY IN THE GLOBAL RACE TO REGULATE RIPPED OUT. WE HAVE THE LATEST FROM A KEY LAWMAKER. KAILEY:
LET'S GET A SNAPSHOT OF THE MARKET, CRYP <GO>. BITCOIN HIGHER AT 1%, IN THE RANGE IT HAS BEEN AT WEEKS NOW, $16,400 OR SO. IT HAS BEEN STEADY FOR SEVERAL WEEKS BUT DO NOT LET THAT FULL YOU BECAUSE IT IS STILL DOWN ABOUT 19% IN THE MONTH OF NOVEMBER. KEEP THAT IN MIND. TODAY ETHER IS OUT FORMING, UP 3% AROUND THE 1200 LEVEL AND MORE OUTPERFORMANCE COMING FROM A MEAN TOKEN, DOGE COIN. ANOTHER COINBASE HAS SEEN VOLATILITY IS MOVING HIGHER ON THE DAY ALONG WITH THE GAINS IN THE TOKENS. MATT: ONE OF THE INTERESTING THINGS HAS BEEN THE DROP WE HAVE SEEN IN BITCOIN, RELATIVE TO EQUITIES.
THE TWO WERE FAIRLY CORRELATED FOR SO LONG BUT THE DROP WE HAVE SEEN NOW IN THE MONTH AFTER FTX'S COLLAPSE IS ONE OF THE WORST, ONLY FIVE HAVE BEEN WORSE IN THE LAST FIVE YEARS. IT IS A ROUGH YEAR FOR CRYPTO, KEEPING MARKET PARTICIPANTS SPLIT ON THE FATE OF THE ASSET. >> WE WILL SEE A LITTLE BIT OF CONTAGION WHEN ONE PLAYER GOES DOWN -- >> I THINK THERE WILL BE A LITTLE MORE FOLLOW. >> I THINK OVERALL THE INDUSTRY IS FINE.
>> BITCOIN IS COMING OUT OF THE SMELLING LIKE A ROSE. >> BITCOIN FUNDAMENTALS ARE INTACT. >> WE SEE THE SAME CONFIDENCE. >> THE BIGGEST LESSON HERE IS THE VALUE IS IN BITCOIN AND SELF CUSTODY AND NOT CRYPTO.
>> I THINK WE WILL SEE SELLING OFF IN BITCOIN. >> I THINK WE WILL RECOVER QUICKLY. >> WE SEE LESS VOLATILITY THAN WE DID IN THE LAST BEAR MARKET. >> SOMETIMES YOU NEED TO BATTLE TEST, YOU NEED TO GO THROUGH CRISES. MATT: SO BIG DIFFERENTIATION BETWEEN THE VALUE BITCOIN AND PROBLEMS BUSINESSES OF TRADING BITCOIN HAVE GENERATED. THE CRYPTO WORLD NERVOUSLY GENERATING FOR FURTHER FALLOUT FROM FTX WITH A SPOTLIGHT ON BLOCK FIVE. SONALI BASAK IS HERE AT THE
LATEST. >> WE ARE TRACKING THE LATE IS BECAUSE NOW THAT FTX IS GOING THROUGH BANKRUPTCY, IN THE COMPANY OF MORE CRYPTO LENDERS AND BROKERAGES, FILING FOR CHAPTER 11 PROTECTIONS IS -- PROTECTIONS. CLIENT HAVE BILLIONS TIED UP AT THEM. SOME COMPANIES OBLIGATED LENGTH GIVEN FTX LEND MONEY TO BLOCKFI AND TO BUY ASSETS OF BLOOMBERG DIGITAL, TO ASSETS THAT HAVE GONE AWRY.
IN ADDITION TO MORE THAN THE $3 BILLION OWED TO THE TOP 50 UNSECURED CREDITORS OF FTX, MANY THAT NAME -- REMAIN NAMELESS, THERE 1.3 BILLION DOLLARS OWED TO THE TOP 50 CREDITORS OF BLOCK FI AS WELL. . THAT INCLUDES FTX AND OTHER SUBSTANTIAL EXPOSURES THAT A BLOCK FI ADVISOR SAYS HAS CREATED A LIQUIDITY CRISIS THAT INCREASE THEIR AILMENTS. THEY ALSO SAY FTX'S ISSUES ARE LIKELY TO DELAY THE RECOVERY OF ASSETS.
AS WE WAIT DETAILS ABOUT BLOCKFI, VOYAGER, CELSIUS, AND GENESIS, SAID TO BE HIRING A RESTRUCTURING AND -- RESTRUCTURING ADVISOR AS IT WEIGHS OPTIONS, INCLUDING BANKRUPTCY, WHICH A TRIED TO AVOID. IT FELL PRIOR TO FTX ISSUES IN EARLY NOVEMBER. BITCOIN OUTFLOWS FROM EXCHANGES HAVE BEEN THE LARGEST IN HISTORY ACCORDING TO ANALYSIS BY GALAXY DIGITAL RESOURCE. THERE ARE BIG PLAYERS AS YOU'VE HEARD IN TRADITIONAL FINANCE. THEY SAY THEY SEE BITCOIN AS A
VIABLE ASSET, EVEN ASKED CENTRALIZED EXCHANGES AND LENDERS FAIL. THIS IS BOUND TO COME INTO THE SPOTLIGHT AS U.S. LAWMAKERS INVESTIGATE THE COLLAPSE OF FTX IN THE HEARING SET FOR DECEMBER 13. THE HOUSE FINANCIAL SERVICES CHAIRWOMAN SAID THIS IS A MATTER OF THE HEART THAT FTX CALLS OVER ONE MILLION USERS LET'S HEAD THIS IS ALSO ABOUT MAKING SURE THERE'S LEGISLATION DIGITAL ASSETS CANNOT OPERATE IN THE SHADOWS OUTSIDE OF FEDERAL OVERSIGHT. MATT: THANKS VERY MUCH FOR THAT.
JOINING US IS CRYPTO INVESTOR WHO WRITES FOR BLOOMBERG OPINION. HE PREVIOUSLY WORKED AT A QR CAPITAL MANAGEMENT AND IS ALSO THE AUTHOR OF THE POKER FACE OF WALL STREET. KAILEY: THANK YOU FOR BEING HERE. I WANT TO START WITH A RECENT PIECE YOU WROTE FOR BLOOMBERG OPINION WHERE YOU SAID "NO NEW REGULATIONS WILL HELP FTX CUSTOMERS AND CREDITORS. WHAT NEW REGULATIONS WOULD DO IS BLOCK ONE OF THE MOST EXCITING AREAS OF CRYPTO INNOVATION, A NEW TYPE OF FINANCIAL EXCHANGE. NO DOUBT THERE WILL BE FAILURES
AND SCANDALS ASSOCIATED WITH THESE INNOVATIONS BUT INNOVATIONS HAVE THE POTENTIAL TO FIX PROBLEMS AND EVENTUALLY ELIMINATE THEM. WHILE NO ONE CAN BELIEVE SOME FUTURE ROUND OF REGULATION WILL BE THE ONE TO FINALLY SOLVE THE ANCIENT PROBLEMS OF FINANCE. SO REALLY? NO NEW REGULATION AFTER THIS EPISODE? AARON: FIRST OF ALL, FTX WAS REGULATED. IT IS NOT A QUESTION OF AN UNREGULATED CRYPTO, NOT ABOUT LIBERTARIAN HACKERS OR OFFSHORE IN RUSSIA. THESE WERE ENTIRELY REGULATED
FINANCIAL INSTITUTIONS WHO FILED ALL PAPERWORK, WERE AUDITED, BACK TO OUR MAJOR INSTITUTIONAL INVESTORS. THE PROBLEMS WE HAVE SEEN FTX APPEAR TO BE IDENTICAL TO THE ONES WE SAW IN MF GLOBAL AND OTHER MAJOR FAILURES. SO IT IS HARD TO BELIEVE. THE ISSUE IS WHENEVER REGULATIONS FAIL, WHENEVER A REGULATION ENTITY FAILS THE ANSWER IS ALWAYS NEW REGULATIONS. BUT BITCOIN WAS INVENTED SPECIFICALLY TO SOLVE THESE KINDS OF PROBLEMS AND IT IS STILL TRUE IF YOU OWN BITCOIN, IF YOU KEEP YOUR PRIVATE KEY AT YOUR COMPUTER WHERE IT IS CONNECTED TO THE INTERNET BUT SOMEWHERE SECURE IN COLD STORAGE, YOU ARE IMMUNE TO THESE KIND OF PROBLEMS. KAILEY:
I GUESS I GET THE ARGUMENT REGULATION DOES NOT NECESSARILY PREVENT ALL BAD ACTORS FROM ACTING BADLY BUT IF SOMEONE IS GOING TO BREAK INTO MY HOUSE I WILL STILL LOCK THE DOOR. HE MIGHT BE ABLE TO DO IT ANYWAY BUT I WILL STILL LOCK THE DOOR. IS THERE NOT A HAPPY MEDIUM BETWEEN INSTALLING SAFE CARS TO HELP PROTECT THE CONSUMER AND STILL ALLOWING INNOVATION TO MOVE FORWARD? AARON: REGULATION IS LIKE PUTTING A DO NOT ROCKET SIGN ON YOUR HOUSE. CRYPTO IS LIKE LOCKING YOUR DOOR. THAT IS THE WHOLE POINT.
CRYPTO OFFERS WAYS TO ESSENTIALLY LOCK YOUR DOOR. YOU DON'T HAVE TO RELY ON S.E.C. AND WASHINGTON TO BRING AN ENFORCEMENT ACTION FIVE YEARS LATER. THAT'S THE PROMISE OF CRYPTO. MATT: THAT'S THE KEY. THAT IS WHY KAILEY DOES NOT KEEP ALL OF HER VALUABLE STUFF AT SAM BANKMAN-FRIED'S HOUSE. [LAUGHTER] SHE CAN LOCK YOUR OWN DOOR WHEN IT IS AT HER HOUSE.
ARE MORE INVESTORS LEARNING THAT LESSON THE HARD WAY ECHO SONALI JUST TOLD US THEY HAVE BEEN OUTFLOWS OF BITCOIN FROM CENTRALIZED EXCHANGES THIS MONTH AND THERE HAVE BEEN IN HISTORY. AARON: I HATE TO BE CYNICAL BUT, IN THE NEXT CRYPTO SUMMER, THE NEXT TIME CRYPTO GOES UP FAST, PEOPLE WILL DO THE SAME THING, THEY WILL LEAVE THEIR ASSETS IN UNSECURED PLACES, WILL NOT KEEP THEIR KEYS, AND THEY WILL -- THEY WILL BE LOSSES THEN. AND IN TRADITIONAL INSTITUTIONS TOO. MORE KEEP OUT SIGNS IS NOT THE
ANSWER, WE NEED LOCKS. MATT: IS THIS STILL GOING TO BE PROBLEMATIC FOR THE VALUE OF CRYPTO ASSETS? THERE ARE TRUE BELIEVERS, CLEARLY, WHO ARE GOING TO KEEP THEIR OWN PRIVATE KEYS AND DO NOT CARE ABOUT REGULATION OR FIAT CURRENCY OR CENTRAL BANKS. NONETHELESS, IF YOU SEE THE BANKRUPTCY OF GENESIS AND/OR GEMINI, THAT IS A REAL PROBLEM FOR THE PRICE OF BITCOIN, ISN'T IT? AARON: I AGREE, THE FUNDAMENTAL USE CASE FOR CRYPTO -- WHICH OBVIOUSLY ONLY CONVINCES MAYBE 1% OF THE POPULATION -- WE HAVE NOT CONVINCED THE MAJORITY PEOPLE OR A SIGNIFICANT MINORITY, 5% OR 10% OF PEOPLE, THAT THEY NEED THESE PROTECTIONS OR NEED THESE INNOVATIONS. INSTEAD, YOU GET THIS WILD SPECULATION IN THINGS THAT DON'T CARRY WITH THEM THE CRYPTO PROTECTIONS. KAILEY: HOW DO YOU, AS AN INVESTOR, DIFFERENTIATE BETWEEN THOSE VEHICLES OF SPECULATION AND WHAT IS A WORTHY INVESTMENT? WHAT ARE YOU LOOKING TO? AARON: I HAVE A VERY SIMPLE STRATEGY, AND I HAVE DONE IT SINCE 2011. I KEEP 2% OF MY WEALTH IN CRYPTO AND TRY TO GET AS BROAD AN EXPOSURE AS I CAN. I HAVE NO ABILITY TO
DISTINGUISH YOU ARE THE GOOD INNOVATORS AND WHO ARE NOT. THAT MEANS I'M SELLING WHEN THINGS ARE HIGH AND BUYING WHEN THINGS ARE LOW AND IT HAS BEEN ENORMOUSLY PROFITABLE. IF IT GOES TO ZERO TOMORROW, I'M WAY AHEAD OF THE GAME. I THINK THIS IS THE RATIONAL ATTITUDE FOR MOST INVESTORS.
UNLESS YOU ARE A TRUE BELIEVER, UNLESS YOU HAVE CARVED IN STONE GOD GAVE YOU THIS MESSAGE CRYPTO IS GOING TO TAKE OVER, LOOK AT IT AS A REASONABLE PORTION OF THE ECONOMY. I BELIEVE IT WILL BE 2% OF THE ECONOMY IN THE LONG FUTURE AND TO COMPARE THAT, THE INTERNET IS ABOUT 7% OF THE GLOBAL ECONOMY. I WANT EXPOSURE BUT I DO NOT WANT TO GUESS WHAT IS GOOD AND BAD. I NEVER PUT MONEY IN FTX OR ON SECURE, I KEEP THINGS IN PRIVATE KEYS. I USE THE TRUE CRYPTO
UNDERLYING FUNCTIONALITY. KAILEY: YOU SAY YOU BUY WHEN IT IS LOW, WOULD YOU ENCOURAGE PEOPLE TO BUY WHEN WE ARE 72% FROM LAST YEAR? AARON: NOT AS A ONE-SHOT DEAL. IF YOU MAKE UP YOUR MIND, I THINK CRYPTO IS X PERCENT OF THE GLOBAL ECONOMY IN THE LONG RUN AND YET BROAD-BASED EXPOSURE AT THAT LEVEL. BUT THAT MEANS YOU'RE COMMITTING YOURSELF, SYSTEMATICALLY, TO BUYING WHEN IT IS LOW AND SELLING WHEN IT IS HIGH, NOT GETTING WILDLY EXCITED BECAUSE IT IS GONE UP, NOT GETTING DEPRESSED BECAUSE IT IS GOING DOWN.
I THINK THAT IS THE RIGHT ATTITUDE FOR EVERYTHING, THE ATTITUDE I TOOK WITH THE INTERNET IN 1995. I THOUGHT IT WAS 5% OF MY WEALTH AND CAP 5% IN INTERNET EVER SINCE. I BELIEVE IN DIVERSIFICATION, PORTFOLIO THEORY, BUT THIS IS THE RIGHT APPROACH. MATT: DOES THAT MEAN YOU DO NOT FAVOR BITCOIN TRIED AND TRUE, THE OG, OVER DOGE COIN, WHICH WAS A JOKE. DOES THAT MEAN YOU DO NOT CARE ABOUT PROOF OF WORK VERSUS PROOF OF STAY? DOES NONE OF THAT STUFF MAKE A DIFFERENCE TO YOU? AARON: MY FIRST THING IS JUST 2%, GET DIVERSIFIED AS POSSIBLE.
I DO APPLY BASIC TESTS, I DO NOT DO DOGE COIN, I DON'T DO ANYTHING TO ME THAT CLEARLY HAVE NO FUNDAMENTALS. I LOOK AT THINGS WHERE DEVELOPERS ARE RESPECTED PEOPLE, PEOPLE I TRUST AND RESPECT THAT ARE BACKED BY INSTITUTIONS, POLY-CHAIN, MARK ANDERSON, HORWITZ, THINGS LIKE THAT. THAT WHEN I READ IT I SAY THAT MIGHT WORK. WHEN I SAY DOES COIN -- DOGE COIN, THERE IS NOTHING THERE.
MATT: THANK YOU FOR JOINING US. I ENCOURAGE VIEWERS TO GO TO BLOOMBERG.COM AND READ YOUR PIECES ON BLOOMBERG OPINION AS WELL. CRYPTO SKEPTIC JOHN REED STARK, PRESIDENT OF JOHN REED STARK CONSULTING AND FORMER SEC OFFICIALS SAYS BITCOIN DOES NOT FUNCTION WELL AS AN INVESTMENT. KAILEY: MIAMI'S FTX PROBLEM, MORE ON THE COUNTY EFFORTS TO BREAK TIES WITH THE FAILED CRYPTO EXCHANGE. MATT:
BINANCE CEO REFLECT ON WHAT HE LEARNED FROM THE FTX MELTDOWN. >> I REFLECT ON THE FTX SITUATION AND I BLAME MYSELF FOR TWEETING THAT TOO LATE. >> BITCOINS HASH RATE IS AT AN ALL-TIME HIGH, AND THAT IS A REAL INDICATION OF THE SECURITY OF THE NETWORK. ON ETHERIUM, WE SEE THE TOTAL VALUE STAKED AT $24 BILLION. THAT IS AN ALL-TIME HIGH. WE THINK THE INFRASTRUCTURE IS WORKING BEAUTIFULLY. KAILEY: THAT WAS THE CEO OF ART
INVESTMENT MANAGEMENT RE- -- WE ALSO HEARD FROM AARON BROWN IN THE FIRST SEGMENT. LET'S GET THE COUNTER ARGUMENT, JOINING ME AS JOHN REED STARK, PRESIDENT OF JOHN REED STARK CONSULTING AND FORMER CHIEF OF THE SEC OFFICE OF INTERNET ENFORCEMENT. JOHN, THANK YOU FOR BEING HERE. AARON BROWN WAS ONE OPINION, I UNDERSTAND YOU ARE OF A DIFFERENT ONE. >> I'M NOT SURE WHERE TO START. SO STOP THE CLOCK.
FIRST OF ALL, FTX WAS NOT REGULATED. I WORKED AT THE SEC FOR 20 YEARS, 11 YEARS AS CHIEF, I TAUGHT SECURITIES REGULATION AT GEORGETOWN, DUKE LAW SCHOOL, FOR 20 YEARS. I HAVE BEEN IN THE SPACE FOR 35 YEARS AND I DON'T KNOW WHAT HE IS TALKING ABOUT. THERE IS NO OVERSIGHT, CONSUMER PROTECTIONS, NO LICENSE INSURER. MATT: TALKING ABOUT THE FTX EXCHANGE AND GENESIS. THEY WERE REGULATED AND THE BAHAMAS FTX. THEY ARE RELATED. JOHN:
REGULATED MEANS AUDITS, EXPECTIONS, REGULATORS, CAPITAL REQUIREMENTS, ALL THE THINGS SEC REGULATION ENTAILS. SO THEY ARE NOT REGULATED. THEY MAY HAVE FILED SOMETHING SO THEY COULD FILE SUSPICIOUS ACTIVITY REPORTS BUT THEY ARE NOT REGULATED. THERE IS NO FUNDAMENTALS TO
ANYTHING HE IS TALKING ABOUT. THE BITCOIN CRYPTO, IT IS MATHEMATICAL COMPUTATIONAL BLATHER. THERE IS NO CASH FLOW, NOTHING. WHAT REGULATORS? MATT: WE HAVE TO DIFFERENTIATE BETWEEN BITCOIN, THE DIGITAL BLATHER YOU ARE TALKING ABOUT, AND THE CENTRALIZED EXCHANGE. THIS IS A BUSINESS JUST TRADING CRYPTO ASSETS. IT IS NOT FTX -- FTX IS NOT
BITCOIN OR ETHER. JOHN: WE DON'T HAVE TO DIFFERENTIATE THAT BECAUSE MOST PEOPLE CANNOT HAVE THE WALLET THAT HOLDS CRYPTO THAT IS SOMEHOW TIED UP IN A COMPUTER ON A POPCORN 10 UNDER A BLANKET IN BATHROOM. MATT: EVERYONE CAN HAVE IT. THAT IS THE WHOLE POINT OF BITCOIN, EVERYONE CAN HAVE A WALLET AT HOME WITH A PRIVATE KEY. JOHN: TELL ME FOR WHAT. IT IS NOT FUNCTION WELL AS A CURRENCY AT ALL. YOU CANNOT USE IT TO BUY GROCERIES, IT IS TOO VOLATILE, IT IS TOO RISKY. MATT: I HAVE. JOHN: THAT IS YOUR PROBLEM. MATT: I HAVE BOUGHT GAS WITH A, VIDEO GAMES WITH THAT I GAMESTOP, I'VE USED IT FOR A LOT OF THINGS. JOHN: HAVE YOU PAID CAPITAL GAINS
EVERY TIME YOU BOUGHT IT? EVERY TIME YOU USED IT? MATT: I HAVE NOT. JOHN: YOU SHOULD. THAT IS WHAT THE IRS WOULD REQUIRE FROM YOU. MATT: I BOUGHT IT FOR $800 AND I SPENT IT WHEN IT WAS WORTH ABOUT $600. JOHN: BUT EVERY SINGLE CRYPTO TRANSACTION IS LADEN WITH FEES, IS RISKY, COMES WITH ALL OF THESE CAPITAL GAINS REQUIREMENTS, AND IT DOES NOT FUNCTION WELL. STARTING JANUARY 2020 FOUR,
EXCHANGES WILL HAVE TO REPORT THOSE TRANSACTIONS ON 1099S LIKE ANY OTHER BROKER-DEALER WOULD AND RETAILERS, IF YOU'RE TRYING TO BUY A ROLEX ON 47TH STREET FOR MORE THAN $10,000, OR GOING TO HAVE TO REPORT THAT TO THE IRS. THERE WILL BE MORE TRANSPARENCY AND MORE SUNLIGHT ON TRANSACTIONS THAN EVER BEFORE AND YOU LEAVE OUT ALL THE DIRE EXTERNALITIES. NOT JUST THAT THERE IS NO OVERSIGHT, NO NET CAPITAL, NO INSURANCE, NO INSPECTION, NO NOTHING PROTECTING YOU IN ANYWAY SHAPE OR FORM TO BECOME AN UNSECURED CREDITOR I CALL THESE, CELSIUS, VOYAGER, FTX ALL OF THEM HAVE BECOME. FINCEN JUST REPORTED THE OTHER DAY 1241 RANSOMWARE PAYMENTS LAST YEAR, DOUBLE THE AMOUNT THE YEAR BEFORE.
I'M AN X BUT ON RANSOMWARE, IT IS GROWING, GETTING WORSE. $1.2 BILLION, NONE RECOVERED, NO ONE FOUND, AND DRUG DEALING, HUMAN SEX TRAFFICKING, SANCTIONS INVASION, NUCLEAR WEAPONS. THERE WAS A REPORT THAT SAID NUCLEAR -- NORTH KOREA WAS USING IT FOR NUCLEAR WEAPONS. MATT: AT A MUCH HIGHER SCALE, RIGHT? EXPONENTIALLY MORE. JOHN: ABSOLUTELY WRONG. THAT IS A FLAWED AND ANEMIC
THAT IT. THAT IS WHAT I TEACH MY LAW STUDENTS. WHAT ABOUT FIAT? OF COURSE THERE ARE PROBLEMS IN FIAT, OF COURSE THEY ARE, BUT BITCOIN AND CRYPTO HAVE BROADENED A CRYPTO CRIME WAVE OF EPIC PROPORTIONS, AND FOR WHAT? WE ALREADY HAVE DIGITAL CURRENCY.
IF BITCOIN WERE AROUND BEFORE CREDIT CARDS AND CREDIT CARDS CAME ALONG, THAT WOULD SOLVE IT. THERE IS CASH OUT, PAYPAL -- CAS H APP, ZAHL, PAYPAL, AND YOU GET PROTECTION. MATT: WHAT PROTECTION DO YOU GET WITH ZELLE? JOHN: YOU CALL YOUR BANK AND SAY THIS IS IN THE CHARGE. MATT:
THEY DON'T REVERSE CHARGES. NOPE. JOHN: ABSOLUTELY IT ALL THESE INTERMEDIARIES ARE CRITICAL TO THE CONSUMER AND FORGETTING ABOUT THE INTERMEDIARIES IS ABSURD. TAKING YOURSELF INTO THE -- IT IS NOT THE WILD WEST, IT IS NOT ANARCHY, IT IS WALKING DEAD LIKE APOCALYPTIC FREE-FOR-ALL. YOU HAVE NO PROTECTION WHATSOEVER. KAILEY: THERE IS NO FDIC CRYPTO WHICH IS SOMETHING WE BRING UP OFTEN AND THERE'S A LACK OF CONSUMER PROTECTION BUT CONSUMERS ALSO SUFFERED FROM ENRON AND THERE HAVE BEEN EXAMPLES IN TRADITIONAL FINANCE WERE REGULATORY -- REGULATED ENTITIES HAVE SEEN EPISODES IN SOME WAYS AKIN TO THIS. WHY DO YOU VIEW THIS AS DIFFERENT? JOHN: FIRST OF ALL OF COURSE THERE HAVE BEEN CRIMES, FINANCIAL CRIMES. THAT IS WHAT I DID FOR 20 YEARS.
CRYPTO USHERED IN A NEW CRIME WAVE. CRIMINALS HAVE A WAY TO CONDUCT TRANSACTIONS AND MONEY LAUNDERING LIKE THEY HAVE NEVER HAD BEFORE. READ THE DOJ REPORTS, THE TREASURY REPORTS. ALL OF THESE REPORTS YOU CAN GO TO MY WEBSITE, DIGITALTRUSTWATCH.COM. I DON'T MAKE A PENNY FROM ANY OF THIS, I'M JUST OUT THERE TELLING IT LIKE IT IS, SPEAKING TRUTH TO POWER BECAUSE THIS IS ABSURD TO THINK THESE KINDS OF DIRE EXTERNALITIES SHOULD BE IGNORED. THAT THE KIND OF THING THAT HAPPENS NO MATTER WHAT.
TRYING TO PAY RANSOMWARE, MAKING A RANSOMWARE PAYMENT OF $5 MILLION WITH CASH. YOU CANNOT DO IT. KAILEY: YOU TALKED ABOUT HOW THESE ARE UNREGULATED ENTITIES. HOW MUCH FALL SHOULD BE PLACED ON THE REGULATORS FOR NOT MOVING QUICKLY ENOUGH IN TANDEM WITH THIS INDUSTRY? WHY DO YOU FAULT JUST THE TECHNOLOGY AND IDEA OF IT IS SELF? JOHN: WELL TO BLAME THE SEC WOULD BE LIKE OSWALD BLAMING THE SECRET SERVICE FOR LETTING HIM SHOOT KENNEDY. THE SEC BROUGHT MORE THAN 100 ACTIONS IN THE AREA OF AND THEY HAVE WON EVERY TIME. INITIAL COIN OFFERINGS, CRYPTO
LENDING PROGRAMS, SAFTS, THEY WON ALL THOSE CASES WHENEVER THEY BRING THEM IN. AS FAR AS REGULATION GOES, THEY COULD NOT HAVE BEEN MORE OUTSPOKEN, BOTH CHAIRMAN J CLAYTON AND CHAIRMAN GOETZ WOULD MAKE RELATIVE ANNOUNCEMENT AFTER ANOTHER TALKING ABOUT CRYPTO. THEY STOPPED COINBASE FROM ISSUING A LENDING PROGRAM, THANK GOODNESS. THEY STOPPED BLOCKFI FROM DOING IT ALSO. THEY PAID A PENALTY OF $100 MILLION. NOW THE SEC IS JUST ANOTHER
CREDITOR FOR $30 MILLION ON BLOCKFI'S LIST. LOOK AT THE BITCOIN SPOT ETF. IMAGINE IF THAT WAS ALLOWED TO HAPPEN. ALL THESE THINGS THAT SEC HAS
BEEN VERY AGGRESSIVE AND THEY ARE A SIMPLE AGENCY. I'M A BIG-TIME SEC CRITIC, I WROTE AN OP-ED PIECE CRITICIZING THE SEC FOR THINGS THEY'VE DONE, CRITICIZED FOR THEM ON CYBER BUT NOT ON CRYPTO. I DO THINK DOJ NEEDS TO DO MORE. I THINK PEOPLE NEED TO BE PUT IN JAIL.
I DO NOT UNDERSTAND, VOYAGER MAKES REPRESENTATIONS THE F TIC HAS SOMEHOW ENSURED THE DEPOSITS OF THEIR CUSTOMERS. THE F TIC SAYS -- THE FDIC'S SENT THEM A LETTER TO STOP DOING THAT. MATT: THAT IS JOHN REID START GIVING US THE BEAR CASE AND MUCH MORE. CHECK OUT OUR BLOOMBERG RIPPED A PODCAST DIVING DEEPER THAN THE DAILY BUYS. CHECK IT OUT EVERY WEEK FROM >> WE ARE STILL TRYING TO UNDERSTAND AND DISCOVER WHAT REALLY HAPPENED AND IF THE REGULATION, IF THE TOOLS WE HAVE NEGOTIATED A FEW MONTHS AGO AND THAT WE ARE ABOUT TO VOTE IN THE PLENARY WILL -- WOULD HAVE BEEN SUFFICIENT. WE NEED TO BE CAREFULLY MONITORING WHAT IS GOING ON AND TRYING TO PUT IN PLACE REGULATION THAT WOULD PREVENT THAT TO BLOWOUT A PROPORTION AND BECOME A SYSTEMIC THREAT.
KAILEY: THAT WAS IN EU POLYMER MEMBERS SPEAKING WITH US EARLIER ON SURVEILLANCE EARLY EDITION -- PARLIAMENT MEMBER, SPEAKING WITH US EARLIER ON SURVEILLANCE EARLY EDITION. MATT: IT'S INTERESTING, ESPECIALLY
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