♪ caroline: i am caroline hyde. joe: i am joe weisenthal. romaine: i am romaine bostick. the day started out up but ended down for the s&p 500. joe: the question is what you miss? caroline: the china regulatory news. the big theme of the day -- it is. romaine: on this show? caroline: we are talking regulation and investing.

the u.k. has slammed crypto finance, forcing them to remove financial promotions to make it clear the exchange will no longer be permitted to resume operation without prior consent. this has kicked off global scrutiny. we speak with the ceo of binance's united states branch. meanwhile, we are not just looking at a centralized exchange of crypto, but decentralized options. what is the future of decentralized finance? what protocols are being built? we speak with a venture capitalist who is investing exclusively in crypto companies. let's talk isn data. still well above 60, but slightly slower pace. joe: exactly right. still very strong. i think the way people would characterize the economy overall right now, and nothing we saw in the ism today, was very strong and fast growth.

there are these concerns about prices. there are these concerns about supply chain bottlenecks that will slow things down. for more on ism, i want to bring it u.s. economic reporter olivia rodman. the market turned a little lower and it seemed like it spoke to the concerns of the market, maybe a little bit of a slowdown in growth at the same time of these pressures that continue to mount. olivia: we know debt demand -- that demand is there. it is really about employment and supply chain and transportation costs are keeping the growth is being as high as it could be. romaine: i'm curious about the supply chain costs. i interviewed a restaurant owner and she talked about the idea of not only are they paying more for these goods, but just getting them delivered. normally her wine guys comes at 10:00 in the morning. he didn't come until 10:00 at night. i'm wondering what evidence are we seeing that in the data? olivia: delivery times and

backlogs are at the highest since 1997, which is as far back as the data goes. with a restaurant owner is telling you is pretty much what every restaurant is experiencing. wedding longer, paying more, etc. caroline: paying more for services rather than goods. what are we going to see differently between a red hot ism manufacturing number and red-hot services number? olivia: the supply and services number is service providers but also includes construction and restaurants and hotels. it could be the goods that restaurants are getting, which could be food, for example. it could be lumber. it could be anything that they need. joe: but, the key theme to be -- we keep looking at all these different measures, backlogs. the cost of trucking, shipping. nothing seems to be rounding the corner yet and sustainably going

down except lumber prices. olivia: yeah, the demand on one side -- we are excited to go to restaurants and get back into this economy. on the labor side, that is not returning as quickly as we expect. so, when is all of that going to float down -- slow down our what these service providers are waiting and hoping for. romaine: we are not really seeing a huge crackdown in growth. a lot of these businesses are having problems, but they are still seeing growth in business here. is that expected to continue or is that going to be derailed? olivia: any member of this index above 50 implies growth. all of the measures this month were above 50 with the exception of employment which dropped below 49.3. we expect to continue to see this. it is just a matter of how much the employment and supply chain issues hold it back from going to its potential. caroline: i little bit of

friction in the system. meanwhile, coming up, we are going back to what we do best. crypto binance u.s. seal will be joining us on the regulatory for crypto's wild ride. this is bloomberg. ♪

romaine: we are talking about crypto, the regulatory crackdown around the cryptocurrencies has been escalating. we have heard this story before. also warning consumers repeatedly of the risk of trading in cryptocurrencies,

saying in january that investors should be prepared to lose all of their money. we heard all this stuff before. the question now is maybe things are getting worse? joe: exactly right. it is global as well. nothing is definitive, nothing has really struck a huge blow, but we see u.s. regulators getting more anxiety, imposing some sort of regulation. mexico, every day there is something. thailand and so forth. lots of stuff going on all over as everyone tries to grapple with this new asset class. joining us now is sonali basek and binance u.s. seal brian brooks. sonali: thank you for joining us. you just hired a former regulator at finance u.s. how are you looking to maneuver some of these regulatory concerns that exist in the u.s., let alone across the world? brian: first of all, thank you for having me these are really

important questions. i quibble little bit with the premise and the premise seems to be that regulation is bad for crypto. we are in a transition point where the number of people participating in this market has gotten so big that you need basic frameworks. that is a sign of maturity and the growth of the market more than a sign of something bad. what i think it means is exchanges like ours, the biggest exchanges in the world need to be very sophisticated about how do you allow decentralization to occur? while ensuring the risk management, complying with the law, the disclosure of what you are selling to your customers. that is why we are so excited about bringing the former financial communications commissioner on board. we need people with those types of backgrounds that have been policymakers in senior roles to navigate. i think successful companies will see that and try to compete for that talent. joe: can you clarify the relationship for viewers between binance u.s. and binance

globally which is the world's i know they are separate legal entities but how are you owned by them or what is the relationship? brian: we are not owned by them at all. binance.com does not share binance u.s. finance u.s. license the name and technology from binance.com. the way to think about it is like, a couple of years ago, the world of segmenting into different markets. you have most of the world which was still learning about crypto. did not have crypto licenses or requirements. and then you have an emerging part of the developed world which started putting crypto within a regulatory framework. we were founded precisely to be a regulatory leak compliant licensed exchange. we have 43 u.s. states that allowed to trade in their borders based on licenses and other legal compliance mechanisms. we will eventually have all 50 state licenses.

there are other parts of the world served different companies. other than licensing the name and technology, we have a separate board of directors, separate ownership. you might think about us is essentially a binance branded exchange. they are the biggest in the world, we are the eighth biggest in the world. different companies. romaine: we have the brand in the u.s. now. when we talk about the u.s. regulation or lack of it, i'm curious your thoughts on why it has moved so slow to see something a little more formative out of the sec or other regulators here. whether it is setting of guardrails, etf's -- there does not seem to be any real momentum, at least not that i can see publicly. brian: that is a great comment. it speaks more about the u.s. regulatory system than it does about crypto, to be honest. part of it, setting up a lot of different regulators and gave each of their share of turf. i know having run one of these

agencies, there is a conflict between the fed and the occ, or sec and cftc. because of that, it is hard to get clarity. if you look at the united kingdom where there is basically a single regulator for the entire financial system, it's a lot easier to get clarity. over here, you have competition among agencies. there is overlap in jurisdiction. i will say we are not as far behind as people might think. at the end of the last administration, all the major regulators, myself included, got together on the president's working group and started providing clarity on certain crypto assets. i think that is an example of how our regulatory system can adapt the fall regulators work together. joe: let me ask you a question about decentralized finance and so forth. are some of these de facto equities and trading as such? brian: it is hard to say.

there are certainly decentralized exchanges that are selling crypto tokens without the intermediary broker. some crypto tokens are securities and some are not classified as securities. it depends on what is being traded. the main takeaway for defi is just the idea that usually in this country, where used to paying middlemen a fee for the privilege of buying stocks and bonds or whatever. we pay a fee to a bank or the stockbroker to do that for us. and the purpose of defi is to eliminate the middleman and make it cheaper. the underlying thing is regulated, the underlying activity should be regulated as well. sonali: you are a primary banking regulator in the u.s. and now your company is more on the defi side of things. so, how concerned should the banking industry be concerned about defi at the end of the day? at what point does it start to be a threat? brian: to me, it depends on

whether the banking industry adapts as it always has or if it retreats to something different. if you go back 30 years, banks used to be really threatened by money market mutual funds. later, they were concerned about index funds. at one time, banks were really scared of computers because of the idea they can maintain ledgers faster than the bank employees themselves could. the banks always managed to adapt to that kind of environment. what i try to do at the occ, is to make sure banks understand what is coming. to understand that defi and other crypto products are competing in the same space that banks typically serve. and to adapt. banks have the customers, but they are where the money is. they have the ability to succeed in this environment instead of resisting if they understand it and adapt to it. sonali: you have been in this role for a number of weeks now. it's a pretty new job.

also, i am wondering what your most immediate plans for expansion are to improve customer service, get past regulators, and ultimately get ready for a potential public listing. brian: that is a great question. the first thing we do anytime we step into a job like that is think about what are the four things we need to do to make this company a wild success? the first thing is, we are not going to get around or evade or otherwise get by regulators. we are going to try to be the most transparent partner to regulators we can possibly be. we are going to be in plain sight. everything we do will be well disclosed. in terms of the other things we need to be successful, we need to grow our exchange business and that means making sure we serve all 50 states, new york and texas and the other states we are not in need to be added to our list. we will get there by the end of the year. the second thing is bringing as many assets to market as people find valuable.

right now, you can buy 56 assets under exchange but i think there are easily 65 or 70 are legal and people find valuable that need to be added. you will be seeing us adding assets. two or three a week for the next several weeks as soon as they pass the listing process. that will allow us to grow. we also need to transition from being an exchange to being a product company. the early days of the internet, there was aol who offered a little more than a portal and email and then along came google and figured all the valuable products that can be added to the internet. we are going to do that for crypto and a whole bunch of ways you will hear about. finally, we need to enrich the financial ecosystem of which crypto exists. derivatives to market. we need to work with our markets in making sure and bitcoin etf eventually comes out because it is safer and easier for people to access than today.

i expect it will be the portal for a lot of those innovations. at the end of the day, adding assets has been more useful to people. romaine: really appreciate you taking the time to speak with us. brian brooks, the ceo of binance.us. our thanks to sonali. we will keep this conversation going. we will be back in a moment. ♪

♪ joe: we're sticking with the crypto conversation for the rest of the show. the first bitcoin specific venture capital firm. we welcome now -- thank you for joining us. we are talking crypto. you are bitcoin focused. bitcoin specifically, but people want to do other things with coins.

they want to buy nft's, for example. in your vision, will all of this of eventually be done via bitcoin and what is in it being done via bitcoin right now? >> first, thank you for having me. i expect that all of what we are seeing in popularity and other spaces and other protocols will migrate or needs to be represented in the bitcoin environment and we are already seeing that today peter for instance -- today. for instance, if you like nft's, you could do that with a blockchain. it is not just nft's. my expectation is developers will observe activities that gain popularity in adoption and other protocol spaces and then will find ways to represent that in a bitcoin environment. of course, in bitcoin, the advantages the network effect as

well as the security and stability that differentiates this caroline: let's go back to basis for a minute. the smart contracts with ether eum, they had scaling issues but we've seen other protocols another underlying crypto born. why hasn't the's gotten really popular to do some smart contracts across the bitcoin protocol? alyse: that is right. first, we should start off by remembering that bitcoin has always had smart contract capabilities. bitcoin is programmable money. you have always been able to require multiple signatures, for example, in a transaction. or to require a certain amount of time or date passed before a transaction is triggered. bitcoin has slowly but surely been advancing more multiplex smart contracting capabilities. in a bitcoin developing

environment, what is most important first and foremost is that the environment is secure and stable. what that means, or the benefit of that is that bitcoin has never seen a breach or hack at the core protocol level. we have also seen very limited downtime. so in the past over a decade bitcoin has been in existence, we've had something like 12 hours of downtime. of course, that is of critical importance when we are talking about financial technology which holds billions of dollars of wealth. for folks across the economic spectrum. the developers and the founders building on top of crypto's protocol take that very seriously and optimize for that first. a function like contracts -- but it catches up. romaine: ok, alyse, when we get into the broader issues of

decentralized finance or whatever we are calling it these days -- you talk about the safety and security. trust is a big part of this. in order for that to function or operate as it is being pitched by a lot of the true believers out there, you have to have that. is there a general sense that while we haven't had these breaches yet of the protocol level, what is being built and the interconnectedness of it will be secure enough and trustworthy enough that we can move to whatever the next thing this is going to be? alyse: that is exactly right. that's happening now. for example, we had something called tap root. advancement activate -- lock in. that will activate in november. something that tapper enables is a more efficient connection between higher layer protocols built on bitcoin and the higher protocol itself. that creates efficiencies for the end-users of bitcoin's

payment protocol, lighting network. there's an interesting auspicious convergence of trends happening here, right? which is that the advancement happening with'bitcoins protocols further enable use of the payment networks. at the same time as we are seeing emerging markets begin to adopt bitcoin through the lightning network or the payment networks. i expect that when we see emerging markets adopt bitcoin, it will not be through bitcoin, the core protocol, but through the higher layer networks with lightning leading. it's exciting to me to see technology advancements that create increased privacy and efficiency and functionality at that level. joe: just a few seconds left. obviously, there is so much money being thrown at other protocols -- cash, vc money, etc. does it make it hard to attract developers? visit because a town -- does it cause a talent challenge?

alyse: i don't think so. the top talent are using other protocols that test that. they're exploring projects and even sometimes seeking funding there, and then moving over to bitcoin as the programming language advances in the bitcoin field. i suspect we will see that continue. we cannot forget that adoption is really accelerating for bitcoin. in fact, the pace of adoption for bitcoin is exceeding a similar stage for the internet. we are seeing a quicker pace of adoption. developers tend to follow the opportunity and want to have their work to be long-term impact. caroline: thank you for joining us. alyse, thank you. from stillmark, founding manager partner. i'm watching italy versus spain going to extra time but what you are looking at first thing tomorrow? joe: i'm wondering when we will

get these votes for the new york city mayor race. it is getting to be a late brunch. romaine: have a great evening, everyone. this is bloomberg. ♪

announcer: from the heart of where innovation, money and power collide. in silicon valley and beyond. this is "bloomberg technology" with emily chang. >> i'm caroline hyde and for emily chang. coming up in the next hour, the firm losing almost $20 billion in market valuation just three days after the company debuted as the larg