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After the meltdown of FTX, a lot of retail investors were scared away from crypto. But many big banks have only doubled down, and are pushing cryptocurrency more into the mainstream.

In today’s episode of the Big Take podcast, Bloomberg Senior Reporter Olga Kharif explains how traditional financial institutions have gotten behind the technology that underpins digital assets—and what that means for the rest of the industry.

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Here is a lightly edited transcript of the conversation:

Sarah Holder: About a decade ago, back in the early days of crypto, the industry was kinda like a Wild West.

Olga Kharif: You had a lot of the sort of quirky characters, very techie people involved.

Sarah Holder: That’s Olga Kharif.

Olga Kharif: I ended up being the first person here at Bloomberg to cover Bitcoin and crypto. And I got sucked in.

Sarah Holder: It was an easy beat to get sucked into. This was an industry full of big personalities. Basically, passionate nerds who believed in the power of cryptocurrency as a way to manage their money beyond government oversight… but who didn’t know a ton about business.

Olga Kharif: For instance, there was Charlie Shrem who started BitInstant in his early 20s. It was a way to use Bitcoin for payments at merchant locations, and eventually he ended up going to prison because he didn't register it as a money transmission business. 

There was also Roger Ver, one of the first investors into the Bitcoin ecosystem. He was called Bitcoin Jesus because he kept carrying on about Bitcoin at various barbecues and parties, everywhere he went. 

Sarah Holder: Proselytizing.

Olga Kharif: Exactly. Right. And so these were people who wore t-shirts and baseball hats with Bitcoin logos on them. This was a very sort of tight knit community that really, really believed in Bitcoin and crypto.

Sarah Holder: In 2019, one of those t-shirt-wearing guys named Sam Bankman-Fried launched an exchange platform dedicated to crypto. It was called FTX. And it took off. The media gushed over SBF like a kind of celebrity.

David Rubenstein: One of the most successful entrepreneurs in the world of crypto currency is Sam Bankman-Fried…

CNBC: The Michael Jordan of crypto if you will—

Yahoo: At 29 years old, SBF is the youngest billionaire in the US and the quickest to reach the Fortune 400 list.

Sarah Holder: And then in late 2022… it all changed. And those commentators changed their tones.

SDNY: Bankman-Fried and his co-conspirators stole billions of dollars from FTX customers—

CNN: Authorities arrested him last night after US prosecutors filed eight criminal charges.

CBS: The collapse of FTX has sent shockwaves across the cryptocurrency industry. 

Sarah Holder: A lot of people watched FTX crumble and saw it as the beginning of the end of crypto.

Plenty of retail investors said: I don’t wanna touch a digital coin with a ten foot pole. 

But interestingly… Wall Street is taking a different approach.

Today on the show: I sit down with Bloomberg’s Olga Kharif, a senior reporter on crypto. We talk about the banks that are embracing the tech that underpins cryptocurrency, and what it means for the rest of the industry.

This is Big Take, from Bloomberg News. I’m your host, Sarah Holder.

Olga Kharif: It's a big change of guard, I think, is happening in crypto. Where, you know, in the early days you saw all those people in t-shirts and baseball caps, you know, true believers in Bitcoin's potential to change the world. Whereas now you see people in business suits, people who used to work at Goldman, people who used to work at JP Morgan, and they're either leading these efforts at those same firms, or they went into some crypto companies and they're leading charge there.

Sarah Holder: Did their entrances come after the collapse of FTX or have they been in the game the whole time?

Olga Kharif: A lot of these companies have been dabbling in blockchain or crypto for years. Like Franklin Templeton, for instance, has been working on this for over seven years. 

By now we have JP Morgan is exploring deposit tokens that would represent customer deposits on blockchain. We have Goldman involved in a variety of ways. We have a bunch of companies involved in stablecoins, which basically represent fiat. So, for instance, Cantor Fitzgerald, BNY Mellon and BlackRock.

So a lot of these companies, you know, I don't think FTX changed things for them that much. But I think what FTX did change for a lot of retail investors is their belief that a crypto native new company is maybe less trustworthy or less stable than somebody like, you know, BlackRock or Goldman or somebody with experience in the traditional financial world. Somebody who adheres to regulation, somebody who's been around for many, many years.

Sarah Holder: Are all the big banks getting into this, or have some of them remained more cautious when it comes to crypto?

Olga Kharif: You know, it is not all. I think it's fair to say that a lot of them are dabbling and experimenting with this, but they're waiting for more clarity from US regulators as to, you know, what they're allowed and not allowed to do.

Like, for instance, JP Morgan is exploring these deposit tokens, but it will need an okay from bank regulators to launch something like this. We are still waiting for legislation clarifying stablecoins and what they are and how they are to be regulated. So there is still a lot of regulatory uncertainty in the US market. 

Sarah Holder: And what happened last month in January that accelerated this trend?

Olga Kharif: Oh my gosh, it was a huge month in crypto. This is when exchange traded funds that invest directly into Bitcoin finally launched. This has been tried for over 10 years. You know, many companies filed applications with the Securities and Exchange Commission, trying to get this approved and they all got rejected.

And then BlackRock submitted its application last summer. And then Fidelity followed suit and a lot of other traditional financial firms. And so finally, the SEC approved the spot Bitcoin ETFs in January, and they've already attracted several billion of inflows. So, it's basically considered to be a pivotal moment that’s signaling mainstream adoption of Bitcoin and possibly crypto.

Sarah Holder: After the break, we dig into exactly what this ETF means, and how it might reshape the way we all think about crypto.

We're back with Olga Kharif, a Bloomberg senior reporter on crypto.  Olga, what did it mean that the SEC approved the first Bitcoin ETF in January?

Olga Kharif: So what it meant was that anybody with a brokerage account can go in there and the same way they can buy stocks or bonds, you could also invest into a spot Bitcoin ETF. So basically, this removed a lot of the hassle of investing into Bitcoin.

So previously, you had to open an account on a crypto exchange, get verified, it took a while, and then you had to figure out how to buy Bitcoin and how to store it so it doesn't get stolen. This is like a big issue in crypto. You know, you wanna keep your coin safe and how do you do it? And it’s, it can be complicated.

And so now you can invest into this Bitcoin ETF through your brokerage, and it's as easy as buying shares in a company. And so this essentially opens up crypto to your typical, not tech savvy, you know, just normal everyday user.

Sarah Holder: And what does all this mean for the crypto industry of the future?

Olga Kharif: So I think this means that once this regulatory stuff gets clarified, I think, crypto is just going to be your typical part of your financial system. I think we're not going to view Bitcoin as an emerging, quirky technology that only speculators invest in. I think it's going to impact Bitcoin's volatility, possibly. It's going to be perhaps a more stodgy place versus, something that's, uh, very volatile, very cutting edge today.

Sarah Holder: The baseball caps have turned into suits, as you said.

Olga Kharif: Exactly. 

Sarah Holder: Does that undermine any of the early spirit of crypto?

Olga Kharif: I think it undermines it a great deal, because the early adopters of this technology, they wanted to have money that the government cannot touch, that it doesn't have oversight of, and what it turned out to be is that the government does want oversight of this money, and very much oversees it. We've seen a lot of enforcement actions from the SEC, from the CFTC, from the Department of Justice.

This goes completely against the grain of what the early adopters believe and wanted, but I think at the same time, this technology and these coins, they would have been very niche if that continued to be the case. There wouldn't be the same kind of mass adoption that we are starting to see now. 

Sarah Holder: Olga Kharif, thank you so much.

Olga Kharif: Thank you. It was my pleasure.

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