Bloomberg Crypto 04/09/2024

Summary

This Bloomberg Crypto episode discusses the upcoming Bitcoin halving and its potential impact on the market, with insights from Marathon Digital's CEO, Fred Thiel. The show also covers the ongoing Senate hearing on illicit finance and features Circle's head of global policy, Dante de Sparty, who addresses the crypto industry's role in such activities. Additionally, the episode touches on the latest developments in the case of TerraForm Labs co-founder Do Kwon, who faces extradition and fraud charges.

Takeaways

• 📉 The Bitcoin halving is approaching, with significant implications for miners and the market.
• 💰 Bitcoin's price has seen a recent increase, but the upcoming halving event could affect miner profitability.
• 🏭 Marathon Digital, a major mining company, is optimizing its operations and facilities ownership to mitigate the impact of the halving.
• 🌐 The U.S. Senate is holding hearings on illicit finance, with a focus on the role of cryptocurrencies in such activities.
• 🛡️ Circle's head of global policy discusses the need for clear regulations and the industry's efforts to combat illicit use of crypto.
• 🔄 The crypto market is experiencing a broad decline in prices ahead of key inflation data release.
• 📊 Ethereum's price is still below its 2021 highs, indicating a potential shift in market sentiment.
• 🚀 Marathon Digital is focusing on energy efficiency and international expansion to stay competitive post-halving.
• 🌍 The company aims to have 50% of its revenues from outside the U.S. by 2028, diversifying its revenue streams and operations.
• 💡 The concept of 'energy harvesting' is introduced as a potential future for Bitcoin mining, utilizing waste energy sources.
• 🔎 The U.S. is making progress in efforts to extradite TerraForm Labs co-founder Do Kwon for fraud charges related to the 2022 collapse of his company.

Q & A

What is the significance of the Bitcoin halving event mentioned in the transcript?

The Bitcoin halving is an event that occurs approximately every four years, where the reward for mining new blocks is reduced by 50%. This event is significant as it reduces the supply of new Bitcoins entering the market, which can potentially impact the price of Bitcoin and the profitability of miners.

How does the Bitcoin halving affect miners' revenue?

The Bitcoin halving affects miners' revenue by cutting the block reward in half, which directly reduces the amount of Bitcoin they earn for mining new blocks. This means miners will earn half the amount of Bitcoin they were previously earning, which could potentially lead to lower profitability unless the price of Bitcoin increases to offset the reduced rewards.

What is Marathon Digital, and what is their strategy in response to the upcoming Bitcoin halving?

Marathon Digital is one of the largest Bitcoin mining companies in the world. In response to the upcoming Bitcoin halving, they are focusing on optimizing their operations by consolidating their hosting facilities, increasing energy efficiency, and exploring new technologies and revenue streams to maintain profitability.

What is the role of Circle's head of global policy, and how do they view the depiction of the crypto industry in the context of illicit finance?

Circle's head of global policy is responsible for shaping the company's approach to global policy issues and engaging with regulators. They argue that the crypto industry is often unfairly depicted in discussions about illicit finance, emphasizing that it is not the technology itself but bad actors who exploit any financial system for illicit gains.

What is the current status of the TerraForm Labs co-founder Doak Wan's extradition case?

The Montenegro Supreme Court has overturned earlier decisions to extradite Doak Wan to South Korea, but the U.S. is working on getting extradition approval. Once the court decides on the country to which Doak Wan will be extradited, he is expected to be brought back to the U.S. to face fraud charges related to the collapse of TerraForm Labs.

How has the ETF approval impacted the Bitcoin market according to the Marathon Digital CEO?

According to the Marathon Digital CEO, the ETF approval has been a huge success and has attracted capital into the market. It has essentially brought forward price appreciation that typically would have been seen post-halving, thus impacting the market dynamics and investor behavior.

What is the role of the U.S. Deputy Treasury Secretary in the context of the Senate hearing mentioned?

The U.S. Deputy Treasury Secretary, Wally Adeyemo, is involved in a Senate hearing discussing efforts to counter illicit finance. His role is to represent the U.S. Treasury's stance on the issue and to discuss potential strategies and policies to combat the use of cryptocurrencies for illicit purposes.

What is the significance of the daily revenue for crypto miners relative to the price of Bitcoin?

The daily revenue for crypto miners relative to the price of Bitcoin is significant as it directly correlates with the profitability of mining operations. Higher Bitcoin prices generally lead to higher revenues for miners, but the upcoming halving event will impact this dynamic by reducing mining rewards, thus potentially affecting miner profitability.

What are the key points of Circle's strategy to combat illicit finance?

Circle's strategy to combat illicit finance includes operating according to all the rules governing money transmission in the U.S., adhering to anti-money laundering and countering the financing of terrorism and U.S. sanctions. They also focus on collective defense within the industry and promoting compliance with responsible financial norms globally.

What is the potential impact of the Bitcoin halving on less efficient miners?

The Bitcoin halving could potentially push less efficient miners over the edge if the price of Bitcoin drops significantly. These miners may have to stop mining and could become acquisition targets, as their machines are less energy-efficient and may not be profitable under the reduced mining rewards post-halving.

What is the future vision for Bitcoin mining according to Marathon Digital's CEO?

Marathon Digital's CEO envisions a future for Bitcoin mining that moves away from large data center sites to smaller, more distributed sites that can utilize stranded energy sources like methane from landfills or biomass from industrial processes. This approach aims to achieve zero-cost energy for mining, where the energy cost is offset by the value generated from selling heat back into industrial processes.

Outlines

00:00

📺 Introduction to Bloomberg Crypto

The script begins with an introduction to the Bloomberg Crypto show, hosted by Sonali Basak and Tim Stanley. They set the stage for the episode, highlighting the focus on people, transactions, and technology shaping the world of decentralized finance. The hosts mention the upcoming Bitcoin halving event and discuss the Senate hearing on illicit finance, featuring Deputy U.S. Treasury Secretary Wally Adeyemo. They also touch upon the legal issues surrounding TerraForm co-founder Doak Wan, who is found liable for fraud in a U.S. government lawsuit. The introduction ends with a brief market update, noting the overall downward trend in the crypto market ahead of key inflation data.

05:02

🚀 Impact of Bitcoin ETFs and the Upcoming Halving

In this segment, the discussion revolves around the impact of Bitcoin ETFs on the market and the anticipation of the Bitcoin halving. The hosts explain how the ETFs have attracted capital into the market, potentially bringing forward price appreciation that would have been seen post-halving. They discuss the significance of the halving event, which will reduce the supply of new Bitcoins and the implications for miners. The segment features an interview with Fred Thiel, CEO of Marathon Digital, who shares insights into how his company is optimizing operations ahead of the halving, including reducing costs and expanding facilities. Thiel also discusses the potential for Bitcoin mining to evolve towards more decentralized and energy-efficient models.

10:03

🌐 Global Expansion and Industry Challenges

This paragraph focuses on Marathon Digital's global expansion strategy and the challenges faced by the Bitcoin mining industry. Fred Thiel discusses the company's goal to diversify its revenue streams and expand internationally, with an aim to have 50% of revenues from outside the U.S. by the next halving in 2028. The conversation also touches on the importance of a vertically integrated technology stack and the potential for Bitcoin miners to utilize stranded energy sources, such as methane from landfills, to offset energy costs. Thiel emphasizes the need for the industry to adapt and evolve to maintain profitability and sustainability in the face of market dynamics and regulatory pressures.

15:08

🛑 Combating Illicit Finance in Crypto

The focus of this segment is on the efforts to combat illicit finance within the crypto industry. The hosts discuss the testimony of Deputy Treasury Secretary Wally Adeyemo at a Senate Banking Committee hearing, which highlighted the use of cryptocurrencies by terrorist groups and other illicit actors. Circle's Chief Strategy Officer and Head of Global Policy, Dante de Sparty, shares his perspective on the issue, emphasizing the need to distinguish between the technology of crypto itself and the bad actors who exploit any financial system for illicit gains. He argues for a collective defense model within the industry and highlights the importance of complying with regulations to deter and identify illicit activities.

20:08

🔍 Updates on TerraForm Labs Case and Extradition

The final paragraph provides an update on the legal case against TerraForm Labs co-founder Doak Wan. The hosts discuss the ongoing extradition process in Montenegro and the likelihood of Wan being sent back to New York to face fraud charges. They also mention the potential scale of the trial, comparing it to that of Sam Bankman-Fried, and discuss the broader implications for the crypto industry. The segment concludes with a brief mention of other individuals associated with TerraForm Labs who have been arrested or indicted.

Keywords

💡Bitcoin halving

Bitcoin halving is an event that occurs approximately every four years, where the reward for mining new blocks is reduced by 50%. This mechanism is designed to control the supply of Bitcoin and create scarcity. In the context of the video, the Bitcoin halving is significant because it affects the profitability of miners and the overall market dynamics of Bitcoin. The video discusses how the upcoming halving might have already influenced Bitcoin's price and how miners, such as Marathon Digital, are preparing for the reduced rewards.

💡Decentralized finance (DeFi)

Decentralized finance, or DeFi, refers to financial systems and services built on blockchain technology that aim to remove the need for central authorities like banks. DeFi allows for peer-to-peer transactions, lending, and investment without intermediaries. In the video, DeFi is a key theme as it shapes the world of cryptocurrency and blockchain technology, which is the focus of the show.

💡Cryptocurrency

Cryptocurrency is a digital or virtual currency that uses cryptography for security and operates on decentralized networks, such as blockchain. The term encompasses a broad range of digital assets, including Bitcoin and Ethereum. In the video, the focus is on the market dynamics and regulatory issues surrounding cryptocurrencies, particularly in relation to the Bitcoin halving event and the Senate hearing on illicit finance.

💡Senate hearing

A Senate hearing is a formal meeting conducted by the U.S. Senate to discuss, investigate, or study a specific issue or topic. In the context of the video, the Senate hearing is discussing efforts to counter illicit finance, particularly as it relates to the use of cryptocurrencies. The hearing involves high-level officials like the Deputy U.S. Treasury Secretary and addresses concerns about the potential misuse of digital assets.

💡Illicit finance

Illicit finance refers to the use of financial systems or institutions to facilitate illegal activities, such as money laundering, terrorist financing, or fraud. In the video, the Senate hearing is focused on the role of cryptocurrencies in illicit finance and the need for regulatory measures to prevent their misuse. The discussion highlights the tension between the innovation of cryptocurrencies and the risks they pose to financial integrity and security.

💡Marathon Digital

Marathon Digital is a leading Bitcoin mining company that operates at a large scale. In the video, Marathon Digital's CEO, Fred Thiel, discusses the company's strategies to optimize mining operations in anticipation of the Bitcoin halving event. The company's approach to scaling infrastructure and reducing costs provides insight into how major players in the cryptocurrency mining industry are adapting to market changes.

💡Market snapshot

A market snapshot is a brief overview or summary of the current state of financial markets, including the performance of various assets like stocks, bonds, or cryptocurrencies. In the video, the market snapshot provides viewers with an update on the cryptocurrency market, highlighting the overall trend of crypto prices and the performance of related stocks like Coinbase and MicroStrategy.

💡Ether

Ether, commonly referred to as Ethereum's native cryptocurrency, is the second-largest digital asset by market capitalization after Bitcoin. It serves as the fuel for the Ethereum network, which supports smart contracts and decentralized applications. In the video, Ether's price movement is discussed as part of the broader analysis of the cryptocurrency market, with its performance relative to Bitcoin indicating potential shifts in market sentiment towards smaller tokens.

💡Risk appetite

Risk appetite refers to the willingness of investors to take on risk in pursuit of higher returns. It is a key factor in market dynamics, as it influences the demand for riskier assets like cryptocurrencies. In the video, the discussion around risk appetite is tied to the overall market sentiment and the potential impact of the Bitcoin halving on investor behavior.

💡TerraForm Labs

TerraForm Labs is a company involved in the cryptocurrency space, known for its association with the stablecoin Terra and its co-founder Do Kwon. In the video, TerraForm Labs is mentioned in the context of a U.S. government lawsuit and the firm's collapse in 2022, which resulted in significant losses for investors. The discussion around TerraForm Labs highlights the regulatory and legal challenges faced by companies in the rapidly evolving crypto industry.

💡Cryptocurrency mining

Cryptocurrency mining is the process by which new units of a cryptocurrency are generated and transactions are verified on the blockchain. Miners use powerful computers to solve complex mathematical problems, with successful solutions rewarding them with new coins. In the video, the focus is on the economics of mining, particularly in light of the upcoming Bitcoin halving, and how it affects the profitability and strategies of mining companies like Marathon Digital.

Highlights

The Bitcoin halving event is approximately ten days away, which will reduce the supply of Bitcoin by about 450 per day.

The ETFs approval has been a huge success, attracting capital into the market and bringing forward price appreciation typically seen post-halving.

Marathon Digital, the largest miner and mining company by market cap, is focusing on scaling quickly using an asset-light model.

Marathon Digital is transitioning from relying on third parties to building and owning more of its facilities, increasing efficiency and reducing costs.

The halving event will make mining Bitcoin more expensive, potentially impacting miner profitability and leading to industry consolidation.

Marathon's fleet is among the most energy-efficient in the industry, which could give them an advantage post-halving.

Marathon Digital's average cost to mine Bitcoin is in the low $20,000 range, which will double post-halving.

Marathon Digital aims to have 50% of its revenues from outside the U.S. by 2028, diversifying its operations geographically.

Marathon Digital is investing in a vertically integrated technology stack, including pool software and firmware in miners, to optimize operations.

The future of Bitcoin mining may involve smaller sites utilizing stranded energy and heat generation for industrial processes.

Circle's head of global policy discusses the need for understanding the nuances of crypto and focusing on bad actors rather than the technology itself.

Circle operates according to all rules governing money transmission in the U.S., including anti-money laundering and countering the financing of terrorism and U.S. sanctions.

The crypto industry has been working on enforcing good standards and self-regulation to combat illicit activities.

USDC, Circle's stablecoin, is rarely used for illicit purposes due to Circle's strict compliance with financial regulations.

TerraForm Labs co-founder Do Kwon is likely to be extradited to New York to face fraud charges related to the company's 2022 collapse.

The U.S. is making progress in its efforts to try Do Kwon for fraud charges, with Montenegro's Supreme Court overturning decisions to extradite him to South Korea.

The potential trial of Do Kwon in the U.S. could be on a similar scale to that of Sam Bankman-Fried, given his prominence in the crypto industry.

Other individuals associated with TerraForm Labs have also been arrested and indicted in South Korea in relation to the company's collapse.

The crypto market is seeing a decline across the board in anticipation of key inflation data, with Bitcoin and Ether both experiencing price drops.

Crypto-related stocks are also moving lower, with companies like Coinbase and MicroStrategy seeing declines despite strong year-to-date performance.

Transcripts

Live from Bloomberg's world headquarters in New York.

I'm Sonali Basak. And I'm tim stanley back.

Welcome to Bloomberg crypto. We'll look at the people transactions

and technology shaping the world of decentralized finance.

The Bitcoin halving is now about ten days away and we're going to talk to one

of the largest miners in the space, the CEO of marathon Digital.

Plus, in D.C. right now, a Senate hearing is underway

with Deputy U.S. Treasury Secretary Wally Adeyemo

discussing efforts to counter illicit finance.

We're going to talk to Circle's head of global policy who pushes back against

how the industry is depicted on the issue.

And we're going to get the latest on the whereabouts of TerraForm co-founder Doak

Wan, as he is found liable for fraud in a U.S.

Government lawsuit over the firm's 2022 collapse.

All that and more coming up over the next half hour.

But first, here's a snapshot of the market today.

We're seeing crypto lower across the board as we see at risk off day in

general ahead of key inflation data tomorrow.

That set a relatively steady march higher for Bitcoin.

Over the last week, though, we are shy of $70,000 over the last seven days,

higher by 5.4%. Bitcoin did reach a high of 72,500

yesterday. Remember the all time high set last

month? 73,797.

And here's that sea of red ether also moving a leg lower today, down 4.3%.

Remember ether still not back to its 2021 highs of 40 $800.

Crypto related stocks also moving lower today after surging yesterday on a

Bitcoin rally. Coinbase now down 4.4%.

MicroStrategy also rallying yesterday, down today by 7.3%.

Remember, both of these stocks up double digits year to date.

We should note that MicroStrategy up more than 100% so far this year after

last year's 350% increase Ali. And Tim, I also want to take a look at

that dynamic you were talking about of Bitcoin relative to ether, because it is

sending a signal. According to crypto trading firm Qcp, it

is hinting at a possible slowdown in risk appetite for crypto and the pattern

could be a very early signal, they say, of FOMO morphing into fear.

If ether is viewed as a proxy for sentiment towards smaller tokens.

Now what we're looking at here is that ratio really being at the highest level

since back in 2021 before Bitcoin, much more valuable than ether.

Finally, the two converging into 2021 a little bit more and back still now

Bitcoin being more valuable and ether being a little more stagnant.

But remember, ether is still one of the largest crypto assets out there.

Tim And it is difficult to say about what it means for the sentiment for the

rest of the smaller crypto tokens out there.

Okay. Well speaking of Bitcoin, I do want to

take a look at how things look ahead of the having.

Here's another chart. This is the daily revenue for crypto

miners relative to the price of bitcoin. This chart courtesy of Deutsche Bank.

Now on the left axes, what you see here is the daily bitcoin miner revenue.

Then over there on the right axis you see the price of Bitcoin.

Perhaps unsurprisingly, miners make more money when the bitcoin price is higher.

Hit a record level this year. Now that the having is coming up this

month though, it's going to cost more to mine an individual Bitcoin.

So unless prices go up and miners are able to actually mine for less profit,

margins are at risk. Bloomberg Originals explored how the

having will work. On the horizon is a pre-ordained event

that will change the business of Bitcoin forever.

It's called the Having. It will become much more difficult for

miners to produce new coins after the having margins will be cut overnight by

50%. So the halving might be good for the

holders, but it's not necessarily good for the miners.

Some companies are either bulking up for scale or finding ways to diversify.

Some companies that in the past were Bitcoin mining.

They've shifted over to training these ever bigger A.I.

models. This is kind of a moment for Bitcoin

that is arguably one of its biggest ever.

21 million. That is the total number of bitcoins

that can ever exist in over 19 million of those have already been awarded.

The having is the mechanism designed to create scarcity and control Bitcoin's

limited supply. It happens every four years, and when it

does, all future block rewards are cut in half.

The having is a natural phenomenon in Bitcoin that disciplines the entire

market and forces it to become more efficient.

Let's now bring in Marathon Digital's Fred Thiel, the CEO of the largest miner

and mining company by market cap. And he comes to us from Washington.

And it's worthwhile to start with the prices here of Bitcoin and how you think

it might be impact into the having a lot of questions out there of whether a lot

of those rises have already been baked in.

Well, I think the ETFs approval, which has been a huge success, has attracted

capital into the market and essentially brought forward what could have been the

price appreciation we typically would have seen 3 to 6 months post having.

So I think we're seeing part of that now already.

These ETFs 11 were approved. Four of the 11 ETFs are the most

successful ETF launches on record ever, and the total amount of capital in the

ETFs already has surpassed 50% of the amount of assets under management in

gold ETF. So what has happened in three or four

months compared to 20 years with gold is pretty astounding.

And so we think that has pulled forward some of the demand.

The having event will reduce the supply of Bitcoin by about 450 a day.

The new emissions of Bitcoin, which will have some small impact on price most

probably. But as miners, we're very excited to go

into a having where for once price has not declined prior to the happy, but

rather price has gone up. So everybody is obviously maximizing and

optimizing to that. Right.

Fred, I want to talk about exactly what you're doing to optimize ahead of that

having over at Marathon, you guys on average mine about 28.7 Bitcoin each

day. What are you doing to decrease the cost

since it's going to cost you more to mine these bitcoin?

What are you doing to save money and easier margins?

Great question. So we built the business and scaled very

quickly using an asset light model where we essentially relied on third parties

to build the infrastructure, the hosting, the data centers.

If you want, then we would come in, plug in our miners.

So 100% of our CapEx was invested in miners that allowed us to scale to

become the largest miner, publicly traded miner, arguably in the world.

Then in December, we went and started looking at those hosting relationships

and we started moving to consolidate them.

And we now have gone from owning less than 3% of our facilities to owning over

53% of our facilities in just a few short months.

The benefit there is it allows us to essentially take out the middleman and

take out the margin that we were paying a third party to build infrastructure

and manage it. And we were able to do that at a cost

less than the replacement cost for those assets.

So a net net great gain for our shareholders in that regard.

We'll continue to do that as we move forward as well as continue to expand

through owned and operated facilities both in the U.S.

and abroad. Average daily Bitcoin produced you have

at 28.7 as of the end of February. When you think about the having how is

it going to change your economics and what you see in terms of Bitcoin rewards

you think? So the essentially, if you look at the

number of 28 eight on average per day, that would tend to be 14 roughly per

day. We'll have to see the impact, if any, on

the global hash rate, remembering that Bitcoin mining is a zero sum game.

Today there are 900 Bitcoin made a day or committed a day post having it'll be

450 and all the people mining or vying for that.

So all our computers, we paid for that. So the key is to be one of the most

energy efficient miners. Marathon's fleet is amongst the most

energy efficient in the industry. Those miners that have less efficient

machines may have to shut off, but the high price of Bitcoin right now

essentially has made it profitable for even marginal miners to mine.

Post having what we'll have to see is really what happens to the dynamic if

the price of bitcoin were to drop ten $20,000 per bitcoin, that could

potentially push some of the more marginal miners over the edge and they

would have to stop mining and they could become acquisition targets potentially.

You also have a fairly large number of rigs, the computers, if you will, that

miners use that are not very energy efficient, that will be marginalized by

this having. So it'll be very interesting to see what

happens. But we're very focused on both organic

and inorganic growth. And we believe that the industry

globally is going to continue to grow in that hash rate, to continue to mine and

secure the Bitcoin blockchain. Fred, on average, how much does it cost

you to to mine a Bitcoin and like what's the cost of extraction in then?

I'm wondering also about potentially moving more outside of the U.S.

perhaps to find cheaper energy. Sure.

So our average cost to mine Bitcoin across all the facilities is in the low

$20,000 range today. And by that we include the energy cost

as well as the operating overhead of the people on the ground that run the

facilities, any cost to run the facilities, etc..

So it's the marginal cost of mining bitcoin, if you would,

that will now go to about $46,000 on average.

Obviously, the people cost doesn't increase.

It's just the amount of effort, the amount of energy that the miners have to

do that will double. So domestically, we're still going to be

in a great position. We operate today on three continents,

North America, the Gulf region and Africa, as well as

Latin America and Paraguay. We're going to continue to grow our

business internationally. And one of our goals is to have 50% of

our revenues from outside of the U.S. by 2028, which is the next having in

line after the one we're going to have here in a couple of weeks.

The other thing we're doing, we're very focused on a vertically integrated

technology stack. So everything from our pool software,

which is the orchestration layer that kind of controls what our miners do all

the way down to the firmware in the miners and also investments in

technology through a company called Paradigm, which is the only U.S.

manufacturer in the space located in Silicon Valley.

And then also immersion or truly tech knowledge.

And we just released some very interesting emerging technology at the

Empower Conference in Houston a few weeks ago.

And so we think that even the A.I. industry will have interest in that.

So diversifying revenue streams, optimizing existing operations, we

continue to expand very quickly here. How do you feel about the future when it

comes to your industry? You kind of alluded to this idea that

players could be washed out. When we think about the dynamics and the

pressure that it puts on the Bitcoin having rewards being less this cycle and

of course in future cycles, how are you preparing for that potential wash out?

You mentioned acquisitions. What do you do today to prepare for that

opportunity and how big do you think that will be?

Yeah, great question. So we are believers that Bitcoin miners

have to try to strive to get to zero cost energy.

What do I mean by that? It means that basically the only way

we'll survive long term is that our cost of energy is offset by something else.

So we have started an initiative that we call energy harvesting.

This is where we are going to landfills and using stranded methane gas from

landfills. It could be oil fields, it could be

biomass from beer brewing, ethanol manufacturing, methanol manufacturing,

where you take that biomass, convert it into energy and then feed back into

whatever that industrial process was. Heat industry pays about 50% of the

energy cost for industry is spent on heating things.

And so Bitcoin miners are great at generating heat.

When they mined Bitcoin, about 95% of the energy that goes into a chip that

mines Bitcoin comes out as heat. So we believe that Bitcoin miners will

be able to essentially take stranded energy in the form of methane, biomass,

what have you generate electricity, generate heat, sell the heat back into

an industrial process. All of that subsidises the cost of

mining Bitcoin because Bitcoin is simply how we generate the heat that we sell

back. And I think longer term bitcoin mining

will move from being these large data center sites with hundreds of megawatts

to being hundreds of thousands of much smaller sites that are doing everything

from heating buildings in Finland to mining to heating greenhouses, eating

shrimp farms, industrial processes, ethanol plants, processing corn waste,

cow manure at dairies, etc. That's the future for Bitcoin mining

long term. Fred, we thank you so much for drawing

out the future the next couple of weeks and frankly the next couple of years

ahead. That is Marathon Digital CEO Fred Thiel.

Now coming up, we're going to talk to Circle's global head of policy, pushing

back on the idea that the crypto industry's role in illicit financing.

Just as the Senate holds a hearing today just on the issue and the chances of

terror reforms, Erdogan heading to the U.S.

to face fraud charges are rising after Montenegro's Supreme Court blocks his

extradition to South Korea and access all the latest data and news on crypto,

check out, see our wiki. Go on the Bloomberg terminal.

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We are increasingly concerned about the ways these actors are using

cryptocurrencies to circumvent our sanctions.

For example, years ago, al Qaeda and affiliated terrorist groups, largely

based out of Syria, operated a Bitcoin money laundering network using social

media platforms to solicit cryptocurrency donations.

After receiving virtual currency, they launder the proceeds through various

online gift card exchanges to be able to purchase what they needed to advance

their own agenda. That was Deputy Treasury Secretary Wally

Adeyemo at the Senate Banking Committee hearing on countering illicit financing

and conflicts in Russia and Gaza and highlighted Crypto's role in those

efforts in particular. We're going to discuss what's going on

with Circle Chief Strategy officer and head of global policy, Dante de Sparty.

If you think about the testimony that was put forward today in Congress, how

do you think about the Biden administration's approach to financing

through the crypto industry, particularly when it comes to

Stablecoins? Well, one of the things that I think is

a little bit candidly frustrating at this point in time is that the Biden

administration was the administration that issued the first executive order on

blockchain and digital assets calling for a broad whole of government study of

the sector. But yet, notwithstanding that, and

notwithstanding many calls from people like Secretary Janet Yellen, Chairman

Powell and Deputy Secretary Adeyemo himself on Congress to act to

effectively equip the U.S. government and regulators and others

with rules for the for the space. We're still seeing this this era of

congressional inaction. And that's that's an item that is, for

us, very frustrating as a company. Circle operates according to all of the

rules that govern money transmission in the U.S.

We we, of course, abide by all the rules for anti-money laundering and countering

the financing and terrorism and U.S. sanctions.

But but in a world where the U.S. doesn't get stablecoin legislation

across the finish line, we think much of the industry will be defined by the

worst actors in the space. Well, I'm wondering, in your opinion,

how to stop those worst actors in the space?

Just to repeat a little bit of what we heard from Deputy Treasury Secretary

Wally Odhiambo just in the last moments. He talked about North Korea and Russia

among the state actors, increasingly using digital assets.

He talked about the Iran Quds Force sending crypto to militant groups, Hamas

and the Palestinian Islamic Jihad in Gaza.

What, in your opinion, is the best way to stop illicit actors from using

crypto? Well, I think the first order of

business and I know your program studies crypto very carefully, is to understand

the nuances, the term of art. Crypto is a neutral term of art that is

frankly no more politically motivated than the Internet itself.

What we really need to identify, especially when combating illicit

activity, are the bad actors or the bad products or the bad nexus of actors,

government and non-government that may take advantage of any financial system

for their illicit gains. And that's a really critical

opportunity. I recently wrote an op ed, in fact,

anticipating the Deputy Secretary's testimony today in Coindesk that

underscored this point that crypto itself doesn't have an illicit finance

problem. Bad actors do, and bad actors will

exploit any financial system to get away with it.

And all of us in the industry and beyond have to work together in a model of

collective defense. The Deputy Secretary has called on the

Senate and Congress to give the Treasury new authorities.

The industry has also done quite a lot in enforcing good standards across the

sector. So while I can understand your point

here that it's not just a concept of a bad product, but bad actors, and you've

also heard, of course, through the crypto industry where people have used

cash for illicit reasons as well. And a lot of these actors have been

found through the use of blockchain and being able to track what's going on.

With all that said, Dante. I think that given everything that's

happened with the significant fines you've seen coming out of the Treasury

and significant actions coming out of the crypto industry that have been bad

over the last couple of years, how does crypto kind of save itself from this

reputation? And victims question distanced itself

further from those bad actors that you're talking about?

Well, it's a good point. And obviously I'm one to avoid false

equivalencies. And, you know, comparing all of crypto,

for example, to all of cash. But I do think it's a really critical

opportunity to underscore where there are good actors using new technologies,

blockchains, digital assets and cryptography, to say the least.

We could demonstrate not only better performance than peer institutions, we

could we could even get to a state with illicit activity of what I would like to

describe as effective deterrence. For example, in a recent Tehran Labs

report looking at illicit financing, illicit finance economy in the space

they're reporting has identified that Usdc circle's stablecoin is used almost

rarely 99.9 95% of the time. Usdc is used for illicit purposes, and

that is, in our view, a function of the fact that circle has structured itself

to be compliant with all of the rules and norms that responsible actors

anywhere in the financial system must abide by the gap that the United States

has. Is it not promulgating those standards

around the world? We're going to have to leave it there.

Circle Chief strategy officer, head of global policy, Dante de de joining us

from Paris. Coming up, the US closer to getting

extradition approval for Montenegro after finding dope on an terraformed

land liable for fraud. This is Bloomberg.

While Montenegro's Supreme Court overturning earlier decisions to

extradite TerraForm Labs co-founder Dau Quan to South Korea, boosting U.S.

efforts to try the former crypto mogul for fraud charges.

Bloomberg's Eva Benny Morrison joins us now.

Eva, good to have you with us. What does this mean for Doc one?

Doc one has been stuck in this tug of war over his extradition in Montenegro

for the past 12 months. So it means that he is more than likely

going to head back to New York, where he'll be on trial for fraud charges.

Prosecutors here allege that he misled investors over the over his company,

TerraForm Labs, before it collapsed and wiped out almost $40 billion in investor

assets in 2022. How do you see this all playing out,

given the issues with extradition? How does it complicate the timelines and

the ability for the US to do their part of the job here?

One of the unusual parts of this case is Japan has actually consented to

extradition. He hasn't consented to where he will go

because that decision is not really up to him.

So once the court makes a decision on where he will go or if the justice

minister can make a decision on which country he goes to, we'll expect to see

him back here on U.S. soil, more than likely pretty soon.

Okay. So when he is here on U.S.

soil, is it a trial the likes of what we saw with Sam Bankman-fried?

Is that the sort of thing we're talking about here?

It could be this. Dogecoin is a big figure in the crypto

industry, and this would be a really big case if he chooses not to play.

Not to plead guilty. He will go to trial and we could see

something on a similar level to Sam Bankman-fried Strong.

What do we know about anybody else that was involved with TerraForm Labs at this

point? He's a TerraForm.

The former TerraForm Labs CFO was also arrested with Doe Quantum Montenegro.

He's already been arrested, sorry, extradited back to South Korea where

he's facing accusations there. There were a few other people who were

associated with the company that were also arrested and indicted in South

Korea as well. But just very briefly, what's the next

thing we're watching for What could happen with Dock One?

We're waiting for the Supreme Court there in Montenegro tonight to make yet

another decision on where he will go and when he will be extradited.

Hopefully this week Lindbergh's ever going to Betty Mars.

And we thank you so much for following all the trials.

My goodness. And it has been a firestorm of them, for

goodness sake. That does it for Bloomberg Crypto today.

Join us again, same time, same place next week, Tim.

Same Tim. Also same time.

Same place. Well, stick with us for markets up ahead

next. This is Bloomberg.