announcer: from the heart of where innovation, money, and power collide in silicon valley and beyond, this "bloomberg technology" with emily chang. ♪

emily: i am emily chang in san francisco. this is "bloomberg technology." coming up, the newly passed infrastructure built and tighter regulation of cryptocurrency. the ceo of kraken is not happy. he will tell us why. plus, an interview with emilie choi. we will get her reaction and more. get this. three major new camera and video recording features for the next iphone. enough to kick off a super cycle? we will talk about it all. first, let us look at the markets. technology leading the decline. >> absolutely. we saw an outsize reaction to a

pop in yields of two basis points, a notable move that signals a lot of people expect 10 year yields to rise tomorrow. you saw this with the tech underperformance. the s&p 500 up, record high. let's look at the yield picture, the technical levels we should be watching. that is where the 200 day moving average comes in handy. yields hovering around that area and potentially breaking out tomorrow with the cpi print. i want to highlight the other sectors, semiconductors, the dragon index, who helped the nasdaq biotech index, all down in line with the trade. that could turn around tomorrow. that is the macro picture for the micro. >> i am focusing on coinbase. strong numbers. the stock is lower after hours. it had been higher, than flat,

now lower. investors trying to make up their mind. we saw a beat on the topline and bottom-line, but a warning that trading volumes will be lower in the current quarter. the trading volumes in the quarter just gone $462 billion, the volume dollar value of how much was traded to the platform, the estimate was $381 billion, so well about that. they point out the volume of ethereum trading was greater than bitcoin. we know there were some upgrades to the ethereum network, transaction costs came down, and basically traded. this is a stock that moves in lockstep with bitcoin. let's bring up this chart and look at this. it is fascinating. as bitcoin pared back in recent months, that chart, we will see coinbase following suit, moving and symmetry. similarly with the bloomberg galaxy crypto index. most of what is happening on coinbase's retail investor-driven, 95% of the

dollar value of those transactions. in recent day with the infrastructure bill, a lot of the focus is on the legitimacy. if you go online, that is the discussion, whatever the net result, policymakers on capitol hill talking about this is giving cryptocurrency some legitimacy, and you see that reflected in these coinbase numbers. bitcoin over the last few days, over the last 24 hours, hovering around the level of $45,000. there is some strength in bitcoin. a few weeks ago, we were talking about bitcoin, $20,000. no more. to the moon. people are talking about bitcoin $100,000. emily: just to the moon? our next guest has some thoughts about that. we will talk to the president of coinbase later this hour. a crushing loss for the crypto lobby, pushing to change crypto tax reporting rules and that infrastructure bill. it opened the door to broader

regulation of the crypto industry going forward. joining is now with reaction is the ceo of kraken. your recent tweets, don't mince words, it's been killed out of spite, sending industry jobs, technology offshore. why, if i may say so, are you so infuriated by this? >> it is a complete disaster. how this language got into the bill is a mystery. that we could not get this amendment through to make some obvious improvements that would save this industry in america is a real shame, and it is due to the holdout senator in alabama who was not willing to support this. i am also going with the industry. we did not come together on this. kraken emailed its user base, calling for support to contact senators, and not everyone did that. some people felt like they could

rely on backroom conversations with senate staffers, and that obvious he did not work out for us. in the end, what mattered was a senator nobody thought to talk to, so we need to come together on this going forward and put everything we have into the house, and now the problem is just four times bigger. we have to convince 400 people instead of 100 people to do something, so we made our own lives difficult, but it is a wake-up for the crypto industry, we need to doing it more than we have been historically. emily: what does kraken plan to do to rally the support you need? education is happening at the same time that lobbying is. jesse: exactly. we all need to donate more to the blockchain association, first. second, the industry is talking about how to set up a super pac

or come together and financed the politicians that are on our side, educating those who aren't , and i think you will see the crypto industry become a massive lobbying force, not just the companies, but the currency holders, and americans broadly see this as a national economic problem, that we need to keep this industry onshore. emily: why do you think innovation will be stifled? what will not happen as a result? jesse: the bill says every time you tip up, stuck, you have to get a 1099, so name, address, proof of identity, social security number in order to give them that tip. it is the same for the blockchain, anyone in the chain of transaction, software developer, node operator, bitcoin miner, anyone

must collect tax information, and identity information, and report to the irs, which is nonsensical and understands the technology and is not even possible and makes colonels out of everyone and kills the industry and kills the technology in the u.s., which means all of those businesses generating terminus amount of tax revenue, all of -- tremendous amounts of tax revenue, the mining industry has recently received a huge influx from china, it will have to go back out of the country because these people have basically been made to be criminals by virtue of being forced to do something that is technically not possible to do. emily: meantime, today, the biggest hack yet, $600 million in assets stolen. this happening on the poly network. when these things happen, it screams the need for regulation

for more oversight. what is your reaction to this? isn't this alarming? jesse: it is. it is a bit of the wild west and crypto. people all over the world are engaged with defi. we tried to do audits. sometimes auditors miss something critical. i would trust the auditors more than the government regulator. big government institutions get hacked just as much, so i don't think it needs more regulation. there is plenty of consumer regulation and protection. this space is regulated by the irs, the sec, you name it. they are trying to regulate the space, and they do, so i don't think it is more regulation. i think it is more education. no matter how much education,

some people will gamble their money. you just saw a hedge fund guy who knew what he was doing lose $20 billion in one day. i don't think it is about needing more protection. i think it's about more education. emily: as defi continues to expand, do not you think there are going to need to be more guardrails? jesse: nope, i don't think so. i think we have plenty of guardrails in place that extensively cover financial services and to a great extent cryptocurrency, and i think that calls for more regulation now are shortsighted and i think we need to see how the space develops. it is still the early days. if we had tried to put too much regulation on the internet and the early days, just to go to website to protect them, it

would not be what it has become today with so much freedom and discussion around the world. that is the hope of cryptocurrency, that we bring financial freedom and inclusion to the world. once we put it in a box and try to control everything, we take that potential away. there is enough regulation to protect people, and we need to watch and see what happens and help the space develop. emily: there has obviously been a lot of volatility. i will pick on bitcoin in particular. you have been on the show talking about it going to the moon. infinity. mars peered beyond. do we have any new -- mars. beyond. we have any new metaphors? are you still as optimistic about this otherworldly potential here? jesse: absolutely. the moon is the barricades for crypto. we are going to other dimensions with bitcoin -- bear case

for crypto. we are going to other dimensions with bitcoin. i think we could see $100,000 this year next year. emily: thank you. we appreciate the colorful metaphors. thank you so much for joining us. later, we have the coinbase president on the second quarter earnings report. her thoughts on the new infrastructure bill and much, much more. you don't want to miss it. coming up, out with the old and in with the new apple plans on releasing a new iphone with three major camera and video recording upgrades. we have all the details. that is next. this is bloomberg. ♪

emily: i apple is getting to release the latest iphone -- apple is getting ready to release the latest iphone, this afternoon, controversial protections after images in its messages app in icloud photo library.

mark gurman is here with more. but start on the new camera and video recording features. -- let's start on the new features. what do we know? mark: the first is a cinema mode where you can take a picture and the object or subject in the foreground will be sharp in the background will be blurred. this is known as an effect in the photography world. now they will ring this to video. it is a comic technique with high-end video, and now it will be coming to the iphone with the new models in several weeks. the second feature is recording and what is known as pro res, a higher-quality format t that makes editing more capable for video editors. the third feature is the new ai-based photo filter system that can adjust colors, highlights, shadows and >> on

individual elements of the photo and object or a person quite a bit for the standard system like the instagram filter system. emily: let's talk about the controversy around apples targeting of explicit images. a lot of people don't understand it and are reading the headlines and don't understand how it will work. what is your take on what we have seen here? mark: the reaction is fair. there is some misunderstanding about the functionality. apple is not viewing the images in your icloud library. they are scanning or analyzing it and assigning hash keys using cryptography to each image, corresponding to those individual images, then there is a database operated by an institute against child

exploitation and child abuse and child pornography and they have a database of videos and photos they collected from law enforcement agencies over the years, and what apple is doing is assigning those hash keys to those images in the database, so there scanning your library and comparing the hash keys in your library of the hash keys and that database to see if they are match, then if there is a certain amount of matches in your photo library, and unfortunately they are not telling us how many that is, they will have human reviewers review those images, and if there is a confirmed match then they will notify others. what apple should be doing is providing a better explanation as to what is in the database, who manages it, and how images get into that database. there is a lot of concern about that. i will not sit here and defend apple's efforts against child exploitation and explicit images. i don't think apple is doing anything wrong to prevent those images, but what i will say it is hypocritical to some people

who say that apple refused to break into iphones belong to those behind terrorist attacks , yet they are willing to do this against child pornography. some people are saying they should be working on both or neither. emily: there is a lot to debate. meantime, you have a story about how google is limiting ad targeting to teenagers, something facebook and instagram did a while ago. what can you tell us? mark: apple, facebook, instagram, google are limiting add targeting -- ad targeting. earlier this year, apple limited apps targeting and advertising tracking apps across the ecosystem. instagram is doing it for 18 and under now in relation to some

demographics and interests. now google is doing that as well , specifically across all services, but with a focus on youtube. there are new protocols in place to protect kids, stopping autoplay, so videos will not continue to play in succession and kids stay up all night watching video. emily: some kids in my household might be doing that, but in moderation. our government, thank you so much for that update. meantime comes up bank reported a sharp drop in profits at its vision fun. masayoshi son's fund had enjoyed a strong run thanks to tech stocks, but quarterly results showed the value of investments in other holdings have declined. however, others were the main reason that does stay profitable. facebook has removed two separate networks of accounts to crackdown on inauthentic behavior. when network was in myanmar and

was used to spread divisive content, and the second from russia attempted to recruit real internet influencers to spread misinformation about covid vaccines. that network included 243 instagram accounts and more than 24,000 followers. coming up, travel and the time of covid. where can you go and which destinations are still sealed off as the delta variant takes over? we will tell you next. this is bloomberg. ♪

emily: this week, ebay and another company with quarter results wednesday. thursday, disney, airbnb, and sofi. airbnb will be interesting to watch as others gave optimistic

outlook despite the delta variant cases. take a listen. >> people are desperate to travel. there is a demand and hunger. >> everywhere people can travel, we see bookings. >> cruise demand is strong. >> we are seeing people more comfortable to be in hotels and, the usual lodging use cases. >> we see increase for demand in the future. >> we have among the best protections in the leisure business. >> while the variant is out there, overall, bookings and experiences are accelerating. >> we will continue to see that. i don't see delta having a particularly large impact. emily: for more, i am joined by drew armstrong. what is opening, what is closing down?

drew: it is a great question. that is why we developed this tracker to answer three questions. first, where can you go? second, where is it safe to go? third, if you go, is it worth it ? are bars and restaurants open? we looked at 1500 different travel combinations that involved 40 different financial and leisure capitals, and we were able to compile ratings for every single one using a combination of travel data from a third party, and our own reporters on the ground and faxing data we have collected to show you what it is like to be there. a lot of the world is still not very open. only 18% of the places we looked at are open and accessible. a lot of the world remains in the closed category. emily: what do you see happening

next? do you expect many more destination will shut down? the number seemed to be getting worse around the world. drew: it is a great question. if you have been watching the headlines over the last week, you have seen new restrictions that could be put in place in some places and lightened in other places. this changes very fast, a lot of times depending on the public health situation on the ground. it makes it hard to know where you can go. what the rules are going to be if you do try to make those trips. in general, even in the u.s. and elsewhere, it seems to be vaccinated travelers with the general trend towards reopening, even with the delta. it is not to everywhere or all the time, but clearly, people are getting vaccinated and want to travel because they feel personally protected at that point. i think we heard it from some of

the clips you played earlier. emily: do you think there will be more restrictions? drew: i have a feeling we will see some of that. we have seen the u.s. add some countries to its warning list for travel. i have a feeling we will see those things. we have seen lockdowns in austria, the resumption's of some restrictions in china locally, so clearly this is not a one-way street, and we will see this wave of deltek cases -- delta cases fight quickly, especially with unvaccinated populations. so, for us, this is about trying to pinpoint the places where you can go, and also identify those places where you can't go. emily: especially as schools are starting to reopen around the world. drew armstrong, thank you so much to your team for continuing to bring us the most updated information. coming up, tesla's footprint in

china fading, falling negative publicity and the recall of almost every car sold in the country. we will have the latest on that story next. this is bloomberg. ♪

emily: welcome back to "bloomberg technology." tesla's china troubles continue, which shipments plunging for july, following negative publicity in the recall of almost every car the company has sold in china. for more, i want to bring in ed ludlow. it is hard to believe every single car in china has been recalled. what is happening here? ed: the numbers are important. for the first time, we saw a big

drop in the number of cars built in the shanghai factory that are delivered to chinese customers. what has happened over the 12 months is shanghai has become the center of production for tesla, no longer from where we are sitting, but shanghai. the orange bar is what you're looking at. we care about that because china is the world's biggest automobile market. it is still building a lot of cars, but the going overseas, mostly to europe. tesla has done a lot to localize the supply chain. it makes a lot of money on those cars, but it is worrying about what it signals for the company performance in that market. emily: compared to the rest of the world, the world is their oyster, right? ed: it is still the biggest market, but china was the growth market, because it is the

world's biggest automobile market. the biggest china, and we have a chart that shows tesla revenue growth by different regions, the blue bars are china. for long time in recent quarters , that is where the growth is coming from. it slowed down last quarter when this started happening, the clash with consumers, regulators coming in. emily: will that continue? ed: the latest data set is not a good sign. we know that for a long time that tesla was the darling of the chinese government. they help the company get set up, and now it seems they will have to do a lot better to improve the situation and allay some of the fears. emily: meantime, the stock has been in a holding pattern. is it due to the china concerns? ed: it's hard to say. 2020 was so massive that it is now underperforming. it is just in positive territory year-to-date. part of that is we saw gains

last year and now we are normalizing a little bit. a lot of folks are waiting on ai day next week to see what the next phase looks like and whether we might see real-time driving. emily: i want to bring in i would guess to talk about the amount of time it is taking for companies to get orders, now stretching to 20 weeks. our long chip reporter is joining now. 20 weeks? why is that? >> it is a continuation. many people were thinking we would see the number stabilize and we would see some sense that things are normalizing, but that is not the case. it just keeps going and going and going. emily: it is not a secret anymore. we have known this is happening. why aren't companies just

producing more chips? >> there is no greater question than this one. it requires constant updating. assuming every chipmaker in the world on january 1 decided we have to make more chips and decided to build new plants, they will not be coming online until the middle of next year. they have this enormous inertia that goes into building one of these plants, but yet they can update their reduction lines, even getting a new machine, it's six months, then you have to install it, get it to work. the industry can't turn on a dime. it cannot catch up with the demand. ed: when we talk about semiconductors, we lump them together. we have had a lot of car companies report earnings, saying the situation is improving and they expected to get better in the second half of the year. is that really the case? is it universal that leadtimes are stretching, or are there

different parts of the market doing different things? >> that is a good question. particularly the automakers. even if you're getting some things improving, you can be sure one small component that is part of the package, the analogy is the part stops you from shipping the $30,000 car. microcontrollers continue to be problematic. that is the kind of thing that when you have an expensive car like emily has, you press the button in the trunk opens automatically, that is the microcontroller at work. some of the power management chips controlling the battery packs inside teslas are coming back and we are getting more supply. emily: you are talking about my

minivan that carries my family, including my four children. is there any good news we can expect? at what point does the lead time come down? >> there are two ways to look at this. the scary side is things are getting worse, supply is getting pushed out more and more. the other side to look at is something investors look at, hold on a minute, maybe this is inventory building, maybe things are about to reach a peak and we will see things normalizing. maybe this is a harbinger in terms of the short-term, the return to normal levels and things like that. there are a number of ways. we are in that territory. emily: thank you. thank you both. we will keep following. coming up, how ai is

transforming the face of fintech. we're talking with upstart on the earnings report in the future -- future of finance. that is next. this is bloomberg. ♪

emily: lending company upstart went public in december, and now out with earnings and forecasts. reacting positively, up 15%, 18% after hours. for more on the report and the future of fintech, i'm joined by the ceo. what do you think about the reaction? >> thanks.

it is the combination of superfast growth combined with profits. then tech are known for growth and when, you put that together with profits, people get excited. emily: the key feature is artificial intelligence and how you are integrating that into the process. talk about how companies are leveraging this technology. david: sure. we operate as a partner to banks to let them use ai technology. that means more accurate models that will approve more people at lower loss rates, so when you put it together, it dramatically increases access to credit for consumers and helps banks have more inclusive and profitable lending programs. that is the heart of ai when it comes to lending. emily: our traditional lenders

keeping up with the technology and how do you know which ones are and are not? david: it is a good question. it is hard to compare lenders and sometimes it takes a while to play out. it's hard for the world to completely grasp what is real and what is not, because there are lots of buzzwords, but ultimately, a strong business ends up in growth and profit, and i think that's what we are demonstrating here. emily: one of the more positive aspects is how ai can be used to make lending more inclusive. talk to us about how that works. david: it sounds almost counterintuitive. you think that a program that says no to more people, but it is the opposite. when the model is better at separating those who can pay back and who cannot, it ends up approving more people, because traditional models are bad at

identifying credit worthy individuals, so it will approve more people end up lower rates. that is why on balance, ai helps everybody, every demographic comes so it is a powerful -- demographic, so it is a powerful change. emily: you have an interesting window into the economic health of people as we come out of a pandemic. so many people have lost their jobs and it has been a tough time for many folks. what are you seeing out that window? david: the economy is not what it was. it is different. it is not pre-covid levels. the government stimulus certainly kept credit balances or banks afloat, people paying back the credit, so it is an unusual environment. we are still operating with headwinds in terms of demand for credit. credit card balances are as low as they have been in a while,

savings rates are up. that is all good for the consumer. we are still growing, which is great. it is an unusual time. i think in the next two or three quarters, we will return to a normal economy in terms of employment, spend rates, and only a matter of when. emily: thank you. ceo of upstart. shares up 18%. 17.90% after hours. thank you for joining us. coming up, the coinbase president emilie choi on the earnings report and her take on the new infrastructure bill and what it means for crypto and volatility, next. this is bloomberg. ♪

emily: coinbase out with

earnings that topped estimates, and guidance showing lower monthly users in q3. coinbase went on to do 38% sequentially. slightly lower inlay trade. i spoke exclusively with the coinbase president emilie choi on institutional versus retail investors. emilie: i think that what we looked at on the institutional side is the quality of the different investors. we talked about the fact that 10% of the largest hedge funds by assets under custody are now using coinbase in some way. on the retail side, a huge part of it. a big thing that happened over the past 12 months is we saw that more than half of trading volume started to come from

institutions. that was the newer business. that is a higher volume segment. it is cool to see both businesses taking off and benefiting from one another with liquidity. emily: you are not providing financial guidance, but saying monthly transactional users will be lower sequentially, same for trading volume. why? emilie: the reality is we are looking at this as a long-term business, so this is a period of years, not quarters. we have to be transparent about everything. when we look at this, we say, there was a ton of volatility this quarter. volatility benefits our business in a massive way. we have a lot of growth in these segments, so we will not continue to have this where you have incremental up and to the right. it will be bumpy. we are used to the volatility. we embrace the volatility. volatility is a feature, not a bug for us.

the business is growing beautifully, but we will not look at it in a myopic, quarter-by-quarter basis. when prices get high or even if they get low, there is a lot of volatility in the market, and people would trade regardless of whether there are high prices are low prices, so because the fundamentals of our business are based on a transaction model, we will make money on that either way. emily: the senate just passed this $1 trillion infrastructure planted they could not get a deal done on the crypto language, which looks like the crypto industry could be broadly regulated. does this concern you? does this concern the industry at large, and also coinbase? emilie: zooming out, this was a big moment for crypto, and ultimately positive. if you think about the 1.5 trillion dollar infrastructure

bill was held up because of a small crypto provision that lawmakers did not necessarily understand the implications of what that provision might be. what it speaks to is the fact that crypto will be a major source of tax revenue to fund infrastructure. that is a very positive thing, and something we think is positive for the industry. it is no longer a french thing. crypto has into the mainstream here. -- fringe thing. crypto has entered the mainstream here. we think the industry will work with lawmakers to help them understand the potential for crypto and where we can shape the regulation to make sure we are protecting customers, and at the same time not hindering crypto in the u.s. and having it move offshore. emily: coinbase has been beefing up the policy side of the team. what kind of regulations do you

want to see from regulators? emilie: ultimately we want a fair and even playing field with the rest of the financial services industry. one of the interesting scratch your head moments that were part of this amendment, if you send money to your sister, that transaction is not going to require any information about your sister, unless it is tagged as something that is dangerous, nefarious, or some threshold dollar amount, so if you were sending that through wells fargo, for example, so why would crypto be regulated in a different way than the traditional financial services industry? we simply want and even playing field. emily: gary gensler call the crypto industry recently by while west and wants investors protected. what are you looking at? emilie: we did not know it will

be regulated as a security. we need to figure out the rules. we pioneered this idea of a digital asset listing framework where we have a bunch of criteria to determine whether or not we think it is a utility or security. at this moment, all the coinbase lists are that. if parts of it become that come there will be an opportunity to play in that, but what we're seeing right now is frankly there is some confusion amongst regulators about which parts of the crypto ecosystem they want to monitor, what they want to regulate, so what we want is more clarity and want to work with him on figuring out the rules of the road and how we can regulate and avoid this and protect the consumers, the customers, but at the same time does not inadvertently hinder crypto innovation, because it will move offshore. crypto is a decentralized movement.

if you try to put that genie back in the bottle, it will morph into something else in another part of the world. emily: interesting. meantime, a huge defi hack was just revealed on poly network, $600 million worth of assets stolen. what about the risk of defi for you? given hacks, frauds, scams can happen? emilie: coinbase is built on a very big foundation of security with the things brian armstrong built the company on, so the way we have built infrastructure in the way we add assets, launch features, launch products is predicated on this foundation of security, and sometimes slows us down, but in a good way. there will be hacks. there are hacks and the current financial system. our responsibility a coinbase is to make sure we are doing as much as we can to protect consumers on our platform.

when other things happen off of our platform, we cannot necessarily control them, but we can learn how to better protect against hackers. emily: looking at centralized and decentralized finance, which is bigger in the future? emilie: it is interesting because the whole foundation was built on centralized finance, then our founder and ceo brian armstrong recently wrote opposed about how much of the future will be from decentralized financial applications. we don't know how long that will take. we did not know when the app store was launched how long it would take for a robust ecosystem happen. when the internet was first launched, how long it would take for true internet adoption happen. i think we can't predict it, but the attributes of decentralized financial application, things like enhanced privacy and protection, you know, the benefits of the blockchain,

permissionless, 24/7, that appeals to users, so over time, that will be a force of nature. emily: you just announced your vice president of capital markets is leaving after four months on the job. he is a former director at the sec. what happened and what is it mean for the priorities for that part of the business? emilie: we wish him the best. this was simply a de-prioritization exercise. we always have to make her calls about different products we are working on based on what demand we are seeing, and were seeing so much demand in the core business that we had to de-prioritize that. we think there will be a robust market for digital securities over time, and back to your other question about sec oversight, and we want to make sure that there is a good regulatory framework for digital securities, that we see market demand for digital securities,

and when that moment happens, we are poised to capture that opportunity, i think. emily: another exchange, falcon x, just raised $3.7 billion. robinhood just went public they are working on expanding crypto services. how concerned are you about the competition and do you see it as a threat? emilie: we think the market opportunity for crypto is massive and we welcome them into the space, because we all grow this together. when we see paypal, robinhood and others get into the space, it validates the hard work we have been doing since 2012. the thing that folks should understand that as users become more sophisticated, they want crypto-first features and assets, and that is what we are well poised to do. we added more assets this quarter than all of 20/20.

you might buy one asset, then we will expose you to other assets and you will learn about him. you might want to use other features beyond buying and selling, send and receive, and so we are the crypto-first company. that is the heritage of the company. that is what we were built on. it permeates everything we do. you can remember back in the day when all the old-school retailers were like digital is a feature, that did not degrade against something like amazon, which was digital first. in the same way, we believe crypto first will be the key to our future. emily: an exclusive interview there with coinbase president emilie choi. that does it for this edition of "bloomberg technology." join us tomorrow as we hear from the ceo of one startup. that person will be with us after that company starts trading on the new york stock exchange. also, gray like partners

hoping to take them public. you don't want to miss that. i'm emily change in san francisco. this is bloomberg. ♪ this is "bloomberg technology." this is bloomberg. ♪

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haidi: a good morning. welcome to daybreak australia. sophie: we are counting down to asia's major market opens. shery: good evening from bloomberg's in new york. u.s. stocks climbed to a record but tech weakness exposes lingering concerns about the virus and a hawkish fed. haidi: