Crypto Billionaires Reconcile, 'Britcoin' In Works

Kraken agreed to do two things. First, pay a thirty million dollar settlement to the SEC and to and even more importantly, to stop offering their US staking service. That's the service that they offered that would allow you to stake your coins with Kraken or your tokens and earn returns on those coins. According to the SEC, this was a direct violation of US securities law. We'll have much more on this in the coming episodes. Enjoy. You've heard

of say it before, and it's worth repeating. Crypto is a twenty four seven asset class and it can feel really hard to keep up. So we're back with another episode that reviews the biggest stories of the week in crypto. Here's one which billionaires have stopped fighting, just as a clue. On the one side you have famous twins Tyler and Cameron Winklevoss and their Gemini exchange and on the other

Barry Silbert's and Genesis. We're also going to talk about luxury handbags and how they relate to n f t s or non fungible tokens, what the UK is doing as it relates to its plans to launch a digital currency, and as a bonus, we have a quick aside about the U S Super Bowl and how it will be different from last year's at least when it comes to crypto ads. Joining me this week in the New York studio to break down the latest developments in the world

of digital assets is Bloomberg Senior editor Anna Arera. I know, so great to have you in the studio and instead of me being in London and US recording this episode, this time you're in New York. Yes, which is a big change of scenery. It's a big change of scenery. Um, but the scenery might change, but somehow the sec coming after crypto companies seems to be the thing that is consistent. As we were getting ready to step into the studio

for this episode. Our colleagues in d C, you know, Alison verse Brel, who has been on this show a bunch of times, reported that Kraken is being probed by you know, the top us financial regulator over whether and I quote it broke security rules related to certain offerings to American clients, which is another way of saying, once again, there are questions over whether exchanges like Kraken and others are offering unregistered secure these and if they are, the

SEC is trying to make it clear that no, you don't get to do that. There are rules, there are regulations that you need to follow. And from the perspective of somebody who covers crypto from like multiple perspectives, multiple countries, multiple geographies, do you feel like we're kind of in a stage where the long awaited enforcement action is seems

to finally be happening. I guess so. But also, knowing crypto, there will always be someone who says, but this, it doesn't show that this they're still not saying that it's a security And if you speak to lawyers, even lawyers with crypto clients now, and obviously they have a sort of like an invested interest in telling you it's a security and you're doing something illegal. But they are saying the SEC could not be clearer Garrigan's or could not

be clear. They are saying and they think that everything under the sun that you have said as a cryptocurrency is actually most likely a security, and it's most likely unregistered, which means if you're trading, selling it, doing anything with it, that that tool will be illegal unless you have a broker deer license, you're registered with the SEC. And to quotes our colleague on Bloomberg Opinion, Matt Levine, if you are Gary Gainstler talking to the crypto industry, it sounds

like everything is a security. And it's not just Gary Gainstter, but his predecessor as well was saying that everything was a security, and they were. There were speeches and there was a case brought against Ripple. So, you know, I think it's maybe wishful thinking, or I guess they're hoping it gets sorted in courts and they're fighting it, and they're hoping that they can claim that cryptos not elenregistered

security so they can keep doing what they're doing. And to your point there, there's you know two things about this cracking thing that are important. The first is it's still just approved. They haven't yet come out and said we are going to accuse you of X y Z, and we don't know what tokens might be involved here, like what are the specific things are that the SEC

is trying to classify securities? But then I think the point that you're making about how so much of this is going to be played out in courts is really key, right, Like, in the absence of specific defineable this is crypto regulation. And here's the book you can read to find out everything you can about it. It's been judges and lawyers

who are ending up shaping this policy. And you know, we are going to have one of our other colleagues, Steve Church, who covers bankruptcy here at Bloomberg, on on a future episode to talk about how that dynamic is playing out. But we had yet another example just this week because as always a lot of crypto stuff happened this week, but this time in the world of luxury handbags. Now I'm not necessarily a luxury handbag person. I feel

like you have better bags than me. But what happened with mez in this case crypto saying you have better bags than mefferent True, I have zero crypto bags, you have zero purpose A bit clear we have we're not holder of crypto crypto bags. Um so Yeah, So basically there was someone who was minting and fts taking advantage of the yes the meta broken, Yes exactly, and the judge says, no, no, you can't, you can't do that.

The luxury French designer is suing the maker of the non fungible tokens of a trademark rights this court case, it's all to do with the fact that these nonfushiable tokens get sold of digital birkens but without is say so, and as it relates to irmas, they had a really significant victory, and the creators of the n f T s were arguing like, no, you know, this is homage.

This is clearly not the same thing as these others, and it's certainly going to have an effect on other similar n f T projects that are sort of playing

with existing very large intellectual property. Yeah, and I guess what's interesting here is that a lot of the use cases for n f T s have been are like potential use cases, pseudo use cases have been in luxury so they were like, I guess playing with their own crowd because there was the luxury people knew and if they've been briefed about n f T s and so you can't, like, I think there's a whole point there.

There there are brands that are trying to connect n f T s to your bag, your luxury bag, and so in this case, you would have been like getting in an f T for a luxury bag that didn't exist. And they were clearly banking on on the on the Burkin brand. So it seems like a bit of a

no brainer. There's something in law, or if you've ever been in trial or on trial or you know subpoena called the discovery process, which is essentially when you are compelled to turn over everything everything like all relevant materials, and in a digital age, all relevant materials increasingly includes text messages. And the discovery in this lawsuit revealed some just incredible text messages. I'm going to read it just

two of them here. Ours attorneys pointed to dozens of pages of text messages that they said show the creators of the meta Burkins wanting to quote create the same exclusivity and demand for the famous handbag. According to the text messages. The creator of the Messa Broakens, used the words pump and chill and sought financial backers that he called whales. Another quote is, we're sitting on a gold mine. I don't have a lot of I'm not a lawyer.

I have a lot of legal advice, but I think you know, just don't send text messages people like especially if you're gonna get sued by luxury brands that have the ability and the resources to hire lawyers. One thing we should notice about this is the the settlements in the case wasn't a lot of money. It was like it was less than two hundred thousand dollars like three in her broken back. I don't even know how much. Broken back costs a lot of time, but if you know,

police school for the emails, crypto, Bloomer dot net. But you know, it's just the important thing here, as we're seeing with other cases, is like the legal precedent. We're gonna stay on the topic of money. This case digital money. And it's the UK which has, as we've talked about a lot on the show, attempted to really position itself as a digital innovator and to capitalize on the reputation for being a jurisdiction that has attracted that kind of

entrepreneurial talents, people who are interested in financial technology. They seem to be moving forward with getting ready to launch, which I know is like regularly to speak for like maybe we will, We're thinking about it. Here's some white papers. But they seem to at least be coming up with a plan for what folks are starting to call get this brit coin. Yeah, it sounds like endorsed by the

Spice Girls, but it is in fact not. Um, we don't think so, but they when when you talk about central bank digital currency, as you said, it involves a lot of white papers and research, and it's hard to understand when is it happening. It's very hard to say. They have said that if they do do something, it will be in the second half of this decade decade, So imagine that being the timeframe from like for like a consumer brand thing. We're doing this in like this decade.

So one of the big sticking points with central bank digital currencies is will it be like cash, Like would it like replace commercial bank money? Will like to be cut out, and so there's a lot of lobbying behind the scenes to make sure banks don't disappear, and I think they've sort of switch concerns and said, you know, it'll be beside cash and it won't hurt banks, and it will be a great opportunity. One thing with like CBDCs is that people they're trying to be a little

bit of everything so that they don't upset anyone. And so the question is will anyone want them? Especially if you're like developing now something that we want we're going to use like in five or six years maybe, So it's quite interesting. So so if it's not going to replace cash, then what is it gonna what's it for?

Can I just not use you know, like whatever we have now and in the UK and like sort of the US digital payments work really well, they're really fast, they're cheap, and you're just like that's in Europe in general, right, So like the idea of like why would we need a CBDC that's like a consumers like, it's just that's something that still needs to be I think answered well.

I think playing into the confusion is when most folks think about digital cash, they think maybe in like the US context of zell or Venmo or PayPal or you know, like, what are some of the e banks in the UK that allow you to do mobile based instantaneous payments, and it's like basically all of them, the banks like your literal bank, Yeah, exactly, just do it. And whereas here in the US, if my landlady is like you need to pay your rent by a transfer, I'm like, yeah,

my landlard here wanted to check when they want. He wanted to check three years ago, so not so long. So you know, we're a very different stages as development as the point that you're making. But those apps are not actually digital cash, because what they're doing is they're allowing you to move around, you know, bits and bytes that represent your claims to the banks that you have accounts in. But digital cash, in the form of a central bank digital currency would actually be like a claim

on the central bank. Right, it would be the equivalent into holding a dollar note or a pound sterling or one Japanese yen, which is a really different paradigm entirely. Yes, so it would he actually be a claim you have with the central bank. Movie, it would be the equivalent of cash. But then the problem is with cash, it's like totally like anonymous, right, So do you actually want

to create a digital form of payment that is totally anonymous? Essentially, it's central banks launching a great, big consumer like a big fintech consumer product, which is like very interesting intellectually, and they're doing it in that horizon that's like very far, very far away. And the last big consumer party launch was cash, which worked pretty well but hundreds of you. But like they haven't done any great product development since, Like who's the product manager at the ECB? Hard to

improve on coins and notes? You know, it's it's it's challenging, but I actually think we should find out who the product manager is the ECB. We'll follow up on that, and if you were the product manager of the ECB and you listen to those podcast, we'd love to have you on the show Cryptoe. When we've done that, we'll be right back with more of the week's top crypto stories with Bloomberg Senior editor an a Arera Anna. How much do you care about the NFL? Not very much.

I used to watch the Super Bowl but like the ads and then I bade like confused. Okay, So that's like you and the vast majority of people, especially people who are not in the US. And last year, basically for my job, I had to watch the Super Bowl for the ads because as we call it, as various people called it, it was the super Bowl of Crypto. You know, you had pick a celebrity and they were telling you how great bitcoin was. And now fast forward

it's a year later. I don't think there are going to be many celebrities at this Super Bowl shilling crypto. It's a very different kind of environment. One of the things that we've talked about is the fact that crypto companies tried to use marketing and advertising to get their products in front of, you know, the average consumer. A big story this morning, Staples Center getting a name change. Yeah, it is soon going to be known as Crypto dot

Com Arena. Crypto dot Com paying some seven hundred million over twenty years for the deal and what is believed to be the richest naming rights deal. That's why FTX had the naming rights to the Miami Heat Arena. In the absence of these big event driven things, is there still scope for crypto companies to be trying to do this kind of marketing and advertising like with the down market,

with regulatory scrutiny, like what's the vibe right now? So they don't have any money, which doesn't help if you're trying to buy a Super Bowl ad. Um. So that that's probably like a big issue at the beginning. I'm also hearing that some are actually thinking about the potential reputational damage now that you might have from having like a crypto advertisement. You know, like if you had an FTX AD. Now is not looking great for you know, what's been known as the mt X arena in downtown

Miami is no more. A judge just terminated the naming rights agreement with Miami. Dad Kelly after the crypto companies. Yeah, well he's retired now, he's already easy retiring and he's re re re retired and he's going to be some kind of sports commentated. Yeah, he's doing fine, I think, right, like definitely better than the people that lost their money and fd X all of it. Um so. So yeah, so they have less money to spend on ads. Um,

there's more scrutiny. And then also we've had cases in which the teams themselves have like upped their due diligence because they were left with no money. So if you sign a sponsor and you put it on your team's shirts jersey and then they disappear. Then that's a big, big problem. So it's another interesting thing that we're looking at is seeing like how sports sponsorships evolved. Now as you correctly identified crypto companies across the board generally have

less money than this time last year. There's always going to be options, but given market conditions, things have been pretty tough, and there are you know, a couple of well three billionaires actually that we've been covering quite a lot, who, to be clear, are still billionaires, so they personally still

have a lot of money. Two of them are Cameron and Tyler Winklevoss, the you know, co founders of the Gemini crypto exchange, and they have been involved in a relatively long running by crypto standards public dispute with Barry Silbert of DCG Digital Currency Group, and Digital Currency Group owns an entity called Genesis, and Genesis is one of the folks that had to file for bankruptcy in recent weeks, so they've been fighting and one of the things that

happened this week at least if you are a creditor to either of these companies is they seem to have come to some sort of agreement. Yes, they have come to a settlement. The big sticking point was that Gemini was getting money from their own clients who deposited money with Gemini, and then the money was going to Genesis within lend them out to someone else. Genesis lent to people it shouldn't have lent to, or like three exactly

and lost the money. And so if you were a user of Gemini, normal people, you will have lost your money. And so that was the issue. Gemini wanted the money back. So they've now come to an agreement. So like there was a lot of squabbling on Twitter, and it seems

that that has been resolved. Of course, you know, again it's yet another instance in which a crypto company has has gone bankrupt, and as we know, in bankruptcy, a lot of people end up not seeing their money, or if they do, they see it many years after and they don't see all of it. So at least it's

been semi resolved and like there's less fighting. So just as a closing note, as we look forward into the next few weeks and months, I think a buzzy word everywhere is artificial intelligence and I'm just going to kind of throw out a question, which is channel chat GPT like war game outs. What you think a likely headline is that we're going to have to talk about on the show that has to do with AI and crypto.

Someone's gonna do like an AI code or is gonna throw AI into their exchange and say that the actually matching engine is optimized for liquidity by using artificial intelligence, So you're like sending an order and it's getting matched in the most perfect way or waiting for the order to find a match because it's using r I AI. And then when we asked, but what liquidity, who's actually wanting to buy stuff? We will never get an answer,

but they will raise a hundred million dollars gazillion? Got it? Perfect? Yeah, Well, thank you as always, and have a safe flight back. Thank you. That was Bloomberg Senior editor Anna Arera. You can find more of Anna's reporting on the Bloomberg Terminal, on Bloomberg dot com and in our twice weekly Bloomberg Crypto news letter. This is Bloomberg Crypto, a daily podcast from Bloomberg 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. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net. The supervising producer of Bloomberg Crypto is Vicky Vergelina. Our senior producer is Janet Babin. Our producers are Mohammed Farouk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer. Original music by Leo Sidrn. I'm Stacy, Marie Ishmael. Have a great weekend.