My son in law introduced me to the topic. He had an interest in it, and he helped me by my first fit coin. This was in that twenty time frame. First introduction to this world was from my teenage Sonum. He was thirteen, and Endy came said, momot my bit point, and I said, absolutely not. I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News, And this is Bloomberg Crypto at Daily Bloomberg I Heart Podcast. It's Friday, June seventeen.
Today on Bloomberg Crypto, we're taking another look at the u S approach to regulate the cryptocurrencies. There's a real drive on Capitol Hill right now to figure out how to define and regulate this asset class and how best to protect consumers. This is especially true in the wake of the collapse of the Terra stable coin on the
effects that had on retail investors. The latest and biggest attempt in this direction comes from the bipartisan duo of Democratic Senator Kirsten Gillibrand of New York and Republican Senator Cynthia Loomis of Wyoming. They're proposing legislation that would, among many other things, clarify the rules of how two very different government agencies, the CFTC and the SEC, would divvy up the crypto landscape. Their bill also contains a proposal
for regularly saying crypto mining. But can it pass and how would it work in practice? Bloomberg report to Alison Verse. Brill joins me. Now, Alison, thank you so much for joining us today. We're going to talk about a pair of senators. We have on the one side, Senator Kristen Gillibrand, who is a Democrat from New York, and a Republican Senator Cynthia Loomis of Wyoming, who have just introduced a crypto regulation bill. What specifically is in it? So we
saw several things in this bill. I mean, it's very sweeping by nature, but I think on a high level, we have stable coin regulation in here. You know, it would require issuers to have a hundred percent reserves and then make public disclosures about the assets backing their tokens um. We would also see a directive that the government a government watch out to a study on some of the opportunities and risks of investing in retirement savings and digital assets.
We'd see the Commodities Feature Trading Commission get significantly greater role in regulating digital assets. Um. They would actually have you know, primary jurisdiction over coins like bitcoin and ether, which together make up more than half of the total market capitalization. So um, not a small amount of us.
Not a small amount. And actually the senators after introducing this bill, you know, they mentioned so CFTC would have kind of, uh, the bigger role when it comes to market capitalization, but then sec would likely have a bigger role. And when it comes to the number of token that would fall under sort of the securities definition. Um, so
kind of an interesting distinction there. And then we'd also have the creation of an advisory committee and this would be you know, consist of private and public sector members. And essentially the idea is to help the government keep pace with innovation, because we know that things move at
a record pace when it comes to digital assets. Uh. And so this this committee would be tasked with coming up with recommendations and um, you know, on new developments and and kind of which agencies should be in charge. And you've got some of the backstory of how these senators got interested not just in crypto, but in working with each other. Tell me more about that. Both of those senators have expressed an interest in cryptocurrency, and I
think it stems from two different places. With Senator Lemis, you know, she started investing in this very early. She has um bought her first bitcoin in at the recommendation of her son in law. And then and then Senator Delibery. And you know, she told me in another colleague of mine that she began working on the Senate Intelligence Committee about a year ago and really started participating in hearings
on virtual currency and the blockchain UM. And she also, you know, she represents New York, which is the financial capital of the world, and so so New Yorkers will tell you so New Yorkers will tell you that's right. And so she you know, that's there's obviously been a lot of interest from local politicians in New York and so she's kind of jumping in on that. And you know, she was the one um to approach Senator Lummis. So she approached Sanis Lumis. Yes, that's the story we were told.
So it's it's pretty interesting they um. You know, Senator Delibran, as she describes it, was working I think about a year ago on legislation to help sexual assault victims in the military, and she, you know, told a story about Senator Lumis being really willing to jump in on that effort without having to consult her staff. Um, you know, just knowing that it was an area that was of interest to Senator Jella Brand. She told us that that
really really stuck with her. Um. She said, she felt like Senator Lammis was an a lawmaker that could make decisions quickly, that could act, you know, sort of outside of the normal partisan divides we sometimes see in Congress. And so when she started getting interested in cryptocurrency and she noticed that Senator Lammis was working on a big, sweeping bill um to regulate the industry, I came to Washington.
I found out that very few of any members of the Senate had an awareness of how big bitcoin and other digital assets were becoming, and that there was a vacuum of both interest and knowledge about this topic. And yet it was becoming more and more apparent that a framework for regulation was going to be needed. She approached her, and you know, now we have both of them working
together there. So, yeah, then is a genuinely refreshing thing to hear because you know, so much of how regulation is presented, and certainly so much of how politics is presented right now, comes from a very adversarial place. Sounds like these are two folks who are absolutely coming at crypto from very different perspectives, but who found enough to agree on. What are some of the things they agree on? What are they trying to do with this bill specifically?
So they both talk a lot about innovation and seeing that there are some you know, potential areas um where they want to encourage companies to continue experimenting. But they also you know, mentioned things like the recent terror collapse and and the fact that you know, you need some guardrails, that things are getting really complex, um. And so they want to regulate, but they're trying to be a little
bit more flexible. And I think one of the really interesting aspects of this bill that they talked to us about was this advisory body that they would like to create and essentially how that would work anytime there's a new development in the industry, So say, you know, non fungible tokens a year or so ago, um, then you would have this body look at that and kind of decide, you know, who should regulate that how should we approach us going forward? So they really want to be adaptable,
which I think is is a pretty interesting concept. And now we'll see, uh, you know, how that works in the long run. But I think UM that's been one of the areas that I think is appealing to the industry as well. Is not acknowledging that maybe something that works today is not going to work in the future
for this particular industry. I've talked for a lot of industry members and having clarity is extremely important to them because they don't want to build a business model that's some regulators going to say it is inappropriate three years from now or fires from now. They want to be able to know that their ideas can be manifest in UM a regulatory framework that works for them and works for consumer protection and safety and SAMUS and all those medicals.
So I am optimistic it's still exactly that right, so very explicitly addressing the criticism that regulators always regulating the last five years and not the coming five years. Yes, who are some of the folks who would be key to having this have any chance at role at actually becoming law? Are there other you know, folks in Congress that they need to be allies or at least to
not be adversaries. So I think, you know, obviously one of the positive aspects of this bill is that it's bipartisan, but I think you would really need buy in UM from leaders on the Senate Banking Committee. You have Chairman shared Brown and Ranking Member Pat to me, and then you also are going to want some buy in UH from leaders on other committees. Had just send it finance given that there are tax elements of this bill, so having some support from someone like Senator Ron wide And
doesn't hurt it either. Are there any folks on there who may have always say competing interests? So you know, I think sometimes is it competing or is it a complementary? I think maybe the jury is still out, but we do know that Chairwoman uh Stabano of the Senate Agriculture Committee is working on a barpartisan bill with um Marky Member John Boseman on cryptocurrency oversight UM, specifically giving the CFTC more authority over coins like bitcoin and ether um.
So it's pretty similar to what we're seeing in the Lummis and Gillibrand bill, but coming directly from the Chairwoman UM, which is important I think, and we've seen that the Senator's Lumis and Gilibran have talked about this being complementary to what they're doing and not necessarily supplanting kind of their real legislation and whole UM. They've actually talked about this being a positive sign that you know they're on the same page and working towards the same end goal.
I think it is important though, when you're talking about the CFTC oversight piece of all of this is whether or not you can get other Senators from other committees like maybe Senate Banking UM who might have more of an interest in SEC oversight. UM. If you can get all of them on board too, agree to this change, we'll be right back. Is this one of those examples where everybody kind of agrees that something has to happen about the devil's in the details, or actually, are you
seeing much more polarization than that? So I think there is a pretty significant consensus that there need to be guardrails for cryptocurrency UM. I think the differences are how you're approaching both the language and the details on that UM. So for the Banking Committee, you have someone like Chairman Shared Brown, who has been very critical of the industry, you know, has talked about their being fraud Big crypto companies are looking to make big profits, are desperate to
reach as many Americans as they can. They brought in celebrities and gimmicks to make crypto sound exciting and daring and profitable. But the ads left a few things out. They didn't mention the fraud, the scams, and the outright theft. And when he was talking about the terracile apps, you know, it's pointing to that as a reason for why they need to be regulation, but why there needs to be
strict regulation. And then his immediate counterpart is ranking Member Pat to me Um, who is very interested in this industry, thinks there's a lot of potential. Um He's put out, you know, draft bill of how to regulate stable coins and that you know, it was a little bit more flexible than what we saw from Treasury and these other
financial regulators. So I think that'll be an interesting committee to watch because I do feel like they're probably on pretty different sides of how they would want to regulate, and so maybe if they can reach agreement, maybe you can disagreement anywhere. So stable coins hot topic. Does the bill address these specifically, and particularly as it relates to algorithmic stable coins like terra USD. So the bill, you know, talks about payment stable coins specifically, and it has this
reserve requirement. It also has these public disclosures that they would have to have with the idea of being that it would event it would prevent collapses like the what happened with tera Um. It doesn't explicitly mention algorithmic stable coins, but you can draw the conclusion that if you have a hundred percent reserve requirement that maybe those type of
stable coins would no longer be existing. There's also something in this bill too that relates to stable coin issuers regarding sanctions, and it would task the Treasury with developing guidance kind of clarifying the responsibility of stable coin issuers to comply with those restrictions. And when we talk about reserve requirements, what we're saying is, if you're issuing a stable coin, you actually have to have some kind of
underlying assets that backs that. It might be dollars, it might be US treasuries, it might be you know, short term lending vehicles like commercial paper right right, And here they you know, they kind of specific like highly liquid assets, right, so they want to really ensure that these coins are actually stable, like they say, and that you can redeem them one for one um, for instance, with the US dollar, if that's what it's pig Two, what does the bill
say about crypto mining? So crypto mining, you know, the bill doesn't um. It doesn't go so far as to require miners to maybe disclose their energy uses. It doesn't really like crack down on them on mining being able to exist. But it does require that the government, specifically the Federal Energy Regulatory Commission and consultation with the CFTC and the Securities in Exchange Commission, that they you know, analyze and report on energy consumption in the digital asset market,
and that includes the energy usage of crypto minors. And I think it's safe to say that this was probably a compromise area. It gets that, you know, something that progressive Democrats care a lot about, but maybe it doesn't go so far as to turn off some of these other conservative Republicans on the opposite end. It seems like there's a lot of compromises on this bill. Yes, there is a lot of compromise as as is the way
with bipartisan legislation. I think, you know, well, we'll have to see if there's enough here for for other Senators to really agree with. So it's very purpose strimity framework. So you know, if it's going to be regulated by the CFTC, um it will look more like in commodity, and it is going to be regulated by the SEC is going to look more like the security and the purposes will will align definitely. This bill would allow the
CFTC to write to directly regulate cryptocurrency um. It would also allow the SEC to continue having authority over cryptocurrencies that act more like investment contracts. So if you're issuing them to the public with the expectation that you know there will be profits, then typically that's that falls within
the SEC. This part of the bill is also the part that I think a lot of folks in the industry have a lot of angst over, and it's definitely caused the most push and pool, And I think what's interesting is sometimes you have more of these traditional players who are wanting to get involved in crypto and they actually might prefer the SEC as their regulator. They deal
with them a lot already. They have their relationships, they have their relationships, um, and then it seems like really the crypto native firms or the associations are the ones that are really pushing for more CFTC oversight. You know, I'm so glad you raised that because it very directly speaks to the split between Wall Streets and the folks who are portraying themselves as defied decentralized finance, the great disruptors, people who are like reinventing investment banking but on the
blockchain or whatever. And you know, this is really setting up this dynamic of the crypto native firms are looking for what would in practice be possibly a more conciliatory leader for them versus being regulated by the SEC, which has these tougher investment protections. So I like the culture clash there is really interesting, and I think you see it in other and other you know, parts of this
space as well. Obviously you see it with stable coins. Um. You know, if you had if you followed the suggestions of Treasury and these other financial regulators who essentially want all stable coin issuers to be banks, um, then that is beneficial to the existing banks. Absolutely. They are like were they already you know, they have the charters, they've gone through, uh, the hurdles that they need to with regulators.
Where you have maybe some of these crypto native firms, native firms who are currently issuing stable coins, and to get that bank charter, it could take them years or to get all the regulatory approvals that they need to. And I think that's why you see some pushing for we'll at least give us some flexibility. Let us be something else that's maybe regulated still but not exactly a bank, or let us maybe partner with a bank um And I think that's going to be something that's very interesting
to watch. Well, thank you, Ali, I appreciate you taking the time, Thanks for having me. You can find more of Alison verse Bills reporting on the Bloomberg terminal on Bloomberg dot com and you can find her on Twitter at Ali their Sprill. That's v R S P R I L L E. On the next episode of Bloomberg Crypto, we're gonna tackle a little bit of a heavier subject.
We're going to talk about crypto addiction. There are rehab centers for people seeking treatment for addictions to drugs, alcohol, gambling, and even recent online experiences like gaming these centers are currently seeing an uptick in people looking for help controlling their crypto trading. We'll have to Bloomberg reporters joining us, Claire Valentine and Charlie Wells. We're off on Monday June
for Juneteenth. We'll be back on Tuesday. I'm Stacy Marie Ishmael, and this is Bloomberg Crypto, a daily podcast from Bloomberg's and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Email your comments, questions or suggestions the Crypto at bloomberg dot Net. Follow us on Twitter at Crypto. The producer and editor of this episode is Vicky Verglina Desta wonder At is our engineer. Original music
by Leo Sidron. Bloomberg's head of Podcasts is Francesca Levi