Crypto Regulation with Matthew Leising

Unknown Speaker 0:15
Why put this George G and the time is right. welcome today’s guest strong and powerful. Matthew, lysine. Matthew, you’re ready to do this. I’m ready, George, how you doing? I am doing great. Let’s go. Matthew has been a reporter since 2001. Spending 17 years with Bloomberg News 2015 He began covering crypto become an expert in the Ethereum blockchain world. He’s the author of out of the ether, and the co founder of decentral. Media. Matthew, tell us about your personal lives more about your work and why you do what you do. Yeah.

Unknown Speaker 0:50
So I grew up here in California. I’m in Los Angeles now, but moved around for college and lived in San Francisco for a while and then moved to New York City in 2004. With my wife, that’s where he got the job at Bloomberg News.

Unknown Speaker 1:08
lived there for 13 years, had both of my my sons that were born in Manhattan, that came back in 2017, just because we had had, you know, 13 years is a long time in New York City. And it’s just, it’s kind of a tough place to live, especially with children if you’re not like a multimillionaire. So back in LA really liking it. It’s my hometown, just more of my vibe. I’m definitely not kind of the A type personality that I think thrives in Manhattan.

Unknown Speaker 1:37
But in so yeah, so in 2015, I saw I had been covering Wall Street for Bloomberg News, and kind of like how markets work. And, you know, it’s called Market structure was the name of the beat. So it’s like, are markets working? Are they not working? What’s what’s our regulators trying to, like, you know, change the way markets operate as they’re scams and fraud and stuff like that. So I gotten a pretty good understanding of like, the derivatives market and the bond market.

Unknown Speaker 2:10
And so when,

Unknown Speaker 2:13
excuse me, when crypto kind of came, it was already around, of course, but it sort of like came back onto my radar in 2015, because Wall Street was starting to kind of experiment with it. And I finally kind of wrap my head around what the blockchain aspect of this technology is. And really, it’s kind of a simple concept. It’s just a, you know, it’s a network of computers that is basically spread around the world. It’s peer to peer, and it’s pretty much unstoppable. From a government or corporation kind of level,

Unknown Speaker 2:42
I realized that that’s pretty much kind of the same basic Arcus architecture of what Wall Street is, it’s just a network, you know, it’s it’s banks, it’s their customers, like asset managers and hedge funds, pensions, you know, all sorts of folks that are just in a big network, they’re trading, you know, trillions of dollars amongst themselves throughout the year. And if they could, kind of adopt the efficiencies that were gained in a blockchain network, in their own networks, I thought man that could really, you know, save them hundreds of millions of dollars, probably a year in, just like, in speeding up trades, for example, in a very simple case. So that kind of sparked my interest. And I started covering it. And, you know, it’s just kind of grown from there. And within a couple of years by 2017, you might recall, that’s when kind of I think Bitcoin sort of broke through to the public consciousness in a big way, because it hit $20,000 For the first time.

Unknown Speaker 3:39
Everyone, Thanksgiving, I remember, in 2017, it was everyone was talking about crypto for the first time. So it was it was a little crazy. I feel like I got in a little bit early on it, but certainly not as early as, you know, other reporters out there. But it’s just a fascinating story. And I think something

Unknown Speaker 3:56
that is changing the world and you know, has the potential to do a lot of amazing stuff. Of course, there’s the downsides to it as well, people have lost a lot of money. And there’s a lot of scams. But I think that’s kind of par for the course when you’ve got any sort of asset class out there that you’re talking about, or any kind of market at all. So it’s been a wild ride. And I decided to start decentral media last year, because I wanted to focus kind of more exclusively on the people who are making all this stuff happen. And I think that really interesting, pretty weird, smart. And for the most part, pretty good people, you know, so my partner, I started decentral and we’re kind of focusing on those folks and just trying to try to tell the stories like make this industry a little more human, rather than always talking about the technology, you know, we really want to bring the people to the front. So that’s that’s what the central is all about.

Unknown Speaker 4:48
Nice. Now, it’s really interesting. When we think about the financial markets, sort of the traditional stock market, is there are there people that that we

Unknown Speaker 5:00
about an I don’t necessarily think that there are. And within crypto, it’s not necessarily at its infancy, but probably still kind of in its infancy. And there are people and characters that we can look to and

Unknown Speaker 5:16
does that make it better? Just it humanizes it?

Unknown Speaker 5:20
Yeah, yeah, I think it does. And I think it’s a nice way. I think some people can be put off by, by they think that it’s complicated and that it’s, you know, very hard to understand. And I think some mainstream media kind of portray it that way, because maybe they don’t quite understand it. So. And I think that gets through to people. And it’s sort of it’s off putting, so if if my approach is, I’m going to tell you a story about a really interesting person, and I want to make this person like three dimensional to you. And along the way, I’m going to tell you what they’re doing in crypto or web three. And I think if you tell somebody an interesting story, when you introduce them to a really fascinating person, I think it just makes the learning easier. And it’s then you can start talking about okay, what’s an NF T? Or what’s a decentralized exchange? Or what does it actually mean to be peer to peer, you know, so those things, I think, come across more easily in the context of like a person, you know, and you’re telling their story, and they can kind of explain it in their own words. Yeah, that’s it’s interesting narrative does make it more accessible to us. Yeah. And then obviously, we we run the risk of the second, Sam Backman, Freed’s and Elizabeth Holmes is of the world obviously, Elizabeth Holmes, not involved with crypto. But

Unknown Speaker 6:37
if you look at the history of the stock market, and just traditional financial markets, they’re littered with fraud and bad actors as well.

Unknown Speaker 6:47
How do you think about the SAM Backman fried? F the whole FTX in the context of the greater industry?

Unknown Speaker 6:56
Yeah, I think,

Unknown Speaker 6:58
I think was quite shocking, because I think he sort of

Unknown Speaker 7:02
created quite an impression among, you know, among regulators and politicians, and among charitable giving, you know, the charitable giving world, you know, this guy was really kind of on the up and up, and he was a good person, and he was into, you know, intrinsic altruism, and, you know, you can go watch baseball, there’s the FTX logo on, you know, the umpires jersey, or there, you know, with the shield that they were, you know, so

Unknown Speaker 7:29
it was kind of everywhere, and

Unknown Speaker 7:32
when I try to tell people is, you know, the whole point of crypto and Bitcoin to begin with was giving people more control over their finances and their their money. And so you, if you want to, you really should embrace that, because that’s what the best of what’s the best of it comes out in my opinion. And if you rely on a centralized place, like an exchange like FTX, to hold your crypto, you’re running the risk that they’re going to be fraudulent. And it’s happened over and over again, basically, from the beginning of crypto when Mt. Gox went down in early 2013. There have been a number of exchanges that have all gone the same way. And I just don’t understand why people don’t learn the lesson. Like, yes, use an exchange to go and buy and sell things. But then you got to you know, you really need to store your crypto in your own wallet, you need to take custody of it, because that’s really what this technology is all about. You’re in control, you don’t have the option of a hacker getting into an exchange or a frog like bank Winfried, you know, kind of like pissing away all your money, you need to take control of it. So I think it’s a tough lesson to learn. And I’ve been covering this now for seven years, and it’s just happened over and over again. And I really try as much as possible to tell people you know, don’t leave your money in someone else’s hands, like, you know, so again, this is it’s, I know, a lot of people lost a lot of money and I would never be the person to say I told you so. But that is kind of one of the general rules here is like, get your own wallet, get comfortable with it and make sure that you’re protecting what you what you own. Because you know, a lot of people made a lot of money in recent bull markets in crypto and you know, a lot of that’s probably all gone now because they left it on FTX. So it’s kind of a shame. And I wish

Unknown Speaker 9:20
I wish the centralized actors, you know, in this industry, were just more responsible and more on the up and up.

Unknown Speaker 9:29
How do you see how do you think about regulation

Unknown Speaker 9:34
in the space?

Unknown Speaker 9:37
I think

Unknown Speaker 9:38
it’s definitely

Unknown Speaker 9:42
it’s been a very mixed bag so far. I think the SEC is not doing a good job of letting people know what is okay and what’s not okay. They’ve been doing something called regulation through enforcement action. So basically, they’ll find

Unknown Speaker 9:58
some bad actor out there doing so.

Unknown Speaker 10:00
Something like selling an unregistered security, you know, in their opinion. And so they’ll sue them. And they’ll they’ll like go through an enforcement action and then kind of make up the rules, not they’re not making them up, but they’re sort of enforcing the rules through these, these actions. And so

Unknown Speaker 10:18
then the rest of the industry is supposed to pay attention to that and like think, Oh, are we selling unregistered securities to we might want to stop that. The problem with that is, it’s, you know, it’s rather case specific about who’s getting sued and settling with the SEC. And you know, maybe your project is a little bit different. And you’re not sure like, Oh, am I? Is this gonna get me in trouble or not? And you don’t have a way of knowing.

Unknown Speaker 10:43
But what I would much rather see is Congress getting involved and writing some new legislation to regulate this market, because the legislation being used now, in the SE C’s case, you know, dates back to the 1940s. It was about a guy selling shares in in orange groves in Florida. And whether, you know, he was securitizing that that real estate, it’s called the Howey Test. And today in crypto, you might be dealing as a Counterparty with a smart contract with a piece of code. And there’s all these new things that have developed and it’s really kind of left the law in the dust. So I think Congress needs to really get involved and start writing new rules that take into account.

Unknown Speaker 11:28
You know, like, what’s a smart contract? And who’s who’s, you know, who’s responsible for that if something goes wrong? And you know, there’s just a ton of questions that aren’t being answered right now. So that’s my hope. It’s definitely going to be regulated, there’s no way they’re going to leave this alone. And it is regulated, you know, and a lot of places, so including the United States, but again, I think it really needs to be

Unknown Speaker 11:51
the the kind of basic framework needs to be updated to the 21st century.

Unknown Speaker 11:57
It’s interesting. You have a sense, how many governmental agencies are,

Unknown Speaker 12:07
are responsible or work around the traditional stock market? You have mentioned the SEC, got organizations like FINRA, do you have a sense of roughly just how are their five or their a dozen

Unknown Speaker 12:21
in the stock market or in crypto in the stock market?

Unknown Speaker 12:25
You Yeah, I mean, let’s see, the SEC is there.

Unknown Speaker 12:31
There’s, I mean, tangentially there’s like the OCC, which regulates banks. There’s the FDIC. You know,

Unknown Speaker 12:41
I think well, yeah. If stock market in particular, it’s really the SEC job. Like that’s their main, you know, that’s their, that’s the main regulator.

Unknown Speaker 12:51
And then, so yeah, I think. And then on the futures are the derivative side, you’ve got the Commodity Futures Trading Commission.

Unknown Speaker 12:58
And then you’ve got like, tangential

Unknown Speaker 13:01
regulator regulators to kind of touch it. But you know, when you’re talking about stocks, it’s really the SEC. Yeah, got it.

Unknown Speaker 13:08
And what else is sort of jumped into my head as as you’re talking about these enforcement actions? Think we’re all familiar with the Internal Revenue Code, how it’s 7000 pages, give or take, and but there’s like 80,000 pages of case law that are constantly being adjudicated.

Unknown Speaker 13:25
Is that a fair parallel to what they’re sort of doing right now, instead of actually writing the making laws at worked, which is what Congress legislators should be doing? It’s the SEC out there just having enforcement and then that sort of de facto becomes our law? Yeah. Yeah, I think I think that is a fair comparison. I mean, I don’t think it’s 80,000 pages of case law and crypto, you know, but I think another thing that’s going on right now is Gary Gensler is the chairman at the SEC. And he’s said repeatedly in public that he thinks they have all the tools they need, they don’t need congressional, you know, any congressional updates to to do what he’s doing in crypto.

Unknown Speaker 14:06
I think that’s a mistake, I think.

Unknown Speaker 14:09
I think he’s probably worried that if Congress starts writing laws, you know, it might limit some of the abilities that the SEC has, or it might take away some of the power that they have, because there’s always, you know, just like in any industry, there are power grabs in Washington, by regulatory agencies, like the SEC. And the CFTC, often compete in certain areas, and they kind of have their own little fiefdoms of different Congress, people who are, you know, running the committees that oversee each of those agencies. And it’s, you know, it’s, it’s just kind of like gets down to base level politics at some point. So there’s always worry, I think, at these agencies that they’re going to lose some of that turf, or they’re going to lose some of their

Unknown Speaker 14:54
ability to regulate things. And so it’s kind of that’s where it gets kind of messy and human.

Unknown Speaker 15:00
Yeah. Interesting.

Unknown Speaker 15:03
Do you feel like do you think slash feel like there should be its own in new or independent entity aside from the SEC, who’s responsible for assuming

Unknown Speaker 15:17
if if we could map out in

Unknown Speaker 15:20
an appropriate way forward? It would be the legislator created a law? And then based on that, or laws, do you think that it should fall under the purview of the SEC? Or do you think it’s wiser or more prudent to create a new organization? No, I think I think the existing agencies can do a good job of it if they had updated rules, and sort of framework. So because I do think a lot of what’s created in crypto sure looks like a security to me, again, if you’re hoping that it’s going to, you know, gain in value, or that you’re getting some kind of monetary reward for investing in it, if it’s controlled by a certain number of people who are, you know, trying to make it go up in value? You know, these are some of the basic definitions of what a security is. And there’s a list of like five or six things, a lot, a lot of the things created in crypto, I think check all those boxes. So I don’t think the SEC is out of its boundaries here. But I do think, like I’ve been saying, it’s just a new like, rulebook needs to be written. So I think the SEC could definitely handle the things that kind of brush up against the securities laws. And then the CFTC should I think the

Unknown Speaker 16:33
regulating the parts of the crypto market that are based on derivatives like Bitcoin futures, which they already do, or Aetherium, Futures, or any kind of derivative product. So I think we’ve got, you know, the agencies and I think that their boundaries are good, as they as they exist today. I just think that there needs to be an update to the legislation. Yeah, I think that makes a lot of sense.

Unknown Speaker 17:00
So

Unknown Speaker 17:02
from your background and experience, you know, 17 years, but Bloomberg working in Wall Street in Manhattan, covering all of that, and now, your passion for, for, for crypto.

Unknown Speaker 17:16
What is?

Unknown Speaker 17:18
What is the purpose of of, of legislation? Is it to protect consumers protect investors?

Unknown Speaker 17:28
Yeah, definitely both of those things. And

Unknown Speaker 17:33
it’s also,

Unknown Speaker 17:35
you know, we want to remain competitive, we like to have the industry be mostly or, you know, we want to have the United States be a good place for this industry to be headquartered, right. And so you need to have that clarity. Because a lot of the companies I read about, they say to me over and over, you know, we want to follow the rules, and we will follow the rules, we just don’t know what they are, you know, and that’s the problem. So, if the United States falls behind, and that lot of these companies can go to Europe, or they can go to Asia, or they can go offshore, you know, there’s a lot of, you know, there’s a reason that FTX and Sandvick been freed were based in the Bahamas, you know, they were doing stuff right off the bat, that probably, you know, would not have been allowed in the United States. So

Unknown Speaker 18:21
if you don’t want to have this kind of regulation arbitrage where you can go to the Bahamas, and like, so I think different parts of the world need to coordinate, so that the set of rules doesn’t drastically change. You know, I know, that’s asking a lot. But in the traditional financial world, it’s pretty much worked. And you kind of get a sense from a company if like, today, if like, a company that’s trying to be reputable is based in some location where, you know, it’s kind of like, there are no rules, you know, you it’s a signal, right? So I think it’s self regulates a little bit in that way. So, yeah, it’s, it’s to protect people. It’s to have transparency into these operations. So if someone says, they’ve got, you know, $40 billion in assets on their balance sheet, it’s actually real. And it’s not this like FTT coin that was created and sort of has a very ephemeral value, and it can crash, you know, to zero in a matter of hours, as we saw.

Unknown Speaker 19:21
And it’s to just create a good

Unknown Speaker 19:24
overall environment for this industry to grow like in the United States and in other parts of the world.

Unknown Speaker 19:31
That makes a ton of sense. Do you see that there is an appetite on in Washington for for doing this?

Unknown Speaker 19:41
I did. That’s a challenge. I think the challenge is, is educating Congress, people in Congress on this issue, because let’s be honest, a lot of people in Congress are older and they might not, you know, be as familiar with this technology as they could be, and explaining it and

Unknown Speaker 20:00
kind of getting through

Unknown Speaker 20:02
as to why it’s important and why it’s an innovation is it can be a challenge.

Unknown Speaker 20:08
I know there are a lot of groups that have come up in recent years to do that to lobby and to educate

Unknown Speaker 20:15
the folks in Washington on this industry. So I think there are certain leaders out there that are they’re doing this in Congress already. It’s so that those numbers are growing.

Unknown Speaker 20:27
I, and then on the other hand, you’ve got folks, if you only see the scams and only see like the FTX is over the world and think that it’s all kind of like this wild west that needs to be regulated out of existence. So you know, that’s the other spectrum here. So

Unknown Speaker 20:45
I think

Unknown Speaker 20:48
as this industry grows, and as it matures,

Unknown Speaker 20:51
more people in Washington will get it that it’s not going away. I don’t believe it’s going away. It’s here to stay. And I think the answer just it’s kind of a slow, painful process, but education is the is the best way to do it at this point. Yeah, that makes sense.

Unknown Speaker 21:10
Well, as they always do, Matthew, I’m sure that they’ll act prudently and with a lot of wisdom. So yeah. Hello, Matt, thank you so much for coming under on that one. Yes. Thank you so much for coming on. Where can people learn more about you? How can they check out decentral media and where can they get a copy of out of the ether? Yeah, thank you for having me, George. Yeah, the website is decentral.io. That’s d c, e n t il.io. We are on Twitter at the central media.

Unknown Speaker 21:43
The book you can find anywhere online that you get books. If you want one of the special editions that are only 1000 printed, and they are

Unknown Speaker 21:52
they are you can mint an NF t that represents the book. You can look that up at out of the ether dotnet. And let’s see yeah, that’s about it. So I’m really enjoyed talking to George, thank you very much for having me on.

Unknown Speaker 22:10
Well, if you enjoyed this as much as I did show Matthew your appreciation and share today show the friend who also appreciates good ideas, check out decentral media at DCNTI a l.io. Find them on twitter as well under essential media. And then pick up a copy of out of the ether wherever you buy our books or and or go to out of the ether.net and pick up the NFT version of it. Thanks again, Matt. Thank you. And until next time, remember, do your part by doing your best

Transcribed by https://otter.ai