The Year in Crypto Regulations

all hoping for quote regulatory clarity. In the US, the Biden administration announced an executive order too much fanfare that called for a national policy on digital assets. It required federal agency is to get their digital asset policies in order, but it lacked either teeth or specifics. Individual US lawmakers across the political spectrum proposed their own bills on crypto asset regulation, some of which competed with or even contradicted

each other. And against this backdrop, things were going mostly poorly for investors in the industry. Token prices plunged in value. One buzzy crypto company after another filed for bankruptcy, including FTX, which had sought to position itself as exceptional in every way, and it's now a former CEO, Sam Bankman Freed, has been arrested and is facing allegations of fraud and other crimes. So will three be the year the crypto gets regulated?

He a source out where we are and to look at head at what we're likely to see our Bloomberg reports. Allison Verse Brull. You know a lot of people that took money from Sam Bateman Freed are getting tough questions from reporters saying, you know, what do you plan to do with that money? Like did you did you veted? And and all of these other, you know, questions that they likely don't want to have to answer in their daily in their daily life. And Bill Allison, he allegedly

used other people to donate money. And this was two campaigns and to party committees which have contribution limits. You can only give so much money. It's twenty now, Allison, Bill, welcome to the show. Bill, how are you doing? I'm doing great. I'm Bill Allison. I cover campaign finance for Bloomberg News. Allison, you've been on the show a bunch of times. When keeping you busy? What's happening in your world?

So I'm Alison versus Brilla. I cover crypto regulation for Bloomberg News and it definitely has been a busy couple of months. Is also going to be a busy year, you know. Certainly. I think we're now going to expect a lot of talk about cryptopod polley and what should be done next, um. You know. Noteworthy, the Financial Stability Oversight Council, which is led by the Treasury Department, recently put out its h annual report and a big focus of that was cryptocurrencies, and so there were kind of

two takeaways from that. First, uh, the Oversight Council said that they wanted different agencies to kind of use their existing authorities and enforced existing laws in the crypto space. And then they also said, look, we have a lot of gaps in this space as well where we need Congress to step in, UM. One of those being providing authority to a federal agency to oversee cryptocurrencies that aren't securities. UM. So you know, I think we're expecting those talks to continue.

Will definitely expect more conversations about stable coin regulation, for instance. I think what remains to be seen is is what can actually get done. Well. I'm glad that you mentioned that because there have been so many reports, there have been white papers, there have been executive orders, there have been requests for comment, there have been like how about we have a hearing, and I'm not sure very many

things have actually happened. Well, it's you know, it's it's interesting because one of the bills that seem to have a lot of momentum before f t x's collapse was this bill from Senators Uh Stabino and step Senators Bozeman that would have given the Commodity Features Trading Commission more

power to oversee cryptocurrencies. Uh Senate Agriculture Committee Chairwoman Debbie Statement Now and the committee's top Republican John Bozeman dropping a brand new bill this morning that would give the Commodities Futures in Trading Commission more regulatory authority to oversee the crypto market and regulate bitcoin and ether as commodities. Now, this bill, and the issue with that bill, of course, was that ft S is former CEO Sam Bateman. Freed

was a vocal supporter of that. He was constant only on the hill talking about the need for that legislation. And so, you know, regardless of maybe the merits of the bill. Um, there are a lot of folks who see that as tainted. Why have your members vote on a bill that could put them in a tough political position, Um, given how how close to the effort Sam Bankman Freed was.

So you know that that bill of course kind of fell apart for for those reasons, though, I know that those senators are still keen on trying to do something in that space. So maybe it's as simple as saying, we went back to the drawing board. Um, we have looked at the bill, We've tightened provisions to make sure that it's a stronger bill, and we still feel like we need to give the CFTC this authority. So we're

moving forward with that, and then on other bills. You know, the stable Coin bill that the House was drafting that was never actually formally introduced. There were a number of challenge challenges. That was a big bill. UM. There were disagreements about the role of state regulators versus federal regulators. UM. I think that those types of disagreements are going to continue into next year. And now we'll have you know, the House and Republican control, so kind of a different conversation.

New dynamics too, to you know, navigate. So it'll be an interesting going back to that idea of the politics of all of this. You know, I think going into the beginning of two there was this idea that all of the Dems were anti crypto and all of the Republicans were pro crypto. Has that been true? No, I would say that. You know, throughout the last year, we saw more Democrats kind of coming on board. We saw Senator Corey Booker talking about crypto a lot more. We

saw um, Senator Kerson Gillibrand from New York. She was actually a bipartisan co sponsor on a bill with Republican Cynthia Lummis. So there were Democrats that were coming and saying, um, you know, look, we think there are are benefits to cryptocurrency. And then of course all of these failures in the market, the declines and token prices, um. You know, FTX was not the only company to go bankrupt. Those have caused

some problems. And you know what I hear now, I was talking to a lobbyists recently who represents a lot of these crypto firms, and basically, you know, that person was saying that there's a lot more skepticism around around lawmakers, probably why you're not seeing a ton of them coming out and being um especially on the Democratic side, like avid crypto supporters at this point. Uh So, I think that will be interesting to see if this does become more of a partisan issue going inte than it was

becoming towards the end of Bill. I want to ask you about I don't know if it's your personal favorite topic, but it's certainly your professional favorite topic, which is which is cow paiin finance? Because this was a thing where, you know, we got into the mid term cycle and you and others were publishing stories about the fact that donations from crypto affiliated you know, political entities were record breaking. They were like, defense, whatever, we've got this. We're crypto,

we have opinions, and we have money to spend. We now have this interesting cork where Sandbag when freed. Among the various charges that he's facing, and he has not been convicted of any of them, and he's certainly been accused of a lot have to do with campaign finance violations, there's possibly three things that he could be in trouble for.

The indictment goes to two. One is is that he allegedly used other people to donate money, and this was to campaigns and two party committees, which have contribution limits. You can only give so much money. It's tars now, and a lot of times when you have campaign finance laws being broken, it's somebody who uses five or six buddies to all give the maximum to a campaign and he's paying for it out of his own pocket, and you know, so that's that's you know, violation number one.

Number two is the indictment alleges that he was using corporate money to actually pay for that, and politicians cannot accept corporate money in any way, shape or form. So if this proves to be true, there's gonna be a lot of campaigns and party committees that are writing refund checks to ft X because they're not allowed to take that money. And then a third possibility is, you know ft X is a sprawling international company with all kinds

of different incorporated divisions. Some of this may be foreign money, which is also illegal for for US campaigns and superpacks to take. So there's there's just the number of potential violations are are are huge based on what the indictment is saying. So, Allison, going back to your point about you know, politicians being like, I don't know if I

want to be associated with this guy. Is some of these alleged campaign violations, is like, is that a consideration for any of the folks who were saying sponsors or supporters of any of these bills. You know, you have to think that it it factors into their decisions. A lot of them are getting you know, a lot of people that took money from Sam Bringman Freed are getting tough questions from reporters saying, you know, what do you

plan to do with that money? Like did you did you veted and and all of these other, you know, questions that they likely don't want to have to answer in their daily in their daily life. Um So, yeah, you gotta think that this is going to factor into how they feel about the crypto industry, how close they want to get to the crypto industry going forward. Obviously this past year there have been a lot of investigations

opened on crypto firms. We have all of these allegations of fraud, so you know, it's it's definitely something that these lawmakers I think are going to be considering as they move forward. Up next, you'll hear more from Bloomberg Reports is Allison Verse Brull and Bill Allison. We'll be right back, Bill. Has there ever been a case I know, you know we've even mentioned on this podcast, like Enron is an example of an entity that had a lot of people associated with it who were big political givers

or influential in some way. But is there like a course correction where politicians would be like crypto money absolutely not, thank you goodbye? Or are they going to realize that campaigns are expensive? And if there's another crypto company the want to, you know, that has a CEO that wants to give them money, they'll at least take the meeting. Yeah, you know, with politics, you know, as long as you haven't been indicted yet, they'll say your money. And you

know we already see Tom emer out. It was a very powerful Republican talking about crypto regulation and he's and his his argument is basically that f t X is all about Sam Bank and Freed. It's all about you know, it's this one person, it's the one bad Apple or bad Egg, and that the industry. You know that what you need is the kind of regulatory frame work that you know, Sam bankman Free was talking about what is

very kind of decentralized, regular story oversight. And so I think that you know, you're going to see politicians who are not going to be afraid, you know, for ideological reasons to embrace people in the crypto industry. And you know, I think the other thing is that as we get further along and this becomes you know, the bankruptcy case will be about Sam Bankman Freed and f t X, and but other companies I think will probably be able

to distance themselves from that that. You know, it's it's you know, just because Enron collapse did not mean that every single energy company stopped giving or politicians stop taking money from every single energy company. Uh, it's it really is, you know. In some ways, you know, because he becomes such a big story, it gives a little bit of cover to everybody else that that's where the attention is, and they can go about things, probably in a more

quiet way, but they'll still be giving money. I would think, now Allison, US regulation is new tour previously parochial in the sense of folks tend to make decisions through a lens of you know, national security or what's good for the US or like the U s economic system, and every single country has kind of a similar perspective on how they do things. The US just happens to be

one of the larger um players in that ecosystem. There's this increasing drumbeat though from other countries and other regulators that the key for crypto is global coordination, that it sort of makes no sense for the UK to have one way of doing things, for France to have another way in for the US to have a third. What do you see the prospects of something like that? You know, I would say that a lot of these agencies would

probably say that these conversations happen right now. I mean, I don't know about the prospects for some sort of big global framework, but there are you know, there are conversations that happened behind the scenes as much as they can under you know, information sharing agreements between different countries. Right Yeah, I mean I think that's probably a conversation that's happening right now. We'll see if you know, groups like like f STOCK start talking more and more about

is the Financial Stability Oversight Council UM. So they're the ones that just put out this annual report and they're made up of all sort of the major us UH financial regulators, including you know, the Security the heads of the Securities and Exchange Commission, the heads of the Commodity Features Trading Commission, UM, Treasury FED. So you know, it's it's something that I definitely expect to be a continued conversation UM and we'll have to see where that lands.

So that f stock report that you mentioned, they mentioned the word crypto nearly a hundred times, which is I mean, I cover crypto and even so that strikes me as a lot. But are there are other players who have kind of opinions in this area that we should be paying attention to. So, you know, I think it's important to note that there are questions about what to do

on a global scale. Obviously cryptocurrency as a globe business. UM. Even if you have an exchange that's based in the Bahamas, for instance, like FTX, it doesn't necessarily mean that you can't have customers from other countries like the US UM somehow be able to access that UM and so I think I will know, you know, in October actually of this year, the Financial Stability Board, which includes UH different countries, had published a proposed framework for international regulation of crypto

asset activities. Uh the US is involved uh in in the FSB, So you know, we'll have to see if there's more discussion about global efforts, about global coordination going into next year bill. On the other hand, you know, campaign finances by definition of very local set of considerations, it almost doesn't matter whatever the Canadians are up to. What are some of the ways in which you know, these laws might get, if not tightened, at least screw sized to avoid some of the shall always say ft

X effect that we've seen this year. One of the things that Sam bankman Fried has claimed, and you know, I'm not sure that the data supports it, but he said that he poured in a lot of dark money and these are undisclosed contributions to Republicans, right, that he basically gave as much to Republicans and as he did to Democrats. And it's very hard to prove, you know, from the standpoint of being a report or whether it happened or not. But you know, there are bank transfers,

there are records that he has. If this does come to come out to be proven, you may see a bigger effort to disclose donations that you know, nonprofits that spend on politics will have to disclose the donors are their major donors. And there's been a bill that's been kicking around. I think since would do that. Uh, maybe we'll finally get some impetus to do that and have

a little more disclosure. But I don't think you're going to see, like, you know, anybody trying to shut down superpacks, although you know a lot of people would like to, but the problem is you have a Supreme Court decision that prevents that from happening. All Right, Bill Allison, thank you so much for being on the show. It's always a pleasure to have you on. Thank you. Thanks for having us. You can find more of their reporting on

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