This Week in Crypto: Regulations, Resignations, and Kardashians

be made from it. And Bloomberg reports to Alison very Sprill. We have so many different regulatory bodies, different agencies that want a piece of the crypto pie. Allison. So good to have you back on the show. So as usual, it's busy story, pretty much the story of our lives. You know. We we wake up, we record podcasts, we firefight whatever is happening in markets. We we write some stories, we do some stuff. Beth, what has been going on?

Because I feel like in preparing for this episode, trying to read everything that we published and I gave up

because it was too much stuff. Of course, Well, we are still in the midst of crypto winter quote unquote, which I describe as there was a big steep decline in prices that we saw earlier in this year as the Fed was raising rates, and then we saw these follow on effects of several crises hitting between Terra three arrows Hedge Fund collapsing, Celsius bankruptcy, and now we're at the point where the market is sort of bottomed out, sort of treading water, yes, treading water, and meantime we're

seeing these bankruptcies play out and liquidations. We haven't seen any further damage in terms of contagion. We're keeping an eye out on it, and kind of in a funny note, even though the market is sort of treading water, we've sort of prepared ourselves for a next leg down if there is a next leg down in a particularly Bitcoin, which is the big cahuna of crypto, but it hasn't happened.

So there's a growing sense that perhaps we've reached a bottom, that the shakeout has happened, and so we've seen Bitcoin again the main crypto that that people really focus on, kind of center around this twenty thousand dollar level. It also at times it had been highly correlated with risk assets, particularly tech stocks. We've seen that break apart a little bit cut it seemed to go its own way again.

Some of the gyrations that the stock market has been through in recent weeks, you could argue the crypto market had already done in June, July, etcetera. So we're kind of at this stage where we're sort of watching the effect of earlier this year sort of play out to sort of the next level, as it were. The absence of retail, the absence of the individual investor, is what's sort of keeping the market from rebounding. Perhaps it's hit the bottom, but it's not necessarily rebounding at this point.

You know. We were talking to one of our other editors earlier before we recorded this episode, Philip Lagerkranzo, who of course has been on the show, and he was making kind of a football analogy, and I used football in the appropriate non American sense of I suppose you'll call it socker, where the idea is that you know, it's crypto has been like a game of two halves this year, where in the first half of the year it was like up down whatever, chaos, and then the

second half the year has just been like it's just the occasional breakout, but not a lot of really intense folatilty. What I'm hearing from you is what we are starting to say is that if there is a breakout, it will be to the upside of twenty thousand rather than blue. It seems that way. I think just nineteen and a half was the where it hit, and maybe July it gets down to that level and it seems to to

find some support. There don't seem to be any major systemic for lack of a better word, further clouds on the horizon. Of course, you know, never say never and that kind of stuff. That's the worst thing I could possibly say, I bet. But another interesting thing that I'm that I'm noticing during this period, after this bit of upheaval, there's been a bit of turnover in the upper management across a lot of major crypto firms for a lot

of different reasons. And I was looking back at our headlines since I don't know, since the summer or so, and there have been at least two dozen moves, either upper management leaving or someone coming onto a firm. That's

a bit of movement in the echelons of firms. From f t X, which is the big crypto exchange to Celsius, which is bankrupt and kind of going through a reorganization, so perhaps not surprising there and also has some some legal clouds over it, to something like a crack In, which is another exchange where a founder has stepped aside

and are letting in other types of management. Perhaps if the market is going higher from here, if the market is going to gain more mainstream adoption, does it require new leadership, does it require a different kind of management, does it require more governance? And so you may be seeing just a reorientation knowing that the crypto market maybe going into a new phase of its maturity or if

it's evolution. The other big backdrop there is regulation. With all the turmoil that happened and great loss to individual investors, really bringing home that sster protections are sorely lacking in crypto. There's definitely been a sense that the regulation is something

that has to be figured out. One of the things that I am finding slightly shall we say, wacky about regulation in the US right now is we have all of these issues that Beth you've just described, you know, significant losses to individual investors and you know, retail traders in particular, you have fairly serious allegations of mismanagement to criminality at different types of entities, you know, funds, companies, etcetera.

You have multiple people in the field kind of clamoring for clarity around the next steps for regulation, and then you have Kim Kardashian. And I'm like, of all of the regulatory priorities in the world, why is finding Kim Kardashian one point to six million dollars at the top of anyone's list. Listen, I'm gonna ask you that question. So, in talking with attorneys and former regulators, I mean, this kind of case is, you know, probably on the on the SEC's list for a number of reasons. Right, It's

relatively a slam dunk. It was kind of an easy case of you know, you touted this particular token and you didn't disclose that you were paid for that promotion. We've seen the SEC go after other celebrities like boxer Floyd Mayweather and music producer DJ khaled Um. So it's well known that this is the SEC stands, and you know what they win here is that this is a

very big name. Pretty much, I think everyone pretty much knows who Kim Kardashian is they also are loving by far the largest fine we've seen, you know, almost one point three million dollars from from the folks die talk to. It's basically just sending a message, right, you know, we've given you fair warning that you can't do this. Now we're showing you that we aren't afraid to love you these even larger fines on you, so, you know, kind

of knock it off. And and the reason we're probably seeing cases like this and maybe not some other cases against say exchanges where the sec has consistently said that a lot of these exchanges are you know, listing securities and so that they need to be registered with the agency. I think we are not seeing really as many of those cases because those are more difficult to prove, especially if you have a lot of high power attorneys sort of arguing against each individual token and saying these are

the reasons we don't think it's a security. So I think that's why we're seeing this kind of case come out. Well, to your points, all fair and legitimate points, I will concede, we're seeing this kind of case come out. But what we're not seeing is policy, right, We're seeing kind of enforcement of policies that all exist, whether the sec will

already exist. So in this case, there is a Securities Act that says, if you tell something that looks like a security that we've defined as a security, not only do you have to disclose that you are doing some telting, that you're getting kind of material compensation for this, but you're supposed to go into kind of the level of detail that hashtag ad does not quite fly by in terms of things that you're putting on you on your Instagram.

But we're not seeing significant movements in legislation. We're not seeing significant movement as you've reported on this podcast and in other places in you know, like the issues relates to the executive order of different agencies kind of coming out and saying, Okay, this is specifically what we're going to be looking at. Here is concrete next steps. What is causing this relative lack of inaction on the policy and legislation inside of the House. So there are several

things that play on the agency side. We have so many different regulatory bodies, different agencies that want a piece of the crypto PI and it's not necessarily clear you know which assets fall under which agencies jurisdiction. I think stable coins are a good example of this. You know, the SEC has previously said that in some cases stable coins might be securities. The Commodities Features Trading Commission has said that sometimes they might be commodities. And then we

know the banking regulators are interested in them. So, you know, I think I think it's just the fact that so many people want to be involved, so many people may have jurisdiction. And then on the legislative front, I think we're just seeing, uh, what we know has been an issue over the last several years. Right Congress is getting more partisan. It's harder to pass big pieces of legislation.

This year, in particular, we have the upcoming midterm elections, so kind of there's a point in Congress where everyone shifts focus and shifts it away from from policy to you know, getting re elected. So a lot of different things at play. And then also on the legislative front, there are still some substantive issues that you know, these

different committees have to hash out. For instance, on the stable coin bill, I've talked to folks who have said, you know, there's still a question of how much overrule state regulators should be able to play in overseeing stable coins. There's some disagreement about whether non banks should be able to get access to federals or master accounts. So these are you know, they're not necessarily easy issues to pass through, and now we have a very limited time left on

the congressional calendar to get through those issues. So it's starting to look less and less likely that we'll see something this year, though people are still pretty optimistic for next year on the legislative front. We'll be right back with more of the week's top crypto stories with Bloomberg reportor Alison Versprol and Bloomberg editor Beth Williams. At the

beginning of which was kind of what I started. Yes, it feels like a lifetime, but at the beginning of twenty I mean, I remember there was so much optimism that is going to be the year of regulation, the year of legislation, and you know, here we are in October and we still haven't really seen all that much progress. So I think the fact that we've actually started to see some pretty substantive proposals, the fact that there is some bipartisan interest, I can see some of the reasons

for optimism. But I think We'll have to see how things go, and it will also depend on how the midterm election shape up and what the makeup of Congresses next year. You know, do we have a Republican Congress and a Democratic president and what does that mean? They think some of the losses we've seen this year did create some urgency the stable Coin bill. Again, I mean, I guess I'll point out that that bill has not

even been released, it's still being drafted. Um, we've seen some draft floating around, but there was some additional urgency after you know, terra USD collapsed. I do think, unfortunately, the further we get from that incident, the less it's on people's minds, and maybe it stops being as much of a driver for legislation. You know, I've talked to folks who have worked in this area for a long time that we're that are essentially you know, it kind

of takes a crisis for for Congress to act quickly. So, you know, do we need another Tara situation before this becomes a serious consideration? And of course you also have a Congress that in additions of thinking about mid terms, just thinking about oh, I don't know, nuclear war. So the list of priorities ahead of crypto at this moment seems seems quite long and quite important from a global

death perspective, I would say, right. And I think there are some too who say, you know, look, the banking sector, the traditional financials actors haven't gotten that involved in crypto yet, so there's been a limited amount of contagion into those industries. Which you can be sure if there was kind of a knock on effect to traditional finance and it was having a big broad effect on the economy, that people would be a little bit more concerned about it. But

we're not necessarily seeing that yet. But some people are concerned. You've been reporting to the f s C, which I'm gonna ask you to explain because I can never remember that acronymics for um has expressed some concern abouts contagient

and stability risks. Yes, so the Financial Stability Oversight Council, which is led by the Treasury Department, they did put out a report this week and they did talk about the potential financial risks, but they mentioned, you know, like this becomes more of a risk the more that banks and some of these other traditional players get involved, kind of the more consumers are exposed to this, so you know, it's something to keep an eye out for going forward,

and it could become a big problem down the road. And so to that effect, they talked a little bit about the risk of this report, and then they also offered some recommendations for legislation that they would like to see Congress act on. And that's just kind of like throwing back to you. You know, we've got potential ongoing consumer crisis and crypto we have this increasingly stressed macroeconomic environments. Like you know, the R word for recession is being

thrown around a lot. Is that affecting anybody's optimism about you know, as you as you called it like the big Huna of crypto bitcoin, but more broadly about where the market might go. I think that macroeconomically, if you're talking about sort of the slashing around of liquidity, the very ultra ultra low rate environment, even the COVID relief that came out, there was just a lot of of

money that people had to spend. There was excitement around crypto rates were really low again for a lot of people. It was sort of a fun experiment. This has taken that part of the market out the rising rates, other risk markets down and now things becoming more expensive. Inflation is out there. I do think that there is a

damper put on the general enthusiasm around this market. But I also think at the same time that you know, we keep reporting, you know, week after week, there's a steady drum beast of institutions and banks that are getting involved in small ways at first custody or through derivatives rather than you know, the actual coins, and I think

that's something to watch. I do think that there's a sense among the you know, what you would call trad five, which is the traditional finance, that this market is here to stay in one form or another, and that there's money to be made from it. And that's where you may see the beginnings of a true reco coovery. And then,

you know, retail can be fickle. Those customers will come back to, but a market that used to be dependent very much so on retail, maybe the recovery this time will not come from the individual, will come from these institutions actually coming on board. And again regulation will have to play a part in that. The great institutional wave that people have been talking about. Another thing we'll just have to see, Well, you know. Thank you very much to you both. It's always a pleasure to have you

on the show. I'm sure I'll have you both back and good luck with all the things, including Kardashians, So thanks for having us. Take care. You can find more of their reporting on the Bloomberg terminal, on Bloomberg dot com or on Twitter. Beth is at b Willie Lou that's b w I l l I l I O U, and Allison is at Ali ver Sprill that's e L L y V E R s p R I L

l E. On the next episode of Bloomberg Crypto. It used to be all of say a year ago, that if you worked on Wall Street and we're looking for a change, then a crypto startup was the go to place to head over to. Now, as prices fall and sentiment declines right along with those prices, these buzzy crypto companies are laying off staff, including those new hires. And what are those staffers doing heading right back to where they came from? Wall Street. This is Bloomberg Crypto, a

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Original music by Leo Sidrn. I'm Stacy, Marie Ishmael. Have a great weekend.