February 23, 2025 • 20 mins
Just as it took the British government a century to catch up to Jonathan Swift’s innovative person-to-person loan program, the U.S. government has been slow to react to crypto, creating bureaucratic and legal hurdles to growth in the industry. But with a new administration and a new Congress, the industry now feels there’s reason to be optimistic that regulatory clarity, and a new chapter in the story of crypto in America, is beginning.
This episode is sponsored by Coinbase.
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Speaker 1 (00:00):
Because you're a subscriber to this Bloomberg podcast, we thought
you'd be interested in a sponsored podcast called Evolving Money,
produced by Coinbase and Bloomberg Media Studios. It explores how
money has changed over the centuries and whether cryptocurrency is
just the next logical evolution of how we pay for
things and store long term value. Here is a recent episode.
Speaker 2 (00:25):
It's been nearly fifteen years since a computer programmer named
Laslohnyez famously spent ten thousand bitcoin for two Papa John's pizzas,
the first ever purchase using bitcoin.
Speaker 3 (00:38):
At the time, those.
Speaker 2 (00:38):
Ten thousand coins were worth only forty one dollars. Since
that landmark moment, the digital currency has traveled an uncertain road,
which isn't unexpected. When new financial practices gained traction, regulation
is usually slow to catch up with the new reality.
As a result, throughout its short history, the crypto market
has been plagued by regulatory uncertainty.
Speaker 3 (01:00):
But last year things started to shift.
Speaker 2 (01:03):
One of the first big breakthroughs came when federal regulators
approved an ETF that tracks bitcoin. Then came election Day,
which was a game changer. A record number of pro
crypto candidates on both sides of the aisle one at
the state and federal levels, with the most pro crypto
Congress ever on its way to Washington. On December seventeenth,
(01:24):
Bitcoin closed above the one hundred thousand dollars mark for
the first time ever. At that moment, the amount of
bitcoin that Laslohanye has used to buy his two pizzas
back in twenty ten was worth one billion dollars. That's
a lot of pizza no matter how you slice it.
It seems clear that crypto is entering a new era,
(01:45):
But what will that new era actually look like? Welcome
back to Evolving Money from Coinbase and Bloomberg Media Studios.
I'm your host, Maggie Lake. On this podcast, we take
a different look at cryptocurrency. It's been as a radical
departure for the monetary system, but what if it isn't
radical at all, just the next logical evolution of how
(02:07):
we pay for things and store long term value. Along
the way, we'll explore how money has changed over the
centuries and look for lessons that might predict its next evolution.
As investors finally begin to see a path toward regulatory
clarity for crypto, what new opportunities are about to be
unlocked for investors and consumers. I'll pose those questions to
(02:28):
Carrick Calvert, head of US policy at Coinbase, and hear
how a clear regulatory framework could build even more momentum
behind crypto and usher in the next wave of money's evolution.
But first we'll speak with historian Daniel Carey about a
moment three centuries ago when a radical new way of
lending money was born and why it took another one
(02:48):
hundred years for the government to catch up to this innovation.
In seventeen twenty six, a new book was making waves
across Europe, Gulliver's Travels. You probably read it in high school,
but did you know that the author, Jonathan Swift, was
also deeply involved in Irish politics.
Speaker 4 (03:08):
He's a controversialist, he's a satirist, a very patriotic supporter
of Ireland.
Speaker 2 (03:13):
That's Daniel Carey, professor at the University of Galway in Ireland,
where his work focuses on money and the economy in
the Enlightenment. With the success of Gulliver's Travels, Swift became
newly rich. With his now substantial personal wealth, Swift decided, hey,
why not try to do some good well.
Speaker 4 (03:30):
Swift clearly has a sympathy with those who are trying
to get by dealing with you know what.
Speaker 5 (03:34):
We would call liquidity issues.
Speaker 4 (03:37):
They've gone debts that they have to call in, they
have bills that they need being repaid. He decides to
make person loans.
Speaker 2 (03:44):
He approached farmers, builders and entrepreneurs he knew, offering loans
of five to ten pounds roughly thirteen hundred to twenty
six hundred dollars in today's money, and Swift didn't ask
for a cent of interest on these loans.
Speaker 3 (03:57):
Swift's idea was a smashing success.
Speaker 2 (04:00):
Soon networks of peer to peer loans began popping up
across Ireland, an unofficial system providing crucial liquidity and startup
funds to people who had no access to financial institutions.
Speaker 4 (04:11):
It is significant in terms of enfranchising people and giving
them a little bit of a sense of reward for
what Swift thinks of as their honestry and their commitment
and diligences tradespeople.
Speaker 2 (04:23):
Even as this informal system spread and its benefits became clear,
the British Parliament didn't formalize or ban these peer to
peer networks, and that lack of structure limited the scale
of their growth. It wasn't until seventy eight years after
Swift's death that Parliament passed legislation to formalize what he created.
Speaker 4 (04:42):
The legacy for Swift is probably in systems of microcredit,
which for most people are relatively recent in terms of
their thinking about what can be achieved through supporting industrious
but impoverished people.
Speaker 2 (04:59):
Fast forward to the late nineteen nineties, when online technologies
began to inspire a resurgence in the kind of peer
to peer lending that Swift made popular centuries earlier. Instead
of a wealthy merchant going to a farm to lend
a worker a few pounds, now online platforms could match
individual lenders with borrowers. It took nearly a decade for
the Securities and Exchange Commission to regulate P to P
(05:21):
lending services. Once it did, the system flourished, and today
the P to P market is valued at over twenty
six billion dollars.
Speaker 4 (05:30):
These are just evolving systems. It takes a long time
to evolve that and to develop systems of trust.
Speaker 2 (05:36):
Taken to extremes, government regulation can be the enemy of innovation,
stifling change. But as the history of peer to peer
lending shows not once, but twice. Instituting the appropriate regulation
can also normalize new kinds of financial practices, Innovation can accelerate,
and even more opportunities open up for crypto. It appears
(05:57):
that breakthrough moment has arrived.
Speaker 5 (06:00):
I got my start in crypto about a decade ago
and had started working for coinbase here in Washington, d C.
Was really one of the few lobbyists on the ground
that was working on digital asset issues, crypto issues, blockchain technology.
Speaker 2 (06:13):
This is Kara Calvert, vice president for US Policy at Coinbase.
As an advocate for financial innovation on Capitol Hill, Kara
has seen how slow regulators and institutional investors can be
when it comes to embracing something new like crypto.
Speaker 5 (06:28):
When I first started working on these issues, it was
much more viewed through the lens of technology, and really
it was so new and nascent that nobody really knew
what to think.
Speaker 2 (06:37):
As the crypto industry has grown, the SEC has sent
mixed and often confusing signals. Rather than regulating crypto through
new roles that treat it as the financial innovation it is,
the SEC has insisted crypto fits its existing set of
roles that approach has led to some murky and seemingly
arbitrary classifications. The SEC, for example, considers most digital assets
(07:00):
as securities, but not bitcoin and ethereum. Back in twenty eighteen,
the SEC ruled that Bitcoin and ethereum, the two most
popular and widely held digital currencies out there, weren't digital
assets at all, but quote replacements for sovereign currencies. The
SEC's selective regulations have resulted in a regulation by enforcement approach,
(07:23):
leading to a slew of lawsuits against crypto companies, including Coinbase.
Speaker 3 (07:27):
In twenty twenty three.
Speaker 2 (07:28):
The SEC alleged that Coinbase had been acting as an
unregistered broker. That's consistent with its view that most crypto
products are no different from stocks, bonds, and other securities.
But Coinbase and other crypto companies targeted by the SEC
have argued in court that digital assets are different and
that it doesn't make sense for them to be treated
(07:50):
the same as existing financial instruments.
Speaker 5 (07:53):
We have been working and really tried to work with
regulators from the beginning. When Brian Armstrong founded this company,
it was to be the mostested, in, safe and secure
way to transact in digital assets, and in order to
do that, you have to work with regulators, and so
I think the SEC over the course of the last
four years had very much a yes, you can come
talk to us, but well, listen, we may not give
(08:13):
you anything in return.
Speaker 2 (08:15):
Kara says that the absence of clear rules has stifled
industry wide progress that.
Speaker 5 (08:20):
Created a real depression I think on innovation here in
the United States and ultimately resulted in a lot of
startups and more importantly, the investors in those startups saying,
let's go overseas. There's a better way to do this
in one of these jurisdictions, not a deregulated jurisdiction, a
regulated jurisdiction.
Speaker 2 (08:38):
There have been signs that the legal tide might be turning.
In twenty twenty three, the SEC sued Ripple, a firm
which provides digital asset infrastructure to financial services companies, for
violating securities laws, but the judge sided with Ripple, ruling
that it didn't break the law when the currency it created, XRP,
was sold on public exchanges. The industry's momentum continued when
(09:02):
the SEC approved an ETF that tracks the price of bitcoin.
That was a big win for crypto custodians like Coinbase,
which provides custody, trading, and financing for etf issuers as
well as investors around the world.
Speaker 5 (09:15):
I do think it paved the way for retail investors
other investors around the world to have access to our
very deep in liquid markets in the United States, and
I think that was very much a turning point for
many people.
Speaker 2 (09:27):
As for Coinbase's battle with the SEC, in March twenty
twenty four, a Manhattan federal judge found quote the challenge
transactions fall comfortably within the framework that courts have used
to identify securities for nearly eighty years, setting the stage
for a jury trial. But then in January she granted
Coinbase's request for a pre trial review of her March
(09:48):
order by the Second Circuit. Those sorts of interlocutory appeals
are rarely granted. A promising sign for the industry. In
the meantime, it can still feel like the US is
in the dark ages when it comes to crypto.
Speaker 5 (10:01):
You have seen now Europe is ahead of the United
States in a innovative technology which doesn't happen that often.
And we're actually very excited about the work in the
EU and working with our counterparts and with regulators In
the EU, they developed a very clear framework and they're
going to be implementing that soon. You have the UK, Singapore, Australia,
(10:22):
there are so many different countries. Roughly eighty percent of
G twenty and other financial hubs already have rules that
they're putting in place to deal with this asset class.
Speaker 2 (10:32):
So why has the US government in comparison been so
slow to create a federal framework.
Speaker 5 (10:38):
The foundational regulatory framework that we're working with in the
United States is frankly more complicated. We have a bifurcated
system where we determine what is a security and then
what is a non security or a commodity. And in
the rest of the world they don't really have that
type of differentiation, and that I think has allowed them
to move more quickly. State regular market regulators two different
(11:02):
market regulators that are in a tug of war. They
just don't have that in most international jurisdictions. Crypto is
not asking for a deregulated environment. Instead, we're asking for
consistent rules that actually address both the benefits of crypto
and of blockchain technology and the risks.
Speaker 2 (11:20):
Today there's more hope than ever that the industry will
finally get the regulatory clarity that will pave the way
for wide scale adoption with widespread benefits for consumers and
investors alike. While the SEC remained reluctant to regulate crypto
and legal proceedings ground on in the courts, the crypto
industry turned its attention to the third branch of government, Congress.
Speaker 3 (11:43):
Ahead of the twenty twenty four election.
Speaker 2 (11:45):
Knowing what was at stake, the industry mobilized to support
pro crypto candidates, contributing more than one hundred and thirty
million dollars to election coffers. Industry advocacy groups such as
Stand with Crypto mobilized as well, organizing more than two
million crypt do advocates through grassroots efforts, and come November,
twice as many crypto supporters were elected to the House
(12:06):
of Representatives as anti crypto candidates. The market's response was emphatic.
In December, bitcoin hit the one hundred thousand dollars milestone,
a remarkable moment considering that just two years ago the
price had dipped below seventeen thousand dollars.
Speaker 5 (12:23):
It's been a complete one eighty. You've got the most
pro cryptocongress, you have a president, you have Republicans and
Democrats all saying, all right, now we know more about
this industry. It is maturing. We understand what the future
might hold and why it's important. So I would certainly
say the narrative has evolved. It's matured. You have more
people at the table, and I think that's the exciting part.
Speaker 2 (12:44):
Now with a new pro crypto administration in the White House,
new leadership at the SEC gives the industry hope for change.
Speaker 5 (12:51):
Now. I think the SEC really has an opportunity to
write the rules that these are not rules that are
deregulatory in nature. It needs to be because the asset
is not identical to what we traditionally see in an
equities market. It has different characteristics, it evolves. We are
really eager and we are very optimistic that the regulators
(13:13):
will work together to actually come up with a framework
that looks at both the role of the SEC with
the digital assets securities and the role of the CFTC
with digital asset commodities.
Speaker 2 (13:24):
The CFTC is the US Commodity Futures Trading Commission, a
government agency that's always been overshadowed by the SEC, but
under the Trump administration, the CFTC is positioned to play
a bigger role in regulation, working alongside the SEC for starters,
Congress could empower the CFTC to regulate digital assets as
(13:45):
commodities rather than securities.
Speaker 5 (13:48):
Congress has a really important role here to ensure the
CFTC has the federal authority to regulate these spot markets
for digital assets, but also that the SEC can use
to tailor and move in the right direction. And so
the work of Congress to really make sure that we
have something in law that can withstand the test of time.
(14:08):
It can it can move through administration to administration, regulator
to a regulator.
Speaker 2 (14:13):
Among the topics the crypto industry hopes Congress and regulators
will address is the status of stable coins. The discussion
around stable coins is only intensified with the growing possibility
of legislation that would facilitate their trading.
Speaker 5 (14:26):
There are a lot of really important characteristics of stable
coins that need to be captured in a federal framework.
How we create a framework at the federal level to
ensure that folks who are issuing digital assets as stable
coins are safely protecting their reserves, are putting those reserves
in a one for one bank account or in an
equivalent of a treasury or cash, that they're holding that
(14:47):
in a bankruptcy remote way, that they are accounting for that,
and they are demonstrating that in a transparent way.
Speaker 2 (14:53):
Another simmering subject the industry hopes Congress takes on is
d banking, the practice of lenders dropping cryptocompany and founders
as clients.
Speaker 5 (15:02):
If you can't get a bank account, it's pretty hard
to start a new business. Stand with Crypto has brought
more than one hundred founders to Washington to meet with lawmakers,
and a really interesting piece of the puzzle for them
is their banking services. And in almost every meeting they
went into, they expressed concern that they couldn't have access
to payroll or checking accounts. And we said, well, would
(15:23):
you be willing to go raise your hand in public?
And Autumn said, well, I actually don't feel comfortable raising
my hand in public because I'm still trying to get
that bank account. I'm still trying to find somebody who
will give me those services. And if I say right
now that I can't be trusted to get a bank account,
nobody else is going to give it to me. And
so what we saw was this inability for people to
(15:43):
really voice their concerns and raise the issues.
Speaker 2 (15:48):
But less than a month into the new administration, that's
already changing. Just a few days into his term, President
Trump issued an executive order that fundamentally changed the federal
government's approach to crypto Fulfilling a promise he made on
the campaign trail.
Speaker 5 (16:02):
The executive order really encapsulated those campaign promises, everything from
ensuring that you can continue to self custody your assets,
to ensuring that there's no central bank digital currency, to
creating a working group to ensure that we stop the
turf war between the different agencies and instead have them
work together.
Speaker 2 (16:19):
The new administration also quickly moved to counteract SAB one
twenty one, an SEC bulletin that prevented a lot of
financial institutions from entering the crypto space.
Speaker 5 (16:29):
SAB one twenty one represents the staff accounting Bulletin number
one twenty one. Think about what that represents. It is
a staff letter, It is not a rule. It did
not go through the proper rulemaking process with notice and comment.
It was bureaucrats inside the SEC who decided to write
an accounting bulletin that then imposed a new framework on
(16:53):
the entire industry.
Speaker 2 (16:55):
SAB one twenty one was a barrier that cut off
access to banking services for crypto companies and kept banks
out of the crypto business. Coinbase has always prided ourselves
on being one of those access points, but when we
think about the recision of ZAB one twenty one, it
really allows other banks other financial institutions to engage as well.
Within days of being appointed, the acting director of the
(17:16):
SEC countermanded SAB one twenty one. Just like that, one
of the major obstacles preventing banks from taking on crypto
clients vanished. Charis is it's a crucial step in allowing
banks the security they need to serve clients who hold
or deal in crypto. Nobody is telling the banks that
they need to not engage in risk analysis and make
(17:36):
sure that the companies that they are banking makes sense
for their own risk profiles. But ultimately we are saying
that you shouldn't punish an entire industry or an entire
class of people because of what they do. We will
continue to advocate for the industry. We will continue to
try to lead from.
Speaker 5 (17:53):
The front and honestly try to make sure that everybody
can have banking services.
Speaker 2 (17:58):
The industry is optimistic this newfound clarity will break down
barriers and allow Americans to understand the promise of crypto.
Speaker 5 (18:07):
So right now there are about fifty two million Americans
who own crypto, So I think that there are investors
and consumers. Really the consumption, I think is what people
are excited about. The ability to say, all right, that
I want to get into this because I think it's
a new industry, it's a new way to transact. Wanting
to know more about this technology, wanting to make sure
(18:28):
it thrives in the US, wanting to make sure that
we can grow jobs here because we're seeing thousands of
small startups come to the market now with really interesting
ideas of how to use this technology. And that I
think that was the secret sauce over the course of
the last year and working with policymakers is showing that
this was more than a handful of individuals who were
(18:50):
getting rich off bitcoin and really a much broader based industry.
Speaker 2 (18:54):
Crypto has proven that it's pretty much impossible to predict
the future, but the industry is optimal mystic that a
new era is beginning when we.
Speaker 5 (19:03):
Start to educate policymakers. They realize eventually this will be
a ubiquitous like the Internet. But in order to get there,
we have to create the framework, and that generally starts
in the regulatory environment. That disruption isn't scary, It needs
to be embraced, and we can in fact find a
way forward that enables new economic opportunities. We're very optimistic.
Speaker 2 (19:26):
Just as the growth of peer to peer lending in
Ireland far outstripped the pace of royal regulation, crypto has
burst onto the scene so fast we're only now seeing
American regulators catch up. But now there's a clear path
for regulatory clarity, unlocking a new future for companies, investors,
and consumers, and accelerating the next wave of money's evolution.
(19:49):
Thank you to Cara Calvert and Daniel Carey. This is
Evolving Money, a podcast from Coinbase and Bloomberg Media Studios.
If you like what you hear, subscribe and leave us
a review. I'm Maggie Lake.
Speaker 3 (20:01):
Thanks for listening.
Because you're a subscriber to this Bloomberg podcast, we thought
you'd be interested in a sponsored podcast called Evolving Money,
produced by Coinbase and Bloomberg Media Studios. It explores how
money has changed over the centuries and whether cryptocurrency is
just the next logical evolution of how we pay for
things and store long term value. Here is a recent episode.
Speaker 2 (00:25):
It's been nearly fifteen years since a computer programmer named
Laslohnyez famously spent ten thousand bitcoin for two Papa John's pizzas,
the first ever purchase using bitcoin.
Speaker 3 (00:38):
At the time, those.
Speaker 2 (00:38):
Ten thousand coins were worth only forty one dollars. Since
that landmark moment, the digital currency has traveled an uncertain road,
which isn't unexpected. When new financial practices gained traction, regulation
is usually slow to catch up with the new reality.
As a result, throughout its short history, the crypto market
has been plagued by regulatory uncertainty.
Speaker 3 (01:00):
But last year things started to shift.
Speaker 2 (01:03):
One of the first big breakthroughs came when federal regulators
approved an ETF that tracks bitcoin. Then came election Day,
which was a game changer. A record number of pro
crypto candidates on both sides of the aisle one at
the state and federal levels, with the most pro crypto
Congress ever on its way to Washington. On December seventeenth,
(01:24):
Bitcoin closed above the one hundred thousand dollars mark for
the first time ever. At that moment, the amount of
bitcoin that Laslohanye has used to buy his two pizzas
back in twenty ten was worth one billion dollars. That's
a lot of pizza no matter how you slice it.
It seems clear that crypto is entering a new era,
(01:45):
But what will that new era actually look like? Welcome
back to Evolving Money from Coinbase and Bloomberg Media Studios.
I'm your host, Maggie Lake. On this podcast, we take
a different look at cryptocurrency. It's been as a radical
departure for the monetary system, but what if it isn't
radical at all, just the next logical evolution of how
(02:07):
we pay for things and store long term value. Along
the way, we'll explore how money has changed over the
centuries and look for lessons that might predict its next evolution.
As investors finally begin to see a path toward regulatory
clarity for crypto, what new opportunities are about to be
unlocked for investors and consumers. I'll pose those questions to
(02:28):
Carrick Calvert, head of US policy at Coinbase, and hear
how a clear regulatory framework could build even more momentum
behind crypto and usher in the next wave of money's evolution.
But first we'll speak with historian Daniel Carey about a
moment three centuries ago when a radical new way of
lending money was born and why it took another one
(02:48):
hundred years for the government to catch up to this innovation.
In seventeen twenty six, a new book was making waves
across Europe, Gulliver's Travels. You probably read it in high school,
but did you know that the author, Jonathan Swift, was
also deeply involved in Irish politics.
Speaker 4 (03:08):
He's a controversialist, he's a satirist, a very patriotic supporter
of Ireland.
Speaker 2 (03:13):
That's Daniel Carey, professor at the University of Galway in Ireland,
where his work focuses on money and the economy in
the Enlightenment. With the success of Gulliver's Travels, Swift became
newly rich. With his now substantial personal wealth, Swift decided, hey,
why not try to do some good well.
Speaker 4 (03:30):
Swift clearly has a sympathy with those who are trying
to get by dealing with you know what.
Speaker 5 (03:34):
We would call liquidity issues.
Speaker 4 (03:37):
They've gone debts that they have to call in, they
have bills that they need being repaid. He decides to
make person loans.
Speaker 2 (03:44):
He approached farmers, builders and entrepreneurs he knew, offering loans
of five to ten pounds roughly thirteen hundred to twenty
six hundred dollars in today's money, and Swift didn't ask
for a cent of interest on these loans.
Speaker 3 (03:57):
Swift's idea was a smashing success.
Speaker 2 (04:00):
Soon networks of peer to peer loans began popping up
across Ireland, an unofficial system providing crucial liquidity and startup
funds to people who had no access to financial institutions.
Speaker 4 (04:11):
It is significant in terms of enfranchising people and giving
them a little bit of a sense of reward for
what Swift thinks of as their honestry and their commitment
and diligences tradespeople.
Speaker 2 (04:23):
Even as this informal system spread and its benefits became clear,
the British Parliament didn't formalize or ban these peer to
peer networks, and that lack of structure limited the scale
of their growth. It wasn't until seventy eight years after
Swift's death that Parliament passed legislation to formalize what he created.
Speaker 4 (04:42):
The legacy for Swift is probably in systems of microcredit,
which for most people are relatively recent in terms of
their thinking about what can be achieved through supporting industrious
but impoverished people.
Speaker 2 (04:59):
Fast forward to the late nineteen nineties, when online technologies
began to inspire a resurgence in the kind of peer
to peer lending that Swift made popular centuries earlier. Instead
of a wealthy merchant going to a farm to lend
a worker a few pounds, now online platforms could match
individual lenders with borrowers. It took nearly a decade for
the Securities and Exchange Commission to regulate P to P
(05:21):
lending services. Once it did, the system flourished, and today
the P to P market is valued at over twenty
six billion dollars.
Speaker 4 (05:30):
These are just evolving systems. It takes a long time
to evolve that and to develop systems of trust.
Speaker 2 (05:36):
Taken to extremes, government regulation can be the enemy of innovation,
stifling change. But as the history of peer to peer
lending shows not once, but twice. Instituting the appropriate regulation
can also normalize new kinds of financial practices, Innovation can accelerate,
and even more opportunities open up for crypto. It appears
(05:57):
that breakthrough moment has arrived.
Speaker 5 (06:00):
I got my start in crypto about a decade ago
and had started working for coinbase here in Washington, d C.
Was really one of the few lobbyists on the ground
that was working on digital asset issues, crypto issues, blockchain technology.
Speaker 2 (06:13):
This is Kara Calvert, vice president for US Policy at Coinbase.
As an advocate for financial innovation on Capitol Hill, Kara
has seen how slow regulators and institutional investors can be
when it comes to embracing something new like crypto.
Speaker 5 (06:28):
When I first started working on these issues, it was
much more viewed through the lens of technology, and really
it was so new and nascent that nobody really knew
what to think.
Speaker 2 (06:37):
As the crypto industry has grown, the SEC has sent
mixed and often confusing signals. Rather than regulating crypto through
new roles that treat it as the financial innovation it is,
the SEC has insisted crypto fits its existing set of
roles that approach has led to some murky and seemingly
arbitrary classifications. The SEC, for example, considers most digital assets
(07:00):
as securities, but not bitcoin and ethereum. Back in twenty eighteen,
the SEC ruled that Bitcoin and ethereum, the two most
popular and widely held digital currencies out there, weren't digital
assets at all, but quote replacements for sovereign currencies. The
SEC's selective regulations have resulted in a regulation by enforcement approach,
(07:23):
leading to a slew of lawsuits against crypto companies, including Coinbase.
Speaker 3 (07:27):
In twenty twenty three.
Speaker 2 (07:28):
The SEC alleged that Coinbase had been acting as an
unregistered broker. That's consistent with its view that most crypto
products are no different from stocks, bonds, and other securities.
But Coinbase and other crypto companies targeted by the SEC
have argued in court that digital assets are different and
that it doesn't make sense for them to be treated
(07:50):
the same as existing financial instruments.
Speaker 5 (07:53):
We have been working and really tried to work with
regulators from the beginning. When Brian Armstrong founded this company,
it was to be the mostested, in, safe and secure
way to transact in digital assets, and in order to
do that, you have to work with regulators, and so
I think the SEC over the course of the last
four years had very much a yes, you can come
talk to us, but well, listen, we may not give
(08:13):
you anything in return.
Speaker 2 (08:15):
Kara says that the absence of clear rules has stifled
industry wide progress that.
Speaker 5 (08:20):
Created a real depression I think on innovation here in
the United States and ultimately resulted in a lot of
startups and more importantly, the investors in those startups saying,
let's go overseas. There's a better way to do this
in one of these jurisdictions, not a deregulated jurisdiction, a
regulated jurisdiction.
Speaker 2 (08:38):
There have been signs that the legal tide might be turning.
In twenty twenty three, the SEC sued Ripple, a firm
which provides digital asset infrastructure to financial services companies, for
violating securities laws, but the judge sided with Ripple, ruling
that it didn't break the law when the currency it created, XRP,
was sold on public exchanges. The industry's momentum continued when
(09:02):
the SEC approved an ETF that tracks the price of bitcoin.
That was a big win for crypto custodians like Coinbase,
which provides custody, trading, and financing for etf issuers as
well as investors around the world.
Speaker 5 (09:15):
I do think it paved the way for retail investors
other investors around the world to have access to our
very deep in liquid markets in the United States, and
I think that was very much a turning point for
many people.
Speaker 2 (09:27):
As for Coinbase's battle with the SEC, in March twenty
twenty four, a Manhattan federal judge found quote the challenge
transactions fall comfortably within the framework that courts have used
to identify securities for nearly eighty years, setting the stage
for a jury trial. But then in January she granted
Coinbase's request for a pre trial review of her March
(09:48):
order by the Second Circuit. Those sorts of interlocutory appeals
are rarely granted. A promising sign for the industry. In
the meantime, it can still feel like the US is
in the dark ages when it comes to crypto.
Speaker 5 (10:01):
You have seen now Europe is ahead of the United
States in a innovative technology which doesn't happen that often.
And we're actually very excited about the work in the
EU and working with our counterparts and with regulators In
the EU, they developed a very clear framework and they're
going to be implementing that soon. You have the UK, Singapore, Australia,
(10:22):
there are so many different countries. Roughly eighty percent of
G twenty and other financial hubs already have rules that
they're putting in place to deal with this asset class.
Speaker 2 (10:32):
So why has the US government in comparison been so
slow to create a federal framework.
Speaker 5 (10:38):
The foundational regulatory framework that we're working with in the
United States is frankly more complicated. We have a bifurcated
system where we determine what is a security and then
what is a non security or a commodity. And in
the rest of the world they don't really have that
type of differentiation, and that I think has allowed them
to move more quickly. State regular market regulators two different
(11:02):
market regulators that are in a tug of war. They
just don't have that in most international jurisdictions. Crypto is
not asking for a deregulated environment. Instead, we're asking for
consistent rules that actually address both the benefits of crypto
and of blockchain technology and the risks.
Speaker 2 (11:20):
Today there's more hope than ever that the industry will
finally get the regulatory clarity that will pave the way
for wide scale adoption with widespread benefits for consumers and
investors alike. While the SEC remained reluctant to regulate crypto
and legal proceedings ground on in the courts, the crypto
industry turned its attention to the third branch of government, Congress.
Speaker 3 (11:43):
Ahead of the twenty twenty four election.
Speaker 2 (11:45):
Knowing what was at stake, the industry mobilized to support
pro crypto candidates, contributing more than one hundred and thirty
million dollars to election coffers. Industry advocacy groups such as
Stand with Crypto mobilized as well, organizing more than two
million crypt do advocates through grassroots efforts, and come November,
twice as many crypto supporters were elected to the House
(12:06):
of Representatives as anti crypto candidates. The market's response was emphatic.
In December, bitcoin hit the one hundred thousand dollars milestone,
a remarkable moment considering that just two years ago the
price had dipped below seventeen thousand dollars.
Speaker 5 (12:23):
It's been a complete one eighty. You've got the most
pro cryptocongress, you have a president, you have Republicans and
Democrats all saying, all right, now we know more about
this industry. It is maturing. We understand what the future
might hold and why it's important. So I would certainly
say the narrative has evolved. It's matured. You have more
people at the table, and I think that's the exciting part.
Speaker 2 (12:44):
Now with a new pro crypto administration in the White House,
new leadership at the SEC gives the industry hope for change.
Speaker 5 (12:51):
Now. I think the SEC really has an opportunity to
write the rules that these are not rules that are
deregulatory in nature. It needs to be because the asset
is not identical to what we traditionally see in an
equities market. It has different characteristics, it evolves. We are
really eager and we are very optimistic that the regulators
(13:13):
will work together to actually come up with a framework
that looks at both the role of the SEC with
the digital assets securities and the role of the CFTC
with digital asset commodities.
Speaker 2 (13:24):
The CFTC is the US Commodity Futures Trading Commission, a
government agency that's always been overshadowed by the SEC, but
under the Trump administration, the CFTC is positioned to play
a bigger role in regulation, working alongside the SEC for starters,
Congress could empower the CFTC to regulate digital assets as
(13:45):
commodities rather than securities.
Speaker 5 (13:48):
Congress has a really important role here to ensure the
CFTC has the federal authority to regulate these spot markets
for digital assets, but also that the SEC can use
to tailor and move in the right direction. And so
the work of Congress to really make sure that we
have something in law that can withstand the test of time.
(14:08):
It can it can move through administration to administration, regulator
to a regulator.
Speaker 2 (14:13):
Among the topics the crypto industry hopes Congress and regulators
will address is the status of stable coins. The discussion
around stable coins is only intensified with the growing possibility
of legislation that would facilitate their trading.
Speaker 5 (14:26):
There are a lot of really important characteristics of stable
coins that need to be captured in a federal framework.
How we create a framework at the federal level to
ensure that folks who are issuing digital assets as stable
coins are safely protecting their reserves, are putting those reserves
in a one for one bank account or in an
equivalent of a treasury or cash, that they're holding that
(14:47):
in a bankruptcy remote way, that they are accounting for that,
and they are demonstrating that in a transparent way.
Speaker 2 (14:53):
Another simmering subject the industry hopes Congress takes on is
d banking, the practice of lenders dropping cryptocompany and founders
as clients.
Speaker 5 (15:02):
If you can't get a bank account, it's pretty hard
to start a new business. Stand with Crypto has brought
more than one hundred founders to Washington to meet with lawmakers,
and a really interesting piece of the puzzle for them
is their banking services. And in almost every meeting they
went into, they expressed concern that they couldn't have access
to payroll or checking accounts. And we said, well, would
(15:23):
you be willing to go raise your hand in public?
And Autumn said, well, I actually don't feel comfortable raising
my hand in public because I'm still trying to get
that bank account. I'm still trying to find somebody who
will give me those services. And if I say right
now that I can't be trusted to get a bank account,
nobody else is going to give it to me. And
so what we saw was this inability for people to
(15:43):
really voice their concerns and raise the issues.
Speaker 2 (15:48):
But less than a month into the new administration, that's
already changing. Just a few days into his term, President
Trump issued an executive order that fundamentally changed the federal
government's approach to crypto Fulfilling a promise he made on
the campaign trail.
Speaker 5 (16:02):
The executive order really encapsulated those campaign promises, everything from
ensuring that you can continue to self custody your assets,
to ensuring that there's no central bank digital currency, to
creating a working group to ensure that we stop the
turf war between the different agencies and instead have them
work together.
Speaker 2 (16:19):
The new administration also quickly moved to counteract SAB one
twenty one, an SEC bulletin that prevented a lot of
financial institutions from entering the crypto space.
Speaker 5 (16:29):
SAB one twenty one represents the staff accounting Bulletin number
one twenty one. Think about what that represents. It is
a staff letter, It is not a rule. It did
not go through the proper rulemaking process with notice and comment.
It was bureaucrats inside the SEC who decided to write
an accounting bulletin that then imposed a new framework on
(16:53):
the entire industry.
Speaker 2 (16:55):
SAB one twenty one was a barrier that cut off
access to banking services for crypto companies and kept banks
out of the crypto business. Coinbase has always prided ourselves
on being one of those access points, but when we
think about the recision of ZAB one twenty one, it
really allows other banks other financial institutions to engage as well.
Within days of being appointed, the acting director of the
(17:16):
SEC countermanded SAB one twenty one. Just like that, one
of the major obstacles preventing banks from taking on crypto
clients vanished. Charis is it's a crucial step in allowing
banks the security they need to serve clients who hold
or deal in crypto. Nobody is telling the banks that
they need to not engage in risk analysis and make
(17:36):
sure that the companies that they are banking makes sense
for their own risk profiles. But ultimately we are saying
that you shouldn't punish an entire industry or an entire
class of people because of what they do. We will
continue to advocate for the industry. We will continue to
try to lead from.
Speaker 5 (17:53):
The front and honestly try to make sure that everybody
can have banking services.
Speaker 2 (17:58):
The industry is optimistic this newfound clarity will break down
barriers and allow Americans to understand the promise of crypto.
Speaker 5 (18:07):
So right now there are about fifty two million Americans
who own crypto, So I think that there are investors
and consumers. Really the consumption, I think is what people
are excited about. The ability to say, all right, that
I want to get into this because I think it's
a new industry, it's a new way to transact. Wanting
to know more about this technology, wanting to make sure
(18:28):
it thrives in the US, wanting to make sure that
we can grow jobs here because we're seeing thousands of
small startups come to the market now with really interesting
ideas of how to use this technology. And that I
think that was the secret sauce over the course of
the last year and working with policymakers is showing that
this was more than a handful of individuals who were
(18:50):
getting rich off bitcoin and really a much broader based industry.
Speaker 2 (18:54):
Crypto has proven that it's pretty much impossible to predict
the future, but the industry is optimal mystic that a
new era is beginning when we.
Speaker 5 (19:03):
Start to educate policymakers. They realize eventually this will be
a ubiquitous like the Internet. But in order to get there,
we have to create the framework, and that generally starts
in the regulatory environment. That disruption isn't scary, It needs
to be embraced, and we can in fact find a
way forward that enables new economic opportunities. We're very optimistic.
Speaker 2 (19:26):
Just as the growth of peer to peer lending in
Ireland far outstripped the pace of royal regulation, crypto has
burst onto the scene so fast we're only now seeing
American regulators catch up. But now there's a clear path
for regulatory clarity, unlocking a new future for companies, investors,
and consumers, and accelerating the next wave of money's evolution.
(19:49):
Thank you to Cara Calvert and Daniel Carey. This is
Evolving Money, a podcast from Coinbase and Bloomberg Media Studios.
If you like what you hear, subscribe and leave us
a review. I'm Maggie Lake.
Speaker 3 (20:01):
Thanks for listening.
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