Fmr. SEC Chair Jay Clayton: The dynamics of bitcoin trading are better understood and disclosed

Former SEC Chairman Jay Clayton joins ‘Squawk on the Street’ to discuss the latest on the bitcoin ETF approval decision, fallout from the SEC hack, and more.

>>> WELCOME BACK TO “SQUAWK ON THE STREET” AS WE AWAIT AN OFFICIAL DECISION FROM THE S.E.C. ON THE APPROVAL OF A BITCOIN ETF. OUR NEXT GUEST SAYS IT’S INEVITABLE AND THE TIME IS HERE. JAY, IT’S GREAT TO SEE YOU. THANKS FOR COMING IN. >> NICE TO SEE YOU.

>> YESTERDAY’S NEWS IS WHAT EVERYBODY’S CHATTING ABOUT. I DON’T EVEN KNOW IF IT’S FAIR TO ASK YOU WHAT YOU THINK HAPPENED. >> LOOK, THERE WAS A COMPROMISE, OBVIOUSLY, AND THE QUESTION WHEN SOMETHING LIKE THIS HAPPENS, AND THIS ISN’T THE ONLY PLACE OR THE ONLY TIME IT’S HAPPENED, BUT

IMMEDIATE, WHAT HAPPENED? YOU DEAL WITH IT. YOU GET OPERATIONALLY BACK WHERE YOU WERE. IT’S CLEAR THE S.E.C. IS OPERATIONALLY BACK ON BOARD, RIGHT? AND LET ME JUST ADDRESS YOUR QUESTION. I DON’T THINK THAT THIS SHOULD IN ANY WAY AFFECT WHATEVER THEIR TIME FRAME WAS FOR DEALING WITH

THESE ETF APPLICATIONS. >> WELL, THERE IS SOME CONCERN THAT IT WOULD PUSH BACK ANY APPROVAL IF, IN FACT, APPROVAL WAS IN THE OFFING. >> WHATEVER THE PATH IS, I DON’T THINK IT SHOULD ACTUALLY BECAUSE THEY’RE CLEARLY OPERATIONALLY BACK WHERE THEY WERE. THEY’VE ADDRESSED THIS FOR THE

MOMENT, AND ANY GOOD BUSINESS, THAT’S WHAT YOU DO. YOU ADDRESS IT, AND YOU GET OPERATIONS BACK IN ORDER. THAT’S THE FIRST THING YOU DO. >> WHICH HASN’T BEEN DONE YET, NECESSARILY. RIGHT? >> I DON’T THINK THERE’S A — I DON’T THINK THERE’S A CONTINUING COMPROMISE OF THE S.E.C.’S

TWITTER — NOW, WHAT YOU’RE GOING TOIS, REMEDIATION. AND WHAT DO YOU DO AFTER YOU’VE GOT A HANDLE ON THIS? YOU GET THE FACTS, HOW DID IT HAPPEN? YOU COMMUNICATE WITH YOUR CONSTITUENCIES. AND THEN YOU HARDEN YOUR PROCESSES SO THAT IT DOESN’T HAPPEN AGAIN.

AND THAT’S NOW THE PHASE THAT WE’RE IN FROM AN S.E.C. OPERATIONAL — >> DON’T YOU THINK THERE ARE SOME IRONIES HERE WITH THIS HAPPENING, THE FIGHT WITH ELON MUSK, FOR INSTANCE, ABOUT TWEETING MATERIAL INFORMATION, THE FACT THAT GARY GENSLER HAS

BEEN HARD ON CYBERSECURITY RISK, THAT HE’S TWEETED ABOUT MULTIFACTOR AUTHENTICATION? I MEAN, HOW MUCH OF A BLACK EYE IS THIS FOR THE S.E.C.? >> WELL, LET’S PUT IT THIS WAY. I THINK IT DEMONSTRATES THAT EVERYBODY NEEDS BETTER CYBER HYGIENE AND CONSTANT CYBER HYGIENE.

YES, IS THERE — LOOK, LET’S NOT — IS THERE IRONY HERE? ARE CONTROL SYSTEMS PART OF THE S.E.C.’S PURVIEW? SURE. IS MARKET MANIPULATION SOMETHING THAT THE S.E.C. ENFORCES AND DEALS WITH, AND ARE BOTH OF THOSE AT ISSUE HERE? YES. WHICH IS WHY I GO BACK TO WHAT

DO YOU DO? YOU COMMUNICATE WITH YOUR SWI CONSTITUENCIES AND TELL THEM WHAT YOU’RE DOING TO ADDRESS THOSE THINGS. WE’RE TALKING ABOUT WHAT’S GOING ON AT BOEING. I EXPECT THE CEO OF BOEING WILL DO A VERY GOOD JOB COMMUNICATING WITH SHAREHOLDERS AND STAKEHOLDERS. THAT’S THE CEO’S JOB, WHAT

THEY’RE DOING TO ADDRESS THE SITUATION. I EXPECT THE S.E.C. IS GOING TO DO THAT IN THE COMING HOURS AND DAYS. >> WHY DO YOU THINK IT’S TIME FOR THIS ETF? >> I’VE SAID IT IS INEVITABLE, AND THE REASON IT’S INEVITABLE IS ALL OF THE LEGAL QUESTIONS

AND WHAT I WOULD SAY IS THE OVERSIGHT QUESTIONS THAT YOU HAVE TO DEAL WITH IN A NEW PRODUCT AND AN APPLICATION LIKE THIS HAVE BEEN ADDRESSED. PEOPLE UNDERSTAND THE — WHAT I WOULD SAY IS THE BITCOIN PRODUCT OR IF WE CALL IT A PRODUCT.

HOW MANY BITCOINS THERE ARE GOING TO BE, HOW IT’S MINED, WHAT IT’S COST, HOW IT’S TRADING. THOSE WERE ISSUES THAT WEREN’T FULLY UNDERSTOOD. THE TRADING IN BITCOIN, GLOBALLY, REALLY UNREGULATED, HAS BECOME WHAT I WOULD SAY IS MUCH MORE EFFICACIOUS, MUCH MORE TRUSTED.

YOU HAVE FINANCIAL INSTITUTIONS THAT ARE IN THE BUSINESS OF SURVEILLANCE COMING IN AND SAYING, LOOK, WE THINK WE CAN SURVEIL THIS MARKET, AND WE THINK THIS MARKET IS DEEP ENOUGH AND ROBUST ENOUGH THAT MANIPULATION IS AT A MINIMUM. >> WHEN THE POST HAPPENED

YESTERDAY, OUR BOB PISANI WAS, LIKE, WHERE’S THE PRESS RELEASE? I DON’T SEE A PRESS RELEASE YET. I WONDER, DO YOU THINK NEWS FLOW FROM AGENCIES ON SOCIAL MEDIA WILL CHANGE? >> WELL, I THINK — LET’S BE CLEAR. THERE WERE SOME — I DIDN’T SEE THE POST.

I’VE NOW GONE BACK AND LOOKED AT IT. THERE WAS INDITIA THAT THERE WAS SOMETHING THERE. IT’S NOT USUALLY THE FIRST MEANS OF COMMUNICATION FOR AN AGENCY. USUALLY, OFFICIAL AGENCY DOCUMENTS ARE ATTACHED TO DISTRIBUTIONS LIKE THIS. YOU KNOW, AM I SURPRISED THAT SOME PEOPLE SAID — AND RAN WITH

IT IN LIGHT OF THE CONTEXT IN THE TIMING? OF COURSE NOT. THAT’S WHAT HAPPENS. BUT WERE THERE — YOU MAY HAVE WANTED TO TAKE A BREATH AND SAY, REALLY? IS THIS REALLY THE — THIS IS REALLY THE WAY THE S.E.C. IS GOING TO ROLL OUT SOMETHING LIKE THIS?

>> I DON’T KNOW. GENSLER’S PRETTY ACTIVE ON TWITTER. YOU SAY THAT BITCOIN ESSENTIALLY SHOULD BE TRUSTED MORE, RIGHT? AND I JUST — I KEEP THINKING OF JAMIE DIMON NOT TOO LONG AGO SAYING THAT IF HE WERE THE GOVERNMENT, HE WOULD BAN IT. >> LET ME SAY THIS.

I DIDN’T SAY BITCOIN SHOULD BE TRUSTED MORE, AND I’M NOT SAYING THAT BITCOIN IS GOING TO BE WORTH A LOT OR A LITTLE. WHAT I’M SAYING IS THE DYNAMICS OF BITCOIN TRADING AND PEOPLE OWNING IT ARE BETTER UNDERSTOOD AND DISCLOSED, AND TO GO — >> ARE THEY?

LAST YEAR WAS A DISASTROUS YEAR AS FAR AS SBF AND CZ AND CRIMINAL CHARGES AND THE FINES. IT DOESN’T FEEL MORE TRUSTWORTHY. >> WELL, I DON’T THINK THE OFF-SHORE CRYPTO ECOSYSTEM IS ANY MORE TRUSTWORTHY, BUT IF YOU LOOK AT THOSE FRAUDS, THEY

WEREN’T INVOLVED IN BITCOIN PER SE. THE BITCOIN-DISTRIBUTED LEDGER, AS FAR AS I CAN TELL, IS OPERATING AS IT HAD BEEN INTENDED TO FROM THE BEGINNING. SO, HAVE PEOPLE TAKEN ADVANTAGE OF THAT AND THE EUPHORIA, PARTICULARLY OFFSHORE AND UNREGULATED PLACES TO DO REALLY TERRIBLE STUFF IN?

YES, THEY HAVE. ONE OF THE THINGS THAT’S HAPPENING HERE IS YOU’RE BRINGING BITCOIN BUT ALSO DIGITAL ASSETS INTO THE REGULATED ECOSYSTEM. >> FINALLY, YOU DON’T THINK — IF THE S.E.C. IS ABOUT INVESTOR PROTECTION, AND THIS ONE HAPPENED TO HIT AT HOME, BUT YOU

DON’T THINK THE COMMUNICATION TO THE INVESTOR COMMUNITY ABOUT RELYING ON SOCIAL MEDIA INFORMATION WILL CHANGE? >> CARL, IT SHOULD. OKAY? WE’RE ALL — PEOPLE WANT TO SLOW DOWN COMMUNICATIONS. THEY WANT TO REGULATE PLATFORMS. HISTORY TELLS US, SPEED WINS. OKAY? SO, YOU GOT TO ACCEPT SPEED AND

DO WHAT YOU CAN WITH IT TO MAKE SURE THAT IT’S MORE RELIABLE. MAKE SURE THAT IT’S MORE TRUSTWORTHY. WE’RE NOT — LOOK, WE TRADE HERE IN MICROSECONDS, RIGHT? I WAS ACTUALLY — I WA