Live from Bloomberg's world headquarters in New York. I'm Scarlet Fu.
And I'm Tim Stenovec. Welcome to Bloomberg Crypto.
Moments from now, we'll speak to the former governor of New York, Andrew Cuomo, about the failure of the Clarity Act and what role he sees crypto playing in politics.
And another major crypto hack, this time on the Bitget exchange. We talked with the CEO about how hackers were able to steal hundreds of millions of dollars in tokens and how her company is responding.
And the SEC commissioner is ending her tenure this week. We discuss how far crypto has come during her time.
That's all ahead on Bloomberg Crypto. First up, a check on how things stand right now. Bitcoin is down about half a percentage point today. A little bit of a risk-off day in equity markets. So, too, in digital assets. Still hovering around $83,000 per Bitcoin. Ether down. Solana down to $118.
I want to zoom out and look at the quarter, because it's been quite a quarter for Bitcoin. The quarter ends later this week, not tomorrow. Bitcoin is up close to 40% from July through September so far. It reverses the 14% loss in the previous quarter. If you look at how Bitcoin has done thus far this quarter, up 40%, you've got to go all the way back to 2024 to see a performance such as that in a single quarter, and that was when Bitcoin was up 47%.
And demand from institutions certainly helped to support Bitcoin's recent price action. Bitcoin ETFs attracted about $2.4 billion. That is the largest weekly net inflow since early October last year. And you remember what happened last October. The coin set a record about $126,000 before then tumbling and entering a crypto winter. So this latest surge in weekly inflows was enough to push the ETFs into positive territory for the year, Tim.
Let's get to one of the biggest stories that's rocking the crypto industry this week. The exchange Bitget reported more than $350 million in unauthorized transfers from some of its wallets, leading it to temporarily suspend withdrawals. The company worked to address the hack. The CEO appeared on a three-hour live stream to share details. She also posted on X saying, 'Based on IP behavioral patterns and signatures, this attack is consistent with techniques used by DPRK-linked hacker groups.' We have notified relevant authorities and are cooperating fully with them globally. For more, we are joined by the CEO, Gracy Chen. Good to have you on the program. I'm really curious about what happened with your company and how you're responding right now. How are you making sure, first, this is never going to happen again?
Nice to see you again, Tim. I'm very sad this is the occasion that we get to speak, not in the market, but on our hack. So the biggest lesson that we know from here is that this has been eight years of our operation. There isn't any incident, and this can never be a reason to become just complacent. Security has to evolve as the platform grows and the attack methods involved. So far, one major lesson is managing the third-party security risk. The attacker this time exploited a vulnerability in one of the third-party security products to obtain high-level internal credentials. We've introduced a lot stricter assessments before any third-party product is deployed and stronger controls around the deployment themselves. And the system access has been tightened, restricting access and requiring multiple approvals for critical operations. We're also strengthening verification and any unlawful monitoring. So there are a lot of things that we've been doing, but the broader lesson is that security isn't only just about managing or protecting private wallets, which is the case this time. We have been protecting those things. But every system, also third-party product that can provide access to critical infrastructure, has to be treated as part of the security perimeter.
Do you have any information on how long the hacker was inside the platform gathering keys?
So no, we don't have private keys being exposed. We don't have our wallets being touched. So it's not about gathering the key, it's more about gathering the vulnerability of the third-party service that we had. So the vulnerability is the key thing, but no, I don't have more about the update about how long they were there before this happened.
Can you update on what you're seeing on the platform right now? Our news team is tracking recovery. The hack has spurred customer outflows at Bitget. Is that number still consistent?
What is the number you are seeing?
$463 million in the 24 hours into Tuesday.
That number sounds about right. Because we do have, this is an ongoing withdrawal from our platform, and we're going to open withdrawals from tomorrow, but there should be about 100 withdrawals so far in terms of the total volume.
How much more does that volume increase? Like, what are you talking about internally to prepare for?
You mean the withdrawals, right?
Yeah, the withdrawals actually stabilized a lot today. I think yesterday we've already hit more than 9,000 withdrawal orders, and that includes 4,000 just in the very first hour. So those hundreds of millions, actually most of them happened in the first hour of the withdrawal restart. So actually right now it's stabilized already, and good news is that even today, when we opened up ETH withdrawals, the inflow is actually larger than outflow, which actually surprised me a little bit.
You said you have a user protection fund of $464 million. That kind of serves as insurance. How is this fund being utilized, and is it being drawn down?
Yes, so we are using the money from the protection fund. By the way, we established the protection fund in 2022, even before the collapse. So right now the protection fund has about 3,000 Bitcoins, that's valued at $260 million-ish in terms of value, so it's obviously lower than it was before the hack. We did use some Bitcoins from the protection fund to move to the wallet in order to deal with the withdrawals that we have from the users. But we also have another promise. We will be putting our company's capital back to the protection fund and keep it above $300 million.
I'm glad you mentioned you sold some Bitcoin. Do you think that selling the Bitcoin in the fund impacted the price of Bitcoin in the broader market? Did you see any ripple effect?
No, so we didn't really sell Bitcoins. We moved Bitcoins from that wallet to our hot wallet. And by the way, you may know that Bitget has a spot withdrawal opening, so on the first day, it's actually Bitcoin that we allow users to withdraw. I suspect that they may not really sell them. So in total, we're not having a lot of sell pressure to the market. We just sell it, and I don't know if they withdraw their Bitcoins afterwards.
Thank you. Gracy Chen, appreciate you sharing your story today and the response that Bitget has had over the last couple of days. We appreciate your time. I want to note, everybody should check out the story on Bloomberg Terminal written by our team about how this spurred a $463 million customer outflows. There's more information in there as well. Coming up in just a minute, former New York Governor Andrew Cuomo discusses the Clarity Act fallout and how America needs to stay ahead in digital finance. And also, his political outlook.
To access all the latest data and news on crypto, including that conversation, make sure you check out all our coverage on the terminal and do check out Crypto Go on the terminal. This is Bloomberg.
Welcome back to Bloomberg Television. Joining us now from Washington, D.C. is the former governor of New York, Andrew Cuomo. He's in our Balance of Power studio, along with Joe Mathieu, who will join the conversation in a moment. Governor, thank you for speaking with us today. I want to start on the Clarity Act, because you have talked about the need to pass the Clarity Act to help the U.S. lead the future of finance. You've also told Bloomberg back in July that you hoped lawmakers would include full disclosure and clear guidelines to reassure the public, something the Republicans and the White House resisted. So did the Clarity Act fail for the right reasons?
The Clarity Act, first, thank you for having me today. We've been talking about this digital assets, and the fact that digital assets are the future of finance for over a decade. 2014, I passed regulations in New York on digital assets. The Clarity Act probably has the best name of any piece of legislation in a long time, because it was actually about clarity. And when clarity failed, ambiguity wins, and unpredictable wins, and that's the last thing the industry can actually tolerate. And you're seeing jurisdictions all around the world that are actually putting in regulations and compliance, so companies know the rules of the game. Just tell me the rules of the game, and it is passing us by. I'm a New Yorker, if you can't tell. New York, finance capital of the world, and I see this financial future developing outside of the United States, so that's what gives me concern. Did it fail for the right reasons? It failed because of politics. There were differences. There are always differences in a bill. Were there any irreconcilable differences in my opinion? No. It was politics. We're coming up to an election. Who didn't want to pass the legislation because the other side would claim the winners? But there are no right reasons for that bill to fail. We desperately needed it, and we still do, and I hope the lame duck Congress, when the politics subsides, they could pass it. Otherwise January 1, it should be right on the desks, because it's a major priority.
The same version of this, Governor, or do changes need to be made to it to get everybody on board?
We live in a political world, whether midterms are five weeks away or not.
The difference is just before the midterms, the political temperature goes way up. That's the difference. Post-midterms, the temperature comes down, hopefully some rationality returns, and responsibility returns. And since the political temperature is down, lawmakers will do what's actually responsible and do their public duty and pass the law that provides the framework for the digital asset future of this country, which is now leading in nations around the globe. So I think the politics derailed it. I think when the politics relaxes, you can see the bill passed, because the differences were not irreconcilable. Should we have ethics reform? Yes, obviously. And not just on the executive, but also for the legislature. Should we have consumer protection? Of course we should. We just heard about another hack. Yes, this industry has to be policed. These are no-brainers that they have to be addressed. Politics is what got in the way.
You mentioned about how you oversaw the construction. That's when it was implemented and you're here now to help us learn what Europe can understand from New York's experiment. The thing is, if you were to give an honest assessment of BitLicense, it drove more than a dozen crypto companies out of the state. Kraken, Bitfinex, ShapeShift, all left rather than comply. Only five companies got licensed in the first three years. I guess my question is, was BitLicense too aggressive? Is that something that European regulators should learn from? If so, what should they learn from that?
Yeah, well, the New York BitLicense, you're right, first in the country, and there are only a handful of states that have passed a license since and the federal government still doesn't have a framework, as we discussed. And more companies have been licensed by New York than any other state in the United States. But the point of the BitLicense was this is the future, let's recognize it. We want it here, but it has to be regulated. You can have innovation and regulation. They're not mutually inconsistent. I think the BitLicense as it was implemented in later years was in many ways too stringent and some companies said it's easier to do business elsewhere. But look, the point of the license was we wanted a true framework. We wanted a framework that protected the consumer. And that was the point of the license in the first place. But as it was implemented, and at the time, if you recall, this is going to the FTX, etc., there were scandals, and they became very cautious.
You mentioned Bitget, and we just spoke with Gracy Chen a few moments ago. They're launching a customer protection program providing up to 500,000 euros of coverage against third-party attacks. The $307 million that Bitget lost to North Korean hackers, that's been well documented. We just spoke about that. The protection you're offering covers individual account compromises, not exchange-level hacks. So if North Korea can drain it from the hot wallet, what good is 500,000 euros of individual account protection?
Yeah, well, obviously I don't know the details of what happened with Bitget, but our point is we believe we have the best technology. That's step one. Step two is consumers have to trust that they are dealing with the platform, the company, and that app that actually understands the fiduciary obligation and has the protections in place. And our way of reassuring consumers, consumer protection, is to say we are so confident in our system that we will provide insurance if you are attacked and defrauded, not that you're part of the fraud or it was your fault, but if you have a secure account, then we'll work with you in the security of the account. We're so confident in our system that we will provide protection. Consumer protection is key. This is finance. You put your money in a company that you trust. And crypto has had questions. Do I trust crypto? I've heard a lot of different things about crypto. And it's OKX's way of saying we're going to put our money where our mouth is, so to speak, and we will provide protection if you're attacked, your account is attacked.
Let's keep talking about the temperature rising. Great to have you in our Washington studios. 35 days to go, you must be feeling that sensation as you creep up on another election day. The Cook Political Report is talking about 15 seats in the House flipping. We're hearing about a blue wave. When we talked to Charlie Cook last night, he said it's a red undertow. Is that how you see it?
That's a great term. That's why Cook is Cook. Well, yes, I don't think this is about the Democrats. It's about the Republicans. And it's also about history, right? I saw this movie. I was HUD's secretary to Bill Clinton in 1992. Hallelujah, Clinton-Gore, a new era, a new leadership. 1994, we lose the House and the Senate. Why? Because that has the historical pattern. I think it's more pronounced now. There is a lot going on in the world. And there's a lot of anxiety. War in Iran, tariffs, the American people want stability. They want predictability. And they believe they get that with the balance of power. And the past two years, the president and Republicans have been dominant. And there's a lot of drama, and I think what Americans are saying is we want to have more balance in the system, and the way we will achieve more balance is by electing Democrats. I don't think they're saying, wow, the Democratic agenda blows me away, these Democrats are really phenomenal.
Some are saying the democratic socialist agenda is blowing us away. You said a lot of things about Zohran Mamdani during the campaign, and I'm wondering now that you've seen him in action, what went through your mind when you see him at the Oval Office or Donald Trump at Gracie Mansion? Does he have the playbook for making this work on a mainstream level?
No, I don't believe the democratic socialists, I don't believe socialism is viable nationwide. Can you sell it in New York City? Can you sell it in Detroit, Chicago, L.A.? Yes. Can you sell it nationwide? No. This is in big cities that have a lot of new immigrants, a lot of young people. My election for mayor, I won with people born in New York City. If you were born in New York City, I won with those voters. It was the young people who came into New York City, so in those cities, I think you see these socialist factions. I don't believe it works nationwide. And I don't believe that has anything to do with what's going on right now. I think the Democrats are winning despite them, because the candidates they have put forward tend to be highly problematic candidates who are winning anywhere. Why? Because it's not about them. It's about just restoring balance, just changing red to blue. How are you talking about a Democrat winning Texas, right? Winning Alaska. That doesn't happen. Republicans can lose Texas. Republicans can lose Alaska, and I think that's what's happening. If you see that shift in the House, and if you believe the prediction markets in the Senate, you're going to see a radical shift in what's happening in this town, this town being Washington.
Governor, I want to end with crypto, because the crypto industry loves to talk about this crypto voter, but you know that is not top of mind for many voters. It's the economy. It's affordability. It's government ethics, immigration, healthcare. Is there really such a thing as a meaningful crypto voter bloc, or is this something the industry is overstating?
There should be. There should be. I think as the crypto industry matures, political maturity will be part of it. And I think you will see them mobilize the crypto voters. You do have tens of millions of Americans who use crypto. Where were they in the debate about the Clarity Act? Where are they as a political force? They haven't really been organized. They haven't been mobilized, which is ironic, because it's probably the most reachable audience by definition. But in a general election, is crypto on the top five issues? No. But when it came to something like the Clarity Act, could the industry have done a better job of mobilizing? Yes, 100%. And I think what the crypto industry realized is you can't just go to Washington with a boatload of money, and make political contributions and think that the bill is going to pass. It doesn't work that way.
Do you think there should be a crypto bloc, a crypto voter bloc? What do Democrats misunderstand about this? What can they do better? What can they learn from the Republicans when it comes to catering to crypto voters?
Well, I think that the Democrats, it became political quickly. I don't believe Democrats are inherently against crypto, right? As I said, New York is a blue state, I passed it in 2014 with an all-blue legislature, in an all-blue town. So they're not inherently against crypto. It is a highly charged political issue right now. And they have questions about crypto. That's the political hot button. And that's why I think it's problematic. We saw Clarity pass. We now see these agencies passing regulations. If the Congress changes, you will see these agency regulations put under a microscope. And all these companies who said it is great, you now have regulations, and by the way, I understand in the void they had to do something, and the SEC has come up with novel programs. We're participating in them, but when the Congress changes, regulation is not legislation. I was HUD secretary. I went through this. And regulations can easily be challenged, investigated, and undone. And that's going to add more chaos to the system rather than clarity.
Governor, before we let you go, you're chairman of the OKX joint venture. Is this it for you for politics? Are you going to run for anything again?
