Sam Bankman-Fried is the founder and CEO of FTX, a digital asset exchange.
In this episode of the Unchained Podcast, he is being interviewed by Laura Shin, a journalist, and Unchained host. They touch on many topics, including stablecoins, the necessity of regulation, and even Sam’s political views.
Read our notes below to learn more.
Thoughts on Crypto Markets
- BTC is going to be responsive to the general macro environment.
- Changes in interest rates are driving the market.
- Relative to stock markets crypto has stabilized.
- Regulatory environment clarity would have the biggest impact, particularly in the U.S.
TradFi Markets
- Sam’s guess is that crypto and TradFi markets will evolve towards each other.
- Some of the most compelling applications in blockchain are in market structure.
- There is a limit on how much money retail is allowed to make with the current market structure.
- This can be fixed with clear, unambiguous settlement that’s fast and cheap, which blockchains provide.
Stablecoins
Sam gives 4 categories of stablecoins:
- Fully backed stablecoins (e.g. USDC): A crash in these currencies shouldn’t happen.
- Backed by debt instruments, but not exactly treasuries (e.g. USDT): In volatile times they might slightly drop. It’s a fine product but it should be disclosed that there is some risk.
- Traditional algorithmic stablecoins (e.g. Maker in the past): These are only somewhat stable. These should have very clear disclaimers of possible de-pegging.
- LUNA: It’s a common misconception that it’s backed by Terra tokens while in reality it’s backed by the ability to mint new Terra tokens. Very unstable and it should have clear disclaimers because it might, and did go to zero.
Thoughts on Institutional Leverage
- Voyager is going through bankruptcy because of unpaid debt from Three Arrows Capital (3AC).
- 3AC took on that debt three weeks before its collapse.
- This is similar to 2008 when there were non-transparent systems, large leverage, etc.
- On-chain protocols don’t have this sort of problem because there’s transparency about borrowing and lending.
- There was more risk than Voyager’s customers understood, therefore, having disclosures, transparency, and more diligence is crucial.
Risk Management
- FTX team is working closely with BlockFi team to understand what’s the best way to measure and manage risk.
- One thing would be to understand the nature of the counterparties, distributing the risk between many of them, taking actual collateral, and being careful about what that means.
- Being ready to margin-call people when necessary is important.
Talks With Regulators
- It’s urgent to have a regulatory regime for crypto in the U.S.
- Some regulators do understand that the parts of the crypto world that get hurt are the parts that are least crypto-like (less transparency etc.).
- He is having a lot of discussions with lawmakers and his team wants to be helpful in any way they can.
- Lawmakers want straightforward constructive engagement.
- The priorities are stablecoin regulation, marketplace regulation, and token registration.
Financial Regulation
- People get distracted by talking about more regulation vs less regulation, which is not the most important question.
- More important is the question of whether the regulation is fit for purpose.
Decentralization vs Centralization
- FTX is a centralized company.
- The product they are building is a centralized product in a decentralized space.
- There are things that are more efficient if done by a centralized entity.
- However, FTX is integrated with blockchain rails, with other centralized and decentralized players, and it is a part of the space.
Alignment With the Democratic Party
- It’s policy, not politics that Sam cares about.
- No one issue is going to give a clear readout as to where Sam’s political affiliation lies.
- Crypto has been a somewhat bipartisan issue.
- Sam is looking for politicians who are doing good policy work in general, not specifically crypto-related.
Alameda Research Concerns
- FTX has oversight and they are regulated in many jurisdictions.
- FTX marketplace is agnostic (they don’t care who sends an order apart from KYC).
- Sam is no longer working on Alameda, he doesn’t trade for it and is not involved in the day-to-day management.
The Merge And BTC’s Narrative
- The merge happened in a very clean way which is impressive.
- BTC is the digital gold and it’s the most trusted and institutional, which is a different role from ETH’s core high trust smart contract blockchain role.
- BTC now is the only remaining major PoW coin.
Macroeconomics
- FTX is keeping its reserves in cash.
- They want to be in a position where they can offer products that people want given the highly volatile and uncertain macro environment.
What to Expect From FTX
- FTX is raising funds for deal-making.
- They are looking at companies that would make sense for them, including companies with in-depth regulatory know-how.
- They want to acquire great teams and businesses that have great user bases.
- FTX has a proposal to change the way derivatives are cleared which would make certain TradFi intermediaries obsolete.
- Working with Regulators to provide spot and futures from the FTX U.S. entity to Americans.
This summary was originally posted on The Daily Bolt, which is a 100% free no-nonsense daily crypto newsletter by Revelo Intel.
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source https://www.reddit.com/r/btc/comments/xz1zed/unchained_podcast_summary_what_does_sbf_think/
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