Bankless - ROLLUP: Wartime Markets | Kraken Gets Fedwire | Trump vs Banks | AI vs Pentagon | NYT Says Crypto Is Dead

Starting point is 00:00:03 Bankless Nation is the first week of March. It's time for the Bankless Weekly Rollup. We've got a war going on. And so what are the wartime markets look like? How did the markets react to the conflict in Iran? We also have to talk about the flight to safety asset. What was it? Was it gold? Was it Bitcoin? Was it something else? And then Trump domestically has taken a side on stable coin yields? Choosing crypto over the banks? Some very loud tweets, both from Trump and Trump. Jr. about the Clarity Act and how the banks need to fall in line. Some just real good drama on the timeline this week. More bad news for the banks, too. Cracken is going bankless. They get a bank license of some sort, access to FedWire.

Starting point is 00:00:46 And I think that's pretty bullish, a historic first. Can you go bankless by becoming a bank? Does that work? They don't have any banks anymore. They are one. Yes. I mean, this is a longstanding bankless prediction, let's say. I mean, we always thought the crypto banks, the exchanges, we called them crypto banks from the very beginning, would become more bank like over time.

Starting point is 00:01:10 And now they're actually becoming banks at this point. It's pretty bullish, though, for crypto, I'd say. Also, Eric Voorhe's AI Crypto Privacy Project, we're going to talk about that. Is this the AI plus crypto fusion we've been waiting for? Also, Avey loses a key contributor just after it lost another one just a couple weeks ago. Zach XBT catches a criminal who stole $46 million from the government. And then, of course, the bottom signal of all bottom signals in New York Times to write a crypto is dead article. So we're going to read that article to you up here on the show.

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Starting point is 00:02:51 Is that what you are? I think something like that. David, let's talk about the big news on the week. Saturday morning, February 28th, the all of the U.S. up realizing that we had gone into conflict with Iran. We had killed the Ayatollah Khamenei, not like a few hours into the conflict. There's a joint conflict with both the U.S. and Israel doing targeted strikes all over the entire country. Ayatollah Khamenei Khamenei Kameda killed in just a few hours, but the conflict has been going on and on and on. It continues today. If we were five, now six

Starting point is 00:03:23 days into it, the Iranian response, they just launched missiles and drone attacks against the United States, Israel, and then also a lot of the allies in the region. So Qatar, the United States Arab Emirates, the Saudi Arabia, Bahrain, Kuwait, kind of just like spraying their drones all over the region. The Revolutionary Guard, the way that they started to impact financial markets, close the Strait of Hormuz, which is the large artery of oil that comes out of Iran, shutting that down, which when that happens, the perceived price of oil is about to go up. So the market has had to digest that. About 20% of globally traded oil moved through the straight oil.

Starting point is 00:04:05 Yeah, that's not just Iranian oil, is it? It's like oil from the entire region, right? Yeah, the entire region, that's right. Yeah. Oil jumped to about $80 a barrel. Some speculators, some analysts speculated that prices could go up to $120 if the straight remains blocked or dangerous. That was up. That's up from like $65.

Starting point is 00:04:28 per barrel, right? Yeah. Yeah. It's quite a jump. So I think that is something that the markets are watching very closely. I think, Ryan,

Starting point is 00:04:35 the markets are pricing in that these rates are pricing in that the straight won't be closed for that long. Okay. Mainly because the entire Iranian fleet is completely decimated. So their means to keep

Starting point is 00:04:45 the straight over-room use close is likely not that substantial. It's still closed at the time of recording? I believe it is still closed at the time of recording. I looked it up this morning and there was nothing to suggest that it was open.

Starting point is 00:04:55 Okay, so this is year-to-date. The price of oil has spiked almost 40% year today. I mean, on the one year, though, it's not kind of at, well, it's close to all-time highest, let's say. Yeah. But on the five-year timeline, in 2022, actually, in June of 2022, oil was up to $115 per barrel.

Starting point is 00:05:17 I'm going over these numbers because I don't often look at the oil prices. I don't know if you do, but most of the time, oil manifests in my life at the price of the pump when you're refilling the car or something like that. So that has definitely been part of the market reaction to this. Oil has increased. What about the safe haven asset? Because if there's wartime, there's usually a class of assets that respond in kind, that investors pour money into them as sort of the safe haven in times of uncertainty.

Starting point is 00:05:48 You'd think one of those assets would be gold, the historic multi-thousand-year safe haven asset. A safe haven asset. Yeah, right. Well, what happened to gold? It was not the case. Spot gold actually fell below 5,100 per ounce, and silver also fell. At first, gold was up after this news, but then it kind of spiked down. Not by a large percentage.

Starting point is 00:06:12 I mean, we're talking like 1 to 2 to 3 percent or so since the conflict began, but gold was not a safe haven asset for this particular news. Here's a quote from a Reuters article. instead of piling into gold, investors seem to sprint for dollar cash, offloading anything that caught a speculative head of steam before last weekend's attack. So that gives a hint to what the safe haven asset actually was. David, it was the dollar. The good old-fashioned greenback.

Starting point is 00:06:45 So the DXY went up, approached 100 or so. So it was up about 2%. And dollars actually proved himself to be the safe haven. asset, at least in the initial phases of this conflict. So you got oil spiking, you got dollars doing fine, gold trading down a little bit. U.S. bonds, they were also down. So bonds were not the safe haven asset. Normally in a crisis, like a geopolitical crisis, people would buy bonds and prices would go up. You know, the bonds would be, the U.S. government bonds would be a safe haven asset. That's the classic flight to safety. But this time, the 10 years,

Starting point is 00:07:26 your treasury yield actually rose to about 4.12%. So yields are rising and bonds selling off. And a lot of analysts are saying the reason for this is because the market's primary fear isn't entirely risk off or recession. It's more inflationary, right? And so inflation as a result of... When oil goes up, when energy costs go up, that increases the price of everything, which is inflation, which means that, you know, you don't want to have your capital as exposed to inflation, which is where bonds are. That's exactly what the market reaction has been. So the oil spike is causing people to think inflation is going to stay for longer. And that gives the Fed less leeway to actually cut, the new Fed chair.

Starting point is 00:08:13 Maybe he's not able to cut as much as he would have if inflation was going down. Okay, now, how about stocks? How did they react to this? Yeah, so there was definitely some volatility in the morning. S&P on Monday. So we announced the conflict Saturday morning. So we had all of Saturday and Sunday to go through. S&P opened up on Monday down pretty hard.

Starting point is 00:08:34 But then it closed essentially flat on Monday. On Tuesday, the stock market fell once again pretty strongly. It felt like 1% as like I think the market started to digest like, oh, this is not a simple operation. This is not a weekend operation or a week-long operation. We're going to be here for a while. So like Tuesday was a pretty bad day in the market. get kind of a blood bath. Wednesday, yesterday, from the time of recording, everything we're covered. So I think we actually are higher now than when we opened up on the week. And so, like, Wednesday

Starting point is 00:09:06 was a very, very green day, one of the greener days I've seen in like over a month, really. So far, on the week, Ryan, SPY, the SPX and QQQ, the S&P 500 and NASDAQ indices, both up a quarter of a percent on the week, which I would consider in the grand scheme of things inside of the range of noise. And so you're like definitely some volatility in the market, but ultimately we're doing okay. Interestingly, Bitcoin up 8%, ether, up 10%. Like, you know, crypto assets are volatile, so 8%, 10%, you know, that can happen in any given week. But the fact that it happened on the week that one of the most major conflicts in the Middle East has happened in decades, kind of notable. Yeah. I saw an analyst talk about the stock, you know, performance.

Starting point is 00:09:54 it says surprisingly benign. Like, stocks just kind of shrugged it off, didn't do a thing. We're not worried about this. It is sort of weird that crypto had such a rebound. And much of this rebound came on Wednesday. I don't know if that's noise in the market or just some sort of mean reversion or if this is, I don't know, this speaks to how the market is actually thinking about crypto assets like Bitcoin and Ether.

Starting point is 00:10:20 But certainly from the stock trader perspective, not worried about this conflict at all. Yeah. I don't know if we're ever going to get this, but the IRGC, the Iranian military, is one of the biggest users of crypto because of all the sanctions that are placed on Iran. And so they absolutely have stockpiles of Bitcoin.

Starting point is 00:10:42 Really? Oh, yeah. You have sources for that? You've seen this? I know that they were using like a known thing. Like tether, and there was some, you know, freezing related to that. I didn't actually, I've not ever read anything or seen any data on how much Bitcoin or ether

Starting point is 00:10:59 or other crypto assets they actually had or are using. I think a lot of the data is just missing or incomplete. But we do know that crypto broadly is used to facilitate oil trades between China and Iran. I don't know if like every single deal or yeah. Yeah. Yeah. Yeah. Yeah.

Starting point is 00:11:16 Again, we don't know how to the scope. Maybe it's small. Maybe it's large. We do know that the people of Iran have a distaste for crypto because the IRGC, the military that like murders those people, uses crypto very heavily to finance their operations. Again, we don't know the full scope of those things, but like that is a thread that I'm hoping kind of gets pulled just for just what like postmortem when hopefully the IRGC is gone and we can like actually do an autopsy of like everything. It's like how, what were they doing? how were they doing it? What were they using Bitcoin or stable coins for? So like we're kind of just seeing whatever, to whatever degree that they were using Bitcoin, we will be seeing the results of

Starting point is 00:11:59 that, the shape of that in the market today, but we don't really know about it until the future. So the story here, the big story, when I see this market reaction is that the hierarchy of what is a safe haven asset has really shifted, the flight to safety, it was the dollar. It wasn't US bonds. Gold went down. So this shows maybe some inflation worry. and stocks pretty much benign. Crypto had a bounce. That could be market noise. That could be for some other reasons.

Starting point is 00:12:27 But it definitely not what I would have anticipated in this type of conflict war type scenario. There was a lot of market activity on a polymarket. So polymarket had its second largest day ever. Daily notional trading volume spiked to almost $500 million. And a lot of this was the war driven, the conflict-driven. flow. Geopolitics. Yeah, geopolitics.

Starting point is 00:12:52 The markets alone contributed about 220 million that day. And indeed, there's a lot of fantastic information markets on polymarket predicting various outcomes of this war. So this is one. Will the Iranian regime fall by March 31st? This has been spiking in different ways throughout the week. It was as high as 30%. It's now trading lower to 12%.

Starting point is 00:13:17 In the grand scheme of things, March 31st is not far away. That's 25 days for an entire regime to fall. So I think you would expect volatility in this market. Well, there's in April 1. April's 23% chance. June, 40% chance. And by the end of this year, 50% chance. There is millions of dollars of volume.

Starting point is 00:13:37 On the March 31st, I think there was something like 20 plus million dollars of volume on this, one on December 31st, $7, 8 million of volume. The second largest day ever of Polly Market volume, as you said, the first being U.S. Election Day. So daily notional volume on one particular day this week, $487 million. U.S. Election Day, $531 million. Wow. Also, it does kind of like throw a flag at the notion that prediction markets for all sports gambling. Polymarket has a very distributed volume categories across all the different categories.

Starting point is 00:14:12 And global geopolitics is. is one of the biggest ones. Yeah, and these are fascinating markets. I got to say whenever there's conflict going. How about this one? So, well, you know about this story. So Reza, how do you pronounce Reza's last name? Reza Palavi?

Starting point is 00:14:29 Okay. Will Reza Palavi lead Iran in 26? And there's an 18% probability of that. He was, is he kind of an ousted? He is the son of the former crown, the former, the former, He's the son of the former Shah. So people call the crown prince. And he's an exile in the U.S. right now?

Starting point is 00:14:50 Exile in the U.S. Yeah. So he's been like, he is the name that the Iranian protesters are chanting in the streets. And he has a team of people to establish a what he calls a democratic transition. So he just wants to be this figurehead to transition Iran from where it is now to a democracy. So when I see this polymarket market market saying an 18% chance that Iran, that he will lead Iran. That's like 18% chance that Iran gets democracy this year, which is higher than has ever been in the last 47 years. One interesting tie off from our story last week.

Starting point is 00:15:24 Remember, we ended the week and we were talking about the DOD versus Anthropic and they were in a scuffle. Well, that escalated on the Friday that we finished recording. And what's interesting about this is Claude was actually used in the Iranian strikes. So for things like Intel purposes, U.S. Central Command in the Middle East used Kod for intel purposes. Klaude was used for intelligence assessments, target identification, simulating battle scenarios. The U.S. government, though, is phasing Klaude out because on Friday, the, I guess the scuffle that the DOD had with Anthropic escalated to the point that Trump and Pete Hegzeth, the Secretary of War, said that they were banning Claude from all government use. And they were also going to put them, designate them as potentially a supply chain risk,

Starting point is 00:16:20 which that's somewhat vague. But it means that other U.S. government contractors can also not use Anthropic and Claude. Yeah. Yeah. This was, and this was just a threat, by the way. This was not actually gone through in an actual court order or whatever that would need to become to become reality. So so far that is just a threat.

Starting point is 00:16:40 But Dario, the founder, CEO of Anthropic, they requested a unadulterated version of Claude, the U.S. government, the Department of Defense did, where there was basically no constraints on Claude. And Dario said, no, our two hard lines are no mass surveillance of United States citizens and no autonomous weapons. And then Pete has a hegsith, the Department of War guy, was like, you don't get to tell us what to do. and Dario said,

Starting point is 00:17:09 well, I'm not giving you what you want. And so that's what escalated everything. And they canceled the contract. And they also said that potentially they would be a supply chain risk. The U.S. government labeled Anthropic as hostile software. This is Trump. Anthropic better get its act together.

Starting point is 00:17:26 I will use the full power of the presidency to make them comply. That is the largest, like, targeting, threatening of a United States company, that doesn't happen. We don't just like randomly or not randomly, but we don't just like say this company is a risk to American national security. That has never happened. Unprecedented.

Starting point is 00:17:49 A large number of things going on here, of course, with this story. It's like one is AI clearly is military technology, isn't it? I mean, it was used. I want to know what it's like to use Claude for military purposes. Are they typing in like how do I? strike the IRGC base. Oh my God, I have no idea. Make no mistakes.

Starting point is 00:18:11 I imagine it's more sophisticated than that. There's also an open AI threadline here too. So Sam Altman came in and said, okay, well, if Anthropics out. Sam Alman sees the opportunity. It's my opportunity. He's like, Claude is out. Chat TBT is in. So OpenAI submitted a bid to replace Anthropic in their deal with the Pentagon.

Starting point is 00:18:34 So basically if Anthropics out, then maybe it's Open AI's opportunity. There was a many users actually migrated off of chat GPT in favor of Claude just in, you know, given this news, in protest. So Claude hit the number one spot on the Apple App Store and chat GPT uninstall surged by about 300%. This is costing chat GPT in the PR department, isn't it? Yeah. So ChatTBTGPT won the contract, the like $200 million plus contract. Anthropic lost it, but Anthropic is gaining all of the retail users who are in support of Anthropic giving the middle finger to the Department of War saying, no, you can't use

Starting point is 00:19:20 our software for weapons. There's actually a crypto chart for this, where Anthropic is trading on a platform called Ventuals. So this is bringing real world assets to hyper liquid perps, I believe. And Anthropic is trading there. Not just real world assets, but like Anthropic is a private company. Yeah, somehow they've made you able to trade on that private company. Yeah.

Starting point is 00:19:43 It's got to be a synthetic market. So like unsure what is actually being traded here. Yeah. But people are are allegedly trading on private shares of Anthropic on a hyperliquid derivative market. So this is, Anthropic is implied valuation right now about $614 billion. And you can see here on the 28th that's spiking down to 470 billion or so before fully recovering, fully recovering to almost all-time highs. So Anthropic, from a price perspective, at least if this price discovery is true, somewhat unbothered by all of this back and forth with the DOD. In fact, maybe is benefiting from it.

Starting point is 00:20:22 Yeah. So I switch from chat GPT to Claude on the backs of this just because, like, I mean, we did our AI safety episodes. I understand the AI plus military weapons. That's a thing that scares me. Is it inevitable, probably? But, like, Claude's just better, dude. It's just, like, a better product. I'm finding it so as well.

Starting point is 00:20:42 I mean, the new Opus model, seeing how it's being used with OpenCla, using it in Cloud Co-Work, which is a lot of my use case for it nowadays. Like, it's definitely surpassed everything. Like, for me personally. Yeah. I was a chat GPT power user,

Starting point is 00:20:59 but Claude is just a better product. It's just a better product. Yeah, I didn't do anything out of protest, but I guess, yeah, it was more that it's just drawing me because it's a stronger product at this point. All right, coming up next, the power shift going on in D.C. Crypto banks are gaining power versus the trad banks. Oh, man, it was a bad week to be a bank, Ryan. Let me tell you that.

Starting point is 00:21:24 Cracking gets the historic first a skinny master account to Fedwire. talk about what a skinny master account is. I know you're dying to know. And then Trump and Trump Jr. Tell banks they need to bend and need to coin pace and give people their stable coin yields. Like I said, bad day to be banking. We're going to talk about all that and more.

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Starting point is 00:23:52 World is, as they say, better than sex. Make more money at world.com. Or read the docs at docks. World. Inc. Cracken becomes the first digital assets bank inside the United States. So there's Cracken Financial, which is not the same entity as what Cracken exchange is, but it doesn't really matter. Subsidiary. It's a Cracken-Wyoming Chartered Bank becomes the first digital asset bank in the United States to plug in directly to the Fed, to the Fed's payment infrastructure.

Starting point is 00:24:20 This operates Cracken on the same rails as traditional banks. And there's a clip from Cynthia, Cynthia Lema, Senator, Senator, Cynthia Lemmuss about this. So let's go hear from this clip. Then we'll talk about why this is a big deal. This is going to be a huge asset. And today's announcement by Cracken, that they now have access to a Skinny Master account, is going to add another opportunity for the new integration of the Fiat dollar with digital assets. This is a huge step forward, very happy to see the Fed finance. realize that we can integrate these financial products in a way that benefits Americans. Senator Lemmiss, of course, is a Wyoming senator. That's part of the reason she's so excited

Starting point is 00:25:08 about this. And she's also been a longtime crypto advocate. But why is this such a big deal? So you remember Operation Choke Point 2.0, Ryan, where we were getting cut off from the banking industry. And so if you wanted to get money into a crypto exchange or anything, well, you couldn't because they lost all of their banking access. Yeah, that was the choke point, right? You can't, yeah, like they were choking us out. They were disconnecting us from the banking rails. You can't, and if Cracken and other crypto exchanges have direct access to the Fed,

Starting point is 00:25:42 there's nothing to choke. They are the bank. And so we have completely, there's a famous Elon Musk quote where like the best part in a machine is no part. we took out the part of needing to have a bank to deposit money into so people can finance their accounts on Coinbase or Cracken or whatever. So, you know, like, I don't know when's the last time you sent money to a crypto exchange, but like if you send money to Coinbase, you send money to like one river financial or something

Starting point is 00:26:12 like that. It's a correspondent bank that services Coinbase because Coinbase doesn't have this Fedwire account. Exactly. If you want to send now, today, if you want to send money. to Crackin, you send money to Cracken. You send money to Cracken Financial. And so like we just cut out the banks because now Cracken is a bank. Now, how did we get here? What was the unlock that allowed for this? There's this thing called a skinny master account at the Fed. This was created in December of last year, so four months ago. So this is a brand new type of Fed

Starting point is 00:26:47 account. And Cracken Financial is the first and only entity who has a skinny master account. What does the skinny master account? What does it get you? What does it not get you? It does get you direct access to FedWire, the real-time settlement system, and the ability to clear and settle payments without any other intermediary banks. What it does not get you, this is the skinny part, is you don't get interest on reserves. You don't get access to the Fed's discount window, so no emergency lending.

Starting point is 00:27:14 You don't get daylight overdraft privileges. So if your balance hits zero, payments just get rejected. So you don't have, I guess, like a buffer or whatever. and then there's also some potential balance caps. So, like, the way I'll describe this is they get the payments. They don't get any of the banking. So there's, like, extra banking service products that Cracken will not be getting. I don't think they really care.

Starting point is 00:27:36 They mostly just focus on the payments side of things. So they get access to FedWire and they can make payments using FedWire. The payments is a big deal. Skinny Master Account is a big deal because the way the banking system works and access to FedWire works is there's about 45. hundred different banks and credit unions that act as almost like proof of stake validators on a permissioned Fedwire network, right? These are the only validators that can actually

Starting point is 00:28:04 submit transactions for Fedwire. And now Cracken is one of those validators. They're like, hey, we get to write the deposits and the credits in the books and you guys have to write those down too. Yeah, it's very cool. And as you said, this is just payments only. So some people might think of the idea of like, oh, What about the idea of a narrow bank where you not only get Fedwire access privileges, but you also get some of those other bank privileges, the ability to get interest, the ability to participate in the Fed's discount window, that sort of thing? And if you had that next level of access, something that Cracken's not being given here,

Starting point is 00:28:39 but if you had that, then you could create what some economists have called a narrow bank, which is essentially you wouldn't do any lending and borrowing, but you would give consumers and users access to the Fed fund rate and they could just keep their deposits in your bank. And it would almost be like a stable coin with yield type of apparatus where you're just passing on the Fed funds rate. The Fed has previously been very against this. So there have been narrow banks that have tried at this before.

Starting point is 00:29:11 One was called TNB USA and the Fed denied them. and TNB actually sued the New York Fed over the denial. They lost in court. So the Fed has been very resistant to the whole narrow bank idea because they think it will destabilize the system, undermine monetary policy, right? Because you're taking the banks out of the loop and create some systemic risk.

Starting point is 00:29:35 I somewhat wonder, though, if this step of getting cracking on a skinny master account is a step towards a narrow bank license maybe at some point in the future, Maybe the Fed will actually open up to that. And if so, that will fundamentally change monetary policy and banking in the U.S. You think the banks are happy about this, David? This brings us to my favorite part of this part of the story.

Starting point is 00:30:00 So within hours of the announcement that happened on Wednesday, the Bank Policy Institute said that it was deeply concerned that the approval came before the Federal Reserve finalized this policy framework, arguing the decision ignores public comment and was issued with no transparency into the process and they are worried that this innovation might destabilize the banking sector. When the banks tell you

Starting point is 00:30:24 that they're worried something is destabilizing the banking sector, they're basically saying, hey, our business model is under threat. Like, we're going to make less money from this. The other favorite part of this story here, I think is this Jesse Powell tweet

Starting point is 00:30:38 where he tweeted out the Cynthia Lemmas clip that we just shared. The founder of Cracken. Founder of Cracken, yeah. He goes, Sorry about your monopoly. Thank you, Senator Lemus, great state of Wyoming, and the Cracken team. We're the bankers now.

Starting point is 00:30:52 Saddle up. Yes. Oh, my God. This is so good. Yeah. This is Mike Epilito commenting on this. Cracken gaining access to the Fed's payment system. Trump openly berating the banks to get clarity paths.

Starting point is 00:31:07 We're about to talk about this. This would have blown the expectations of even the most bullish crypto evangelists in 2020. 17 out of the water. Crazy how many people in crypto are giving up on Eva victory. This is another case of all of the crypto prophecies, wildest dreams are starting to come true. You know, the crypto exchanges, which were kind of ostracized on some periphery of the financial system are now being admitted as validators to the Fed, Fedwire.

Starting point is 00:31:38 I mean, this is a big freaking deal. And this goes to kind of our next story on the week, which is Trump slapping back the banks and coming out in support of crypto and stable coin yield. So he tweeted this just days ago. The Genius Act is being threatened and undermined by the banks. And that is unacceptable. We're not going to allow it. The U.S. needs to get market structure done. ASAP. Americans should earn more money on their money. The banks are hitting record profits. We're not going to allow them to undermine our powerful crypto agenda. That will end up going to China and other countries if we don't get the Clarity Act taken care of.

Starting point is 00:32:18 This industry cannot be taken away from the people of America when it's so close to becoming successful. And they need to get in line and let stable coin yield go to consumers. This is something that Brian Armstrong and Coinbase has been arguing for in the Clarity Act from the very beginning. But this is Trump using the truth social bully pulpit to absolutely slam the banks over the head on this issue. He literally says they need to make a good deal with the crypto industry.

Starting point is 00:32:50 Trump wasn't the only one, Trump Jr., Eric, he tweets out, Big Banks are lobbying overtime. Wait, actually, I guess they're both juniors. Never mind. There's Donald Trump, Jr. Little Trump, you know. Eric, whatever, Eric Trump said, tweeted out, Big banks are lobbying overtime to block Americans from getting higher yields on their savings

Starting point is 00:33:12 while trying to block any rewards or perks from being given to customers. So, like, Eric Trump also comes in with the second of the two punches. He goes in, like, you know, today the banks are desperately targeting crypto-sable coins where platforms plan to offer 4% yield to rewards. The ABA and other lobbyists are spending millions trying to ban or restrict those yields via bills like the Clarity Act crying fairness and using words like stability, which that's what I said. Like, if it's a threat to the stabilization of the finance sector, that just means their profits. Yes. Yes.

Starting point is 00:33:42 it's really about protecting their low rate monopoly and preventing deposit flight. So the timing on this whole thing was interesting, right? So like we had these two tweets back-to-back, Trump on truth social, Eric Trump on Twitter. The hours before, or maybe the day before, President Trump had a meeting with Brian Armstrong. And so the political reported that Trump and Armstrong met behind closed doors at the White House on Tuesday. yes, just hours before the Trump's truth social post blasting the banks. And so that's interesting. The timing is very, very interesting.

Starting point is 00:34:17 Did Brian being just peril on this? Trump here? Definitely. I mean, this is what it seems like. This is what the timeline is revealing. And of course, this was Brian Armstrong's issue and Coinbase's issue. This is why they withdrew support from the Clarity Act. And a lot of other people in the crypto industry said, guys, we have to compromise.

Starting point is 00:34:36 Right. Coinbase, better to get clarity. Other good things in the Clarity Act, we can't die on this one hill of stablecoin yields. And Brian was like, I'm going to do it. Yeah, I'm going to do it. It's kind of a gambit. But now he's got Trump weighing in on his side on this. So it's paying off for him, I suppose.

Starting point is 00:34:55 This goes back to remember a few weeks ago we were talking about Davos and Jamie Diamond, apparently, getting in Brian Armstrong's face, wagging his finger over this issue. What did he call him? You're full of shit. He said you're full of shit. You're full of shit. I guess, I mean, good on Brian for getting in there and playing the D.C. lobbyist game and fighting on this issue, it looks like it's paying off. Yeah.

Starting point is 00:35:20 It's not over yet. This is a tweet from Ron Hammond. He's a pretty trusted political commentator. He tweeted out, the closer we get to election, the midterms, the odds for the Clarity Act passage gets lower. The banks know this. Stalled for long enough till election politics takes over. It's a classic lobbying tactic, but Trump is the kind of X factor that could force the political calculus to change. And so this is just like some good old clarity commentary about the timing and the strategy of this whole thing.

Starting point is 00:35:48 If you go to the polymarket, we are at a 71% chance that the clarity gets signed into law in 2026. It's up up 6% on the week. But it's just been like kind of creeping upwards for a while. Alex Thorne, who also definitely absolutely pays attention to this matter, he tweeted out, Is there alpha and the delta between these two images? The one image is the 71% chance on Pollymarket. The second image is Cryptobail hits new impasse, raising doubts over its future,

Starting point is 00:36:16 which is an article on Reuters. So he's pointing out that Pollymarket is pricing in a lot of optimism on the clarity passage than what reporting is suggesting. So there is a dislocation between these two things, unsure as to how it resolves. The game's not over yet. We haven't won yet.

Starting point is 00:36:33 Yeah, no, we haven't won yet. And it's, I don't know, it does, it does feel like a long shot. Although I will say, I mean, Polymark is generally right on these things. Maybe 7% odds is kind of, is kind of accurate. Yeah, let's see, $300,000 of volume, so not a crazy amount of volume here. So that could be a little bit better to just have better signal. I don't know what it's like to be behind these closed doors but also like this is everything for the banks

Starting point is 00:37:09 like yield on deposits and who gets that is the whole thing for the banks so like it's optional this is the same calculus we were talking about two weeks ago it's optional for the crypto industry to die on this hill it doesn't seem optional for the banking industry to die on this hill yeah and I mean they are they going to let some little upstart industry, upstart company

Starting point is 00:37:33 a 60 or $100 billion coin base company disrupt their Are they going to let them kind of steal their golden goose? I don't know. I'm sure we haven't heard the last from them, but getting Trump

Starting point is 00:37:44 weighing in on this. It is really nice to have Trump on our side. It's a big deal. All right, we get a lot more to cover coming up next. Orhe's project. It's a crypto project for private AI. Was it recommended by OpenClawe? It kind of was. We'll talk about that.

Starting point is 00:37:59 Also, X is rolling out X money. Well, this includes stable coins in crypto. And David, the story, remember the kid who stole $46 million from the government? Well, he got apprehended by special forces. He didn't get away with it. How? Special forces? Yes, yes. French Special Forces. How did we think this would end? How did he think this would end? We'll talk about all that and more. But before we do, we want to think the sponsors that made this episode possible. What if you could trade gold, Forex, and global markets with the same tools and speed that you use for crypto. That's exactly what BitGet TradFi unlocks. After strong beta demand, including over $100 million in single-day gold trading volume,

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Starting point is 00:39:11 traditional markets. Try trading gold on BitGet now at bitget.com. Click the link in the show notes. For more information, this is not financial advice. Some exciting news. We are launching a new podcast to help people figure out the crypto cycle, how to navigate it. The best crypto cycle investor I know, his name is Michael Nato. He runs the DeFi report.

Starting point is 00:39:28 This is the guy that sent me a sell alert before the 10-10 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years. And this year, we started recording weekly podcast episodes. Each one we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether, and where we are in the cycle, there's new episodes that are released every Wednesday. They're 30 minutes.

Starting point is 00:39:52 They're short. They're punchy. I think this crypto cycle is harder to navigate than most. So let's do it together. Go subscribe to this podcast. search the Defi Report, wherever you get your podcast, YouTube, Apple, Spotify, or find a link of the show notes. There's a new episode waiting for you now. So, David, have you been following Eric Forhey's project? It's called Venice. It's a LLM. It's an AI project. Have you been looking

Starting point is 00:40:13 at this at all? I wouldn't say I have both my eyes on it. I think I have one eye on it every once in a while, which is to say not much, but like I understand that sometimes, Ryan, just hypothetically, I'm typing a prompt into Clodder ChatGPT and I'm like, you know what? Maybe I'll take this one to Venice. I'll do this one in Venice. I don't want to do this one in chat. This is a little private, right?

Starting point is 00:40:36 I mean, yeah. It's well known that private AI really doesn't exist outside of some small pockets, maybe proton meal as kind of an instant. That's what Venice is trying to deliver. Actually, I've started hearing about it more in mainstream podcasts. So I think Venice has been running some ads,

Starting point is 00:40:56 in mainstream podcasts, and Venice is actually pulling in some pretty impressive numbers. So this is a tweet from Eric Voorhees. Each color is a different model. So what Venice does is it runs private AI instances, generally open source models in kind of a cloud type of environment. And it can run anything. So it can run, you know, Kimmy. Here are actually some of the top models, the top five. There's a lot of colors here. Yeah, a lot of colors. It's a lot of different. models. DLM 4.6, Venice Uncensured 1.1, Kimi K2, 2.5, GROC 4.1. Its specialty is really these open source modules, and it's running them in its cloud, and Venice's claim is that everything is run in a private way. So there isn't a third party that can actually access your transcript

Starting point is 00:41:50 and your chat logs and what you're doing inside of the interface. Just for the podcast listeners out there, last October, Venice was clocking in about 8 billion tokens per day. They were running for their APIs or people showing up to their website. Today, March, 36 billion per day. So quite the growth. Now, Eric Forgeys claims that Venice neither observes nor stores prompts or responses. So there's no eavesdropping. There's no records of convo's conversations of any kind. Of course, those are with the open source models that are run. by Venice specifically.

Starting point is 00:42:28 You can also use Venice to sort of almost provide a VPN layer on top of your query, but then it would route to a cloud model like an OpenAI, a Google Anthropic. Of course, those companies can see the chatlock, but they don't see the metadata, so they don't know who it comes from. But you kind of have to right now trust that Venice is actually keeping these things private and is not storing any of the prompts or responses. If there is one person I'm going to trust in this industry to uphold the values that he talks about and espouses publicly and has for decades, it's airport he's.

Starting point is 00:43:07 I agree about that. I don't have a doubt in my mind that that man actually believes this thing that he says. Sure. I agree with that. But also, it's just like that's not good enough for people in crypto. It shouldn't be the status quo. We should not trust an individual way. That wouldn't be good enough for Eric?

Starting point is 00:43:23 It wouldn't be good enough. And so Eric responds to some of that criticism, basically a little bit of the trust me, bro, privacy. And he said lots of discussion around Venice's privacy model in the past few days. To date, Venice is private and that prompts and responses are not stored on Venice servers. This is private today, but it's not provable. Venice users are not mainly crypto people. And for them, as we just said, the above has been sufficient empirically given the growth. but proving the privacy is much better

Starting point is 00:43:52 and we need to do so. This has been on our roadmap since inception. So you get the sense that Venice is going to deliver some proof of privacy as well, so it's not just a trust me, bro, type of model. But anyway, this is the only place you can really get private LLMs unless you're running it locally, which is why I think it's such an attractive service.

Starting point is 00:44:13 Yeah. I'm sure Eric understands a trade-off between like building a product that is 100, percent committed to like principles and like transparency and all that kind of stuff and like the UXUI tradeoffs that that presents where I'm sure he's thinking like if I need I need to get this product into the hands as many people as possible because you know a private product like this is harder than Linne Claude or a chat GBT you know very much in the same vein as like moxie and signal it's interesting to be how similar this product is to shape shift his first crypto project, which is just like, let me basically run a private, no sign up, no KYC

Starting point is 00:44:57 exchange. I'll do the work for you in the background by routing your trade, your crypto trades to the right order, and then I'll give you the tokens you want back and you don't have to sign up for everything. Same thing, but this is just LLM models. Yeah, similar ethos. I think some of the growth has been the usage of Venice with OpenClaw. So if you want a completely private open claw with an open LLM model,

Starting point is 00:45:24 like where else do you spin this up? And Venice has provided that so much so that some of OpenClaas onboarding docs actually recommended Venice as a private LLM. That was since rescinded. So OpenClaught said we want to maintain a neutral platform and we don't want to recommend specific solution. It was rescinded for the reasons you said where like you don't know that it's actually private.

Starting point is 00:45:47 Like, they don't have insurance. That's part of it too. Errs. in the thread saying, like, understood, we're working on that. Yeah. Have you looked at the Venice token and what this thing does? Yeah. Yes, very briefly.

Starting point is 00:45:58 I kind of understand it that it represents just like a share of the compute of the whole system. That's right. It's a true, like, utility token, I suppose, from that perspective. So instead of paying per API, I call, you can actually stake these Venice tokens, it's VVVT tokens, and you get a pro rata share. of Venice's inference capacity indefinitely. Which reminds me of the EOS token model, bro.

Starting point is 00:46:25 That's EOS. You own a percentage of the compute of the network, yeah. And the reason this is somewhat interesting is as compute gets cheaper over time, the inference capacity, like the intelligence behind each token or each prerata portion of all of Venice's compute, that's got to grow. Yeah.

Starting point is 00:46:49 Does Venice own a data center somewhere? Or are they renting it from someone? How does that work? Yeah, I still have a lot of questions about this. I have a lot of questions. Yes, you don't have to stake VVV in order to participate in this. You could just buy Venice instances, I believe. They have a separate token called Diem, which represents AI inference credits.

Starting point is 00:47:12 So, I don't know. Oh, we took those credits. Oh, that's cool. Honestly, like, usually when I see a token, I'm just like, why do we need a token? And for this, I'm like, oh, this makes total sense. One token is a credit. One owns the actual compute and hardware. I think he could.

Starting point is 00:47:26 I think that makes sense, dude. Yeah. And good for four. He's for stepping into this, like applying crypto values to LLM, certainly much needed. David, we got more drama from the Avey space. What is this on the week? Okay, so Mark Zeller's ACI, the Avey Chan initiative, which is kind of like a governance delicate platform. Think of it like a voting block inside of the AVE-Dao. They are leaving. They are

Starting point is 00:47:51 leaving AVE. They have decided to not renew its engagement with the AVE-Dao and will wind down operations over the next four months exiting by July. This is kind of the second high-profile departure from Avey, the system Avey the Dow downstream of just like the governance tensions inside of Avey. This happened after Avey Labs introduced the Ave will win proposal. And that caused, you know, some people liked it. Some people didn't like it. Mark did not like it, I'm guessing. Mark highlighted that three labs linked wallets

Starting point is 00:48:26 when they voted on the temperature check for the AVE will win proposal, realized that the AVE labs can simply vote, they have enough voting power to dictate things. And then especially if the AVELabs, Avey Will Win proposal goes through, they will be rewarded with even further AVE, so it kind of functionally enshrines AVE's voting power, and so AVE

Starting point is 00:48:50 becomes essentially AVE Labs, is the critique that Mark has. And so he decided that he doesn't want to be under the governance authority over Avey Labs, because what if they just cancel ACI's funding stream whenever they want? That was something that Mark put into the governance forums. And so, instead, they are electing to wind down. Mark Zeller has been effectively the pseudo-CEO founder operator in chief of the Dow.

Starting point is 00:49:25 And so a very key person. Like it's like Stony on one side and Mark on the other. And Mark is saying like I don't want to work under these conditions and he's throwing in the towel, which is not great. Dows are so messy. That's just so messy. I wish it wasn't this way. way, but I mean, I guess the question is, is it over now?

Starting point is 00:49:45 Is, are the remaining parties aligned with the proposal and? I would assume so. Yeah, like the defectors need to defect so that all the people who have consensus can coordinate together. Yeah. Yeah. It's like a messy way to lose talent, but like maybe that was inevitable. Yeah.

Starting point is 00:50:04 And I wonder if Mark is leaving the space entirely or if he's just leaving Avey. I think just, I think the latter. I think the latter. Okay. Okay. Yeah. This was big news. New York Stock Exchange parent company, ICE, invested in the crypto exchange,

Starting point is 00:50:21 OKX at a $25 billion valuation. The reason for this they gave was a push towards tokenized stocks. I did not see this one coming, kind of a out of left field investment. But I think it makes sense to have some share in one of these emerging new crypto banks, crypto exchanges. I think what was really what we're starting to see is that there have been just the exchange wars since the genesis of crypto. And now I think if you are still alive and operating in 2026 and you have like, you know, if you're profitable, you are starting to be gobbled up by traditional institutions or you are now made it over the threshold. And so profitable exchanges in 2025, which are far fewer than they've ever been before, are now working their way into the actual.

Starting point is 00:51:09 Exactly, yeah. They're actually working this way into the economy. A threshold is about to be reached, David. We are about to mine our 20 millionth Bitcoin. Okay, so we're about to hit that. That's going to happen, I believe, sometime next week. So that would be 95% or 10th or something? Yeah. Yeah. That would be 95% of the eventual 21 million bitcoins have been mined. So only 1,000. million left to go. And that last one million will take roughly 114 more years for that remaining 5%. It's funny. Out of the 21 million total bitcoins, one million of the bitcoins will pay for the security budget for 114 years. That's all we got left. And the only question is,

Starting point is 00:52:01 how much will those one million be worth in Fiat terms? That's a question that's still unresolved. but big milestone next week as we hit the 20 millionth number. Also, David, X money, the Twitter X platform, their long-awaited financial service, I suppose. There were some leaked screenshots from that. What are we seeing here? This has been a long time in the making. I think Elon said that he wanted to do this with X

Starting point is 00:52:29 since buying it in the first place. But we're seeing screenshots of an account with a balance. William Shatner is the one tweeting this. Don't know how that happens. I don't know. I don't know. But there's a deposit button, a request to button, and a send button. These are all buttons that very much look like crypto buttons. The request is a QR code. There's nothing in here is explicitly talking about crypto, but you could only imagine, especially if there's a request with a QR code. The rumors are, there's a tweet with rumors.

Starting point is 00:52:57 What I'm hearing, it seems like Cross River for holding funds with FDIC insurance, same bank that Coinbase uses. X Payments LLC has money transmitter licenses in 40 states. VISA. for money movements and sardine for AML, who cares about that part. So it's kind of a neobank, though. That's the stack that they're using. It's like a mercury-trad-fi kind of neobank approach. I don't see anything about crypto or stablecoins here.

Starting point is 00:53:23 I don't quite see anything, but it would be hard to imagine that stable coin payments would not be in here. It's got to be at some point. It's got to be in here, right? They're taking the fintech route, at least first, it looks like. speak of Elon Musk is you know SpaceX they're getting ready to IPO did you remember that they have a pretty substantial Bitcoin stack

Starting point is 00:53:44 on the balance sheet yeah I remember reading about this but it's going public they had about at one point in time $780 million worth of Bitcoin so almost a billion in Bitcoin that's worth about half that now just given prices I wonder about it but why like I know that SpaceX does a ton of stable coin commerce because they like sell. Oh yeah.

Starting point is 00:54:09 Because they own Starlink, right? And Starlink sells a lot of Starlink all across the world across different fiat currencies and stable coins. So they just use stable coins to rectify everything and just have that be seamless. Yeah. What does that have to do with Bitcoin? Unsure. Are you asking why they own Bitcoin?

Starting point is 00:54:27 Yeah, I'm asking why they own Bitcoin. Maybe they just, you know, heard Michael Saylor talking about it and they were very excited about that. All the normal reasons. Yeah. I mean, it is interesting. And it's, we'll see how investors react to that portion of the balance sheet. Maybe they'll ask about it on future earnings calls.

Starting point is 00:54:46 David, if you are excited about justice, then you should be excited about this news on the week. Zach XPT got another one. Do you remember that story of this guy? His nickname was Lick, but his name is John Degita. We were talking about him, I don't know, six weeks ago, something like this. This was the son of a government contractor. So this government contractor was contracted by the U.S. Marshals for custodying seized crypto assets, I think primarily Bitcoin.

Starting point is 00:55:19 Suddenly, the son of this government contractor who was supposed to be doing that, it was revealed that he had stolen approximately $46 million. dollars worth of crypto assets from the U.S. Marshals, from the U.S. government. Okay, so Zach XPT revealed this, published a threat about it. This guy has been on the run ever since, and he was just caught. This is a tweet from FBI director Cash Patel. Last night, John Gadita, a U.S. government contractor who allegedly stole more than $46 million from cryptocurrency, was arrested on the island of St. Martan by the first. French premier elite tactical units.

Starting point is 00:56:04 I wonder what that was like. And he goes on, the FBI will continue working 24-7 to pursue these apprehenders no matter where they hide. Zach XPT tweeted this out. He said, in late January, 2026, I exposed how John stole 46 million and seized crypto assets from the U.S. government by abusing access to his father's company. John then taunted me multiple times by a telegram channel. This is the most wild part.

Starting point is 00:56:33 And dust attacked my public wallet address with stolen funds. Thanks for the last laugh, John, he says. Though after Zach XPT revealed all of this, Lick apparently started dust attacking Zach XBT and taunting him via telegram. Like, you'll never catch me. Yeah. Uh-huh. Yeah, and there's like screenshots of the chat between Zach and this guy.

Starting point is 00:57:02 It's like, man, if you stole, first you stole $46 million from U.S. Marshals. And then you're taunting crypto's most sophisticated on-chain sleuth who is just like, I don't know what Zach XPT's capabilities are, but they are incredible, I'm sure. He's developed the craziest skill set out of anyone in this industry. Yeah, this is insane behavior. This is absolute mad lad behavior. Other than the fact that this guy is going to jail, sometimes I kind of wish I was this dumb

Starting point is 00:57:33 because it seems like a good time. Well, the other thing, do you recall this original story? I mean, the reason Zach XPT caught him was because he was basically flaunting his wealth on telegram chats and videos and all of this tied back to addresses that you were obviously tied to him. I mean, he's just a dumb criminal, David. He's just a complete idiot.

Starting point is 00:57:59 I mean, is this kid, even 18? How old is this guy? I don't know how old he is. I mean, he doesn't, he looks pretty young. He looks pretty young. He looks pretty young. So got another one. Justice has served.

Starting point is 00:58:11 One by one, we're making crypto better. All right, I've got another survey for you, Ryan. Okay, so the South Korean police also came up on some crypto recently. They seized some crypto. the National Tax Service, excuse me, the National Tax Service of South Korea seized about $5.6 million in crypto from about 125 high value tax evaders. So they got some crypto assets from some tax evaders and put a large amount of that crypto in ledger hard wallets as evidence in custody. Or maybe they like seize the ledger with the wallets. as you know how like the police will like sometimes take pictures of their

Starting point is 00:58:52 perpetrators or like they'll take pictures with all the drugs that they sees like oh yeah they always look at what we've got away like we've like seized these assets confiscated hall they take a picture of it yeah exactly so I don't know why they do that why did they do that kind of proof that they're doing a good job you know they're kind of like proving that like hey we're we are worth our tax money so that's what south Korea's tax service did they took a photo of the ledgers and and the seed phrases of associated with the ledgers, and then they posted them online.

Starting point is 00:59:24 Wow. Do you know how quickly it took people to drain those wallets? How quickly? About four minutes. Four minutes. Four minutes after they posted the unadulterated, uncensored seed phrases next to the ledger in question. Four minutes later, those wallets were drained.

Starting point is 00:59:42 The agency followed up with a statement offering a deep apology. They took the photos. down, by the way. Not that it matters anymore. And then they offered a deep apology admitting there was no excuse for failing to mask the wallet password. Wow.

Starting point is 00:59:57 Oh my God, that's hilarious. So it's $5.6 million and somebody knew has that. Somebody somewhere in the world, no clue. That's a criminal, right? That's a criminal. Somebody stole it. It almost felt like the authorities were giving someone that.

Starting point is 01:00:12 But, you know, it's technically that was a criminal act, I suppose. Oh, you know, it was a good conspiracy. is somebody who had access to those private keys first, seized it, then posted it online. And then they were like, and had a friend to go, oops.

Starting point is 01:00:30 Yeah, exactly, exactly. We may never know unless Zach XPT gets involved. And then we certainly will know in a few weeks. David, last to close up the week, I was actually bullish about this because this is the New York Times opinion article with something about crypto saying, Crypto is pointless. Not even the White House can fix it. Since its peak last fall, Bitcoin,

Starting point is 01:00:54 the world's largest cryptocurrency, has lost them. It's half its value. That's how the article starts. Nearly two trillion in wealth has evaporated from crypto since October. We have just one question. What took so long? Outside of crimes and scams, the technology is useless and its economics are even worse. These are two economic advisors for the Biden administration giving an opinion piece on how pointless crypto is and how not even Trump and Trump's favors for the industry can actually save it because it's a pointless technology that is only good for crimes and scams. And this is the type of bear market opinion piece from the New York Times. I see every single cycle during the bear and it's just a good sign. It's just a good sign for things ahead.

Starting point is 01:01:46 What took so long is right? Like, why haven't they written this article sooner, man? I feel like we're going to make it date. This is a right of passage. Like, we get to clown on people like this at the top. They get to clown like people like us on the bottom. The cycle repeats. We get richer.

Starting point is 01:02:04 Yeah. They stay the same. Yeah, it's definitely a bottom signal. confirmed in a signal to me that we're going to be okay. Let's end it there. You guys know crypto is risky. You could lose what you put in. The frontier, it's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.

Bankless - ROLLUP: Wartime Markets | Kraken Gets Fedwire | Trump vs Banks | AI vs Pentagon | NYT Says Crypto Is Dead

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