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00:00Bitcoins cash rate is at an all time high. And that is a real indication of the security of the network. The theory and we're seeing the total value staked at 24 billion, that is an all time high. So we think the infrastructure is working beautifully. That was Kathy Wood, CEO of ARC Investment Management, reiterating her faith in crypto assets in the wake of FTSE collapse. We also heard a more faithful tone coming from Aaron Brown in our first segment. So let's get the counter argument now. Joining us is crypto skeptic John Reed. Starkey is President John Reed Start Consulting and former chief of the FTSE Office of Internet Enforcement. So, John, thank you so much for being here. Aaron Brown was of one opinion. I understand that you are of a very different one. What's your reaction to the conversation we just had? OK. I'm not sure exactly where to start. Kelly, so stop the clock here. First of all, FTSE X was not regulated. You know, I worked at the S.E.C. for 20 years, 11 years as chief. I've taught securities regulation at Georgetown Duke Law School for 20 years. I've been in this space for 35 years. I don't know what he's talking about. There's no oversight, no consumer protections, no net capital requirements. You know, license. You're talking about the FTSE ex exchange. And I get it in Genesis. I mean, they were regulated in the Bahamas, RTX and Jenison and Gemini. Here they are not regulated. Regulated means audits, inspections, examiners, net capital requirements, all of the things that S.E.C. regulation entails. So they're not regulated. They may have filed something with Vincent so they could file suspicious activity reports, but they're not regulated. There's no fundamentals to anything that he's talking about. You know, the bitcoin, crypto, it's mathematical computational blather. There's no well, there's no cash flow. There's snow and nothing with that, John. But it's like well regulated. Right. We have to differentiate between bitcoin, the blather, digital blather we don't talking about and the centralized exchange rate. This is a business just trading crypto assets. It isn't FTSE isn't bitcoin or ether. We don't have to differentiate that at all because most people can't have the wallet that holds the crypto that is somehow tied up in a computer, in a popcorn tin under a blanket in a bathroom. Everyone in Ohio generally and that's the whole point of bitcoin. Everyone can have wallet at home with a private. Tell me. Tell me for what? It doesn't function well as a currency at all. Okay. You can't use it to buy groceries. It's too volatile. I have to risky. It's too. Well, that's that's your problem. Every year I've thought gas and I've thought big games with it at GameStop. You know, I've used it for a lot of things. Have you paid capital gains every single time that you've bought it? Every time you use it? No, no, I haven't. Of course you haven't. Well, you should, because that's what the IRS would require from you. And just although I'm not sure they're going to be a master at six. So I wouldn't I I bought it for a hundred dollars and I spent it when it was worth about six hundred dollars. So I wouldn't say you have an audience, but every single crypto transaction is laden with fees, is risky, comes with all these these capital gains requirements and it doesn't much well. And starting in January 2024, those exchanges are going to have to report those transactions on ten ninety nine. Just like any other broker dealer would. And retailers, if you're trying to buy, you know, a Rolex on forty seven street for more than ten thousand dollars are going to have to report that to the IRS. So there's going to be more transparency and more sunlight on these transactions than ever before. And you're completely leaving out all of the dire externalities. OK. Not just that. There's no oversight, no net capital, no insurance, no inspection, no nothing protecting you in any way, shape or form. You become an unsecured creditor like all of these Celcius Voyager. RTX. All of them had become the dire events and just reported the other day. Twelve hundred ransomware. Twelve hundred and forty one ransomware payments last year, double the amount of the year before. And I'm an expert on ransomware. It's growing. It's getting worse. One point two billion dollars. None of it recovered. No one found. And drug dealing. Human sex trafficking, sanctions evasion, nuclear weapons. The G8 came out with a report that said North Korea was using it to buy nuclear weapons. Well, we saw what you're eating. You're going to use this Dow Jones, right? I mean, I don't think these crimes normally happen with U.S. dollars, John. Of course they do. But that's sort of what about a much higher oil reward? And that about higher Zale exponentially more. And Egan. Oh, absolutely wrong. If that is a flawed and anemic pivot, that's what I teach my law students. What about fish? What about this? Of course, there are problems in theory. Of course there are. But Bitcoin and crypto have it brought in a crypto crime wave of epic proportions. And for what we already have digital currency. If Bitcoin were around before credit cards and then credit cards came along, that would solve it. There's cash up. There's PayPal. There's. There's a million ways. There's Zel that you can use this and you get protection. You're not Salvador intention. Do you get with Zell all sorts of productions you call your bank and you say this transact. You don't have to charge. It need to be John. Absolutely they do. No, absolutely. I'll tell you this. I'll tell you this. All of these intermediaries are critical to the consumer. And forgetting about those intermediaries is absurd. Taking yourself into the. It's not the Wild West. It's not anarchy. It's walking dead like apocalyptic, free for all. You have no protection whatsoever. OK. And you. Right. There's no FDIC. And crypto is something we bring up. That's right. There is a lack of consumer protection. But at the same time, consumers also suffered from Madoff and Enron. And there have been examples in traditional finance where regulatory and regulated entities have also seen episodes in some ways akin to this. So why do you view a deadly ecosystem as it so entirely different? OK. First of all, of course, there have been crimes, financial crimes. That's what I did for 20 years. But again, crypto has ushered in a new crime wave because criminals have a way to conduct transactions and conduct money laundering like they've never had before. Read the DOJ reports on it. The jail report time. The Treasury reports on it. All of these reports, you can go to my Web site, digital trust watchdog com. I don't make a penny from any of this. Not a nickel, not a dime. I'm just out there telling it like it is speaking truth to power because this is absurd to think that these kinds of dire externalities should just be ignored. That's the kind of thing that happens no matter what. Try to pay a ransom. Where? Try to make a ransom where? Payment of five million dollars with cash. You can't do it. You can't go to your bank. You talked about how these are unregulated entities, how much fault should be placed on the regulators for not moving quickly enough in tandem with this industry. Why do you fault just the technology and the idea of it itself? Well, you know, to blame the FCC here would be like Oswald blaming the Secret Service for letting him shoot Kennedy. I mean, the FCC has brought more than 100 actions in the area of crypto and they have won every single time. Initial coin offerings, crypto lending programs, SAPS essay FTSE. The S.E.C. has won all of those cases every time they bring these cases in and and as far as regulation goes. They couldn't have been more outspoken, both Chairman J. Clayton. And then later on, Chairman Gunns would have made speech after speech, regulatory pronouncement after another, talking about the perils of crypto to doing. You know that they they stopped Coinbase from issuing a lending program, thank goodness. Saving billions of dollars. They stopped block 5 from doing it. Also blocked five, paid a penalty of one hundred million dollars. Now the S.E.C. is just another creditor for 30 million dollars on block fines list. But they stop that lending program and they stopped it from happening. So and look at the Bitcoin spot ETF. Imagine if that had been allowed to happen. What what would go on? So all of these things, the S.E.C. has been very aggressive and they're just a civil agency. Look, I'm a big time S.E.C. critic. I wrote an op ed piece in The Wall Street Journal criticizing the S.E.C. for some things they've done. I've criticized them for what they do on cyber, but not on crypto. I do think DOJ needs to do more. I think that people need to be put in jail. I don't understand. Voyager makes representations that the FDIC has somehow insured the deposits of their customers. The FDIC sends them a letter to stop doing it. Why is no one in jail for that? John saying no default DOJ for that.

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FTX Was Not Regulated: John Reed Stark

John Reed Stark, president of John Reed Stark Consulting and a former chief of the SEC office of internet enforcement, says FTX was not regulated. He's on "Bloomberg Crypto." (Source: Bloomberg)

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