Bloomberg Crypto Full Show (12/20/2022)

Bloomberg Crypto Full Show (12/20/2022)

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Live from Bloomberg's world headquarters in New York, I'm Kelly Lyons and I'm sure Charlie Bass is stepping in for Matt Miller. Welcome to Bloomberg Quicktake. It's a look at the people, transactions and technology shaping the world that decentralized finance. Coming up, Sam Bateman. Freed's preparations to be extradited to the U.S. appear back on track after hitting a snag in a Bahamas courtroom. We'll be live there with the latest.

And while authorities in both the Bahamas and the United States continue to investigate, they've been freed. We'll speak with former CFTC chairman Timothy aside. And lingering crypto concerns remain as another Bitcoin miner joins the bankruptcy watch list.

We'll take stock of the year that was and the year ahead with Mountain Dew mirrors of Queen shares. So all of that is ahead. But first, let's get a snapshot of the market. The best way to do that on your Bloomberg terminal C are Y P go. That is their function. And what you will see is that it's a

fairly positive day for digital tokens across the board. They are more risk on than perhaps other risk assets are, which have been wishy washy throughout the day. Bitcoin is up about one point four percent. Sixteen thousand eight hundred dollars

or so is where we trade. So still firmly in the range we have been in for weeks now. A little bit of outperformance for either eat up about 3 percent. Twelve hundred where we are at now. And finance coin, which, of course, has been in the news.

BNP seeing a lot of volatility as there's been questions circulating around the health of finance itself in the wake of the RTX collapse. But BNP up about two point three percent in Coinbase. Interestingly, of course, a rival crypto exchange is underperforming what we're seeing with the digital currencies themselves. It was only positive by about two tenths of one percent.

I do. Those generally want to take a longer term view because this is our last crypto show up 20 20 to you, if you can believe it. And how much things have changed over the course of this year. Bitcoin is down 64 percent year to date. And what's interesting is while we did have the stereotypical voluntarily early in the year, about halfway through, we started getting stuck in ranges. First we were stuck on the range around 30000.

Then around 20000 for so long post RTX. Now that range is more in the 16 to 17 thousand dollar range. But it is very, very interesting to see the trademark volatility kind of evaporating at the tail end of this year. We're definitely going to talk more about that crazy year, but really at first of the Bahamas, where FTSE co-founders Sam Baker and Freed is being held in jail.

Thanks. And free hearings in a Bahamas court will resume tomorrow and he's expected to drop his fight against U.S. extradition. Bloomberg's Jim West, who's been attending the hearings, joins us now from Nassau.

Jim, what is happening at these hearings? Who is there? What is the vibe? Well, it's been a couple of days of confusion. You know, there was maybe 20 people, including a lot of press, a lot of crypto investors there on Monday expecting Bateman free to drop his extra to drop his fight against extradition and to be hustled out of the country. That didn't happen on Monday. He got sent back to the prison today. We were all there again, waiting again for a hearing that was rumored to be happening. And then after several hours, it got canceled. And now we're told that tomorrow at

11:00 a.m., in fact, the extradition hearing will take place. And big for local lawyers have said that indeed he has dropped his fight against the extradition. And so presumably he will be on his way to the U.S. very soon. Well, on that note, Jim, do we know why? Because just last week, he was saying he plans to fight extradition and now of a sudden U-turn.

Well, you know what I think I think it started with the fact that he didn't get bail here in the Bahamas. So he's up in a very jail, that foxhole in and under very rough conditions. And I think the expectation is that he might have a better chance of getting bail in the US.

There's kind of a history of that happening. Even Bernie Madoff was released on bail before his trial, and I think that's what is the defense is expecting as Bloomberg's. Jim with NASA. Thank you so much for your time and your reporting. The FTSE fallout has been shedding light on the need for better regulatory frameworks.

And I caught up with lawmakers on Capitol Hill after the RTX hearing last week. The RTX crisis, you know, billions of dollars lost. It's a much bigger problem with crypto generally. We need to stop the cheating that's going on in this space is crying out for a sensible, thoughtful regulatory regime. Just getting a set of rules in place. It's really a problem that Congress hasn't been able to get this done. Same kind of transaction, same kind of risk means that we've got to have the same rules. We have asked Janet Yellen to sort of

coordinate this as the treasury secretary. We've got to have a cop on the beat who is well enough financed to actually be out there. The regulators, the S.E.C., especially, we think, has the ability to go after this in a big way. It's time for Congress to weigh in very firmly and just set the rules of the road. Joining us now to discuss further is Tim

Assad, former chairman of the Commodity Futures Trading Commission, the CFTC, under President Barack Obama. Which makes him a wonderful person to speak with today. Tim, thank you so much for joining us. We were just hearing their call upon call for more regulatory clarity, greater regulatory scrutiny over this space that to this point hasn't really materialized. How much fault should be placed on regulators for what has gone down with RTX? Well, it's true that we don't have standards governing these trading platforms that are like the standards we have in our securities markets or and in our derivatives markets. Now, part of that is because the S.E.C.,

the chairman, has said that he believes all these tokens are securities and all these platforms should register as securities exchanges. And the industry has said, no, no, no. These are commodities or these at least aren't securities. So we don't have to register with you. And if they are commodities, there's actually no federal regulator of what we call the commodity spot market, meaning buying and selling bitcoin or any other token for cash. There's the CFTC, which has the authority to set standards for trading of crypto futures and crypto swaps. And it has very, very limited authority in what we call this spot market or Cashmore. So that's the problem.

We've seen this fight kind of play out, if you will, this kind of dual regulatory mandate between the CFTC and the S.E.C. in traditional markets here. But how much of an issue is it not to set the rules of the road between the two? In this market that has gone on for a decade now? Well, you're absolutely right. Look what I have said. And Jay Clayton, the former FCC chairman and I have called for the S.E.C. and the CFTC to get together and develop some common standards.

The standards we want are frankly pretty similar. Whether these things are securities or commodities, they should come up with those standards and then basically force the industry to implement those. And let's stop getting bogged down in this classification dispute. Now, Congress might do something. It would be good if they did clearly give authority to one of the regulators over the spot market.

But even without that, I think the regulators could basically prod these trading platforms to implement this. And if the US did that, then hopefully other jurisdictions would follow our lead. But Tim, to your point on Congress needing to to some extent decide who has the power here, Sam Bank Ben Freed was often on Capitol Hill pushing congressional leaders to give that power to the CFTC. That is what he was advocating for. Does that now backfire?

Well, it could. I mean, the problem on Capitol Hill is I think everyone is is, you know, finds this to be a terrible, terrible problem. But they have very different views on what should be done about it. There are those who are pushing for stronger regulation, but there are some who say, well, look, the whole sector is worthless.

So they don't want to do anything that would legitimize it. So they may take a different view on regulation. They would prefer the sector just die of its own weight.

And then there are those people both in the industry and some in Congress who would say that, look, the the the problem with FTSE X was that it was a centralized intermediary. It wasn't true to the to the promise of crypto, which is decentralized protocols. So, you know, they may oppose regulation for other reasons. So whether Congress can reach a consensus I think is is could be challenging. You know, the SPF bill was how it was so affectionately, call it, if you will. There was so much support from the FTSE

to this Stabenow Boozman bill that would have given more weight to the CFTC when it came to overseeing the crypto industry at large, but because of its closeness to sandbag, mend, frayed. I'm wondering if you think that that bill now just has too many associations to this disgraced crypto act? Well, I don't think so. I mean, look, I think anyone who really has looked at this issue and understands it recognizes that we need to have federal regulation of this spot market. Maybe the bill gets changed. I think there are ways it could be strengthened, but I think that concept is still very important.

And, you know, maybe it comes out with different co-sponsors or something. I mean, I have a lot of respect for both Senator Stabenow and Senator Boozman. And I know, you know, they're very dedicated to this. So, you know, I hope it's not permanently tainted by by the fact that Sam Bank and Freed may have supported it. And we've had a lot of conversation on this show in the last several weeks about the line between. Nation that is needed in order to

protect consumers and just set some guardrails around this industry versus the kind of regulation that's going to choke off innovation and essentially stifle that too much. Where is that line for you? Tim? Well, look, I think that we need to have these standards, and I don't think they're going to stifle regulation. You know, that was said when the FCC under under J. Clayton, went after these Internet coin offerings.

You know, these offerings have tokens that were done without any disclosure. And people said all that's going to stifle innovation or it's all going to move offshore. That didn't happen. I think actually regulation will enhance regulate innovation, because what it will do is it will take some of the fraud and manipulation. It will stop that and take some of the speculative air out of this market and maybe cause people to focus on things that really have more innovative potential. So I think you can actually enhance

innovation. There are so many questions around crypto derivatives and ancillary products, one being ETF industry. There's a debate on one hand that says entering the ETF industry in a bigger way would have created more risks for investors. But then there are plenty of other people who also believe the opposite that allowing for more regulated products here would have protected consumers more. Do you fall on one side of the debate or the other here? Oh, I'm clearly on the side that stronger regulation protects consumers. I mean, look what we did in the

securities markets, right? There was basically no federal regulation in 1929 when the markets crashed. And then we developed the securities laws. And a lot of people in the industry said all this is going to be the death of capitalism. In fact, the head of the New York Stock Exchange said that we implemented those laws.

We have the strongest securities markets in the world because they're transparent. They have integrity. There's good disclosure. And there's good standards that protect customer assets, that prevent fraud and manipulation and that prevent conflicts of interest. Those are the things that we're missing with FTSE. Those are the things we need. But to that point, Tim, how much overlap realistically should there be between the regulations that govern traditional financial assets and the traditional financial industry security laws that have been around for some time? As you rightly allude to, versus what should govern the crypto space? I mean, can are they directly applicable? Well, they're pretty similar, but I said this all along. Now I have kind of written about this space for many years.

We should recognize the potential for digital technology, crypto technology, block chain to develop decentralized protocols and applications. And so we do need to make sure that regulation doesn't favor centralized intermediaries, that it recognizes that potential. And there's going to be lots of areas where the rules have to be written specifically for for crypto or at least customized. But the basic principles are the same protect customer assets, prevent fraud and manipulation, prohibit conflicts of interest, have transparency, good governance, basically attempt to stop this kind of thing from happening ever again. Thank you so much for your insight

today. Really fantastic to talk to you. That was former CFTC C chairman Tim aside. And coming up, more interesting conversation.

Melton Demir is the chief strategy officer of digital asset investment firm Quinn. Shares will join us to talk about where exactly we go from here. And grayscale is considering appealing to the same U.S. regulator that it's currently suing. More details on that ahead. And access all of the latest data and

used on crypto. Check out our why pick up on the terminal. This is BOVESPA. This is Bloomberg Crypto. I am Kailey Leinz with Sonali Basak Matt Miller is off today. Now we want to get to some crypto stories that caught our attention this week, including finance.

It's cutting jobs and replacing the CEO and its Indonesian unit, Togo Crypto. That's after the parent company lifted its shareholding to nearly 100 percent. The unit is also halting diversification into non exchange businesses.

I want to flip over to grayscale because it's considering appealing to the same U.S. regulator that is currently selling. It wants permission from the FCC to buy back up to 20 percent of the outstanding shares of its heavily discounted Bitcoin trust. Should the firm's lawsuit fail? The S.E.C. previously denied Grace Gayle's attempt to convert the Bitcoin trust into a physically backed Bitcoin ETF in June. And the value of the largest public

digital asset exchange in the US is now below that of a mean cryptocurrency. Coinbase has about eight billion dollars in market cap, while the value of Dogecoin is topping nine billion dollars. Doge coin, of course, was originally created as a joke back in 2013 and share knowledge to me. The difference the key difference here is that doge coins value is entirely arbitrary. Coinbase is actually a company with fundamentals. You get the fundamentals maybe at this point are looking pretty poor.

So we're going to continue talking about the fundamentals in this space and what is coming up for crypto in the year ahead. Melton Demir is chief strategy officer of digital asset investment firm Quinn. Shares will join us. This is Bloomberg. Welcome back to Bloomberg Crypto. I'm Sonali Basak with Kailey Leinz Matt Miller is off today. Clearly it's been a chaotic year in

crypto one that's resulted in the collapse of a popular stable coin. A meltdown of a major crypto hedge fund firm. Then the bankruptcy of multiple firms that includes Voyager Celsius blocked by and the collapse of the FTSE empire that now has authorities around the world just beginning criminals. A criminal and civil investigations of Sam Bateman freed. All of these events have led to a crisis of confidence in the crypto industry that is now searching for its next leg.

For some, there's a big opportunity in the middle of this turmoil. Companies like Finance and Mike Novogratz is Galaxy Digital are finding ways to buy assets out of the bankruptcies of a number of these firms. Assets might be acquired on the cheap and it's leaving windows open for the big to get even bigger. Galaxy has sought to buy a Celcius custody subsidiary out of a bankruptcy proceeding while buying and got a discount as it struck a more than 1 billion dollar deal to buy Voyager assets that were meant to go to RTX. Bitcoin itself faces a test as it's

dropped 75 percent from its record high last November, and it has also knocked some of its traditionally use cases. For example, that's lost its luster as a hedge against inflation. But there's some hope among some of the industry's biggest whales. As Dan Moore, head of Pantera, wrote to

investors this week, block chain didn't sail and business is just moving back to safe entities, especially ones that can prove the reserves and subject themselves to big for audits. Moorhead points out that the market share for exchanges like Coinbase crackin up bit and Bitstamp have actually increased since the collapse of FTSE Caylee. OK, so maybe there are at least some winners, but there's obviously a whole lot of losers. Joining us now to discuss this further, Melton Demir. She is chief strategy officer of a

digital asset investment firm Coyne shares. She is here with us in our New York studio. Milton, it's great to see you. Chanel, he was just running through a lot of damage that has already been done. And clearly none of us have a crystal ball or we would have seen some of these things coming. But what is your read on the damage that

still may be yet left to do? I think there are three major things that we're thinking about. A coin share is, number one, the RTX fallout isn't completely done. Obviously, the three arrows fallout from the summer caused a major credit crunch in the industry. And there we did see a lot of bitcoin and ether getting sold into the market because that was used as collateral for a lot of their loans with RTX. The selling case is more limited since they primarily used FTSE their own coin as collateral for lending. But many firms took venture capital funding from the firm, kept treasury assets on the RTX platform, and many firms may have 6, 9, 12 months of operating runway left.

But as that runway starts to dwindle, it'll be interesting to see what assets go up for sale and what MSA takes place. The second thing really is reputational damage. There's just been a tremendous reputational hit that has been brought to the industry.

I mean, it's been six months of nonstop news stories, headlines. You've been covering a lot of it. It's crazy. It's chaotic, and it just makes the industry look bad, unfortunately. And then the last piece we're really looking at is what market sentiment is going to be going into 2023. Obviously, the macro environment is not a great one. A lot of these business models work and end up only environment. But now that macro is slowing down and a

lot of the speculation has gone out of crypto. It'd be interesting to see what businesses can survive the long term. We've been doing this for a decade. So we've been here.

We have a business that makes money in good and bad times, but a lot of business models don't work. What's crazy about this, too, is that you do see a shakeout across traditional players, but you see some of the, let's say, parents coming home here, big traditional Wall Street firms walking in and picking at the carnage here or finding opportunities, whether it's Visa or Fidelity or one of my favorites. Now, we reported by Post Oak Tree and others are looking at buying claims when it comes to FTSE acts. And of course, there is value here as things have sold off.

What do you think about kind of traditional Wall Street stepping in here that we've talked about this a lot? The institutions are coming is the narrative that we've been talking about in the industry for the last five years or so. And it's really not been this wave we thought would materialize. It's been a slow trickle. So we continue to see a lot of larger hedge funds, publicly traded asset managers and institutions looking to allocate to crypto, maybe creating routes for their clients, particularly on the ultra high net worth side or high net worth side, not quite retail and giving them exposure to crypto as an asset. Visa obviously is starting to explore a crypto as a payment real, but I think it's going to be slow.

Again, institutions are reticent to take on a. These liabilities. So the majority of the buying is still assets, not yet operating companies, operating businesses don't really see any major players yet announcing that they're launching any new crypto initiatives. But maybe that will start to shift over the next year or two. But again, I think it's going to take

time for that reputational damage to dissipate. On the subject of buying and assets, which you internally we're both talking about, that may be up for sale. What are you expecting in terms of that kind of everyday activity? And frankly, how much risk is there in concentration if you suddenly have just finance, for example, coming in to buy it? Right.

I mean, the big thing when it comes to MSA is whereas the value in the business, typically we look at intellectual property assets on the balance sheet, which is what's motivating a lot of the buying of Voyager and Celsius claims. So if those unique intellectual property, if there is a large client base that continues to be active, even in a non speculative market environment like the one we're in, or if there are assets on the balance sheet that can be utilized, those are attractive emanate targets. But at the end of the day, many of these businesses, when you strip out the speculative component, don't really have a lot under the hood sometimes. So be interesting to see what gets spot and what doesn't. I do think, though, there will be big opportunities. Quinn shares, we're looking very

opportunistically at this environment and there will be a lot of aqua hiring as well. Talent has been notoriously scarce in the crypto space, so it's a great opportunity for firms to add engineering teams and add new capabilities. All right, Milton, unfortunately, we have to leave it there, but that just means you're going to have to come back next year and talk with us about this further melting Dominguez of coin chairs. Thank you so much for joining us.

And Charlie, that does it for Bloomberg Crypto for the year. We're not going to be back until now. Long year it's been. Indeed. That almost feels like an

understatement. Thank you so much for being here today. And again, we'll be back Tuesdays at 1:00 p.m. New York time in the New Year. And if you want to wait that long discussion all night, we'll be back later today for the close to to 5:00 p.m. Eastern Time. So don't miss it. Live from New York, this is Bloomberg.

2022-12-22 07:59

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