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.
