On The Brink with Castle Island - Weekly Roundup 11/23/23 (OpenAI drama, Binance settlement, Milei wins) (EP.477)

Episode Date: November 23, 2023

Matt and Nic return for a Thanksgiving episode. In this edition:  Fidelity files for an ETH spot ETF The SEC sues Kraken Javier Milei wins – and prospects for dollarization Stablecoins versus dollar liabilities in emerging markets Prediction markets do well in the Argentine election We digest the OpenAI scandal and reflect on corporate governance Do we need a new McCarthyism directed at effective altruists? CZ settles with the DoJ and the CFTC over BSA and OFAC violations Binance appears to be solvent thanks to their Proof of Reserve Where the Binance settlement leaves the industry Tether supply hits $88b Bhutan is mining bitcoin Sponsor notes: Coin Metrics STATE OF THE NETWORK— Checking On-Chain Indicators for Green Shoots in the Digital Assets Market In Coin Metrics State of the Network Issue 234 we present a selection of indicators that offer us insights against the backdrop of a recent surge in valuations within the digital assets ecosystem.

Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of Concentuteease. You've printed a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin. Welcome to On the Brink. I'm Matt Walsh.

And I'm Nick Carter. And this episode is brought to you by Coin Metrics. And here is the Metrics Minute. For today's Metrics Minute, we're looking at certain on-chain indicators. The network value to transfer value ratio for Bitcoin and ETH has risen sharply. This suggests the valuations are outpacing underlying activity. Bitcoin's Market Valley to Realize Valley, MVRV, has risen. indicating that sentiment is increasing faster relative to cost basis, although Bitcoin's MVRV is still well below its topy range.

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Anything happened this week in the industry? I think this was the most eventful week of all time in any respect. You know, the Open AI thing I've just been completely absorbed by and following and just refreshing Twitter or just seeing what the latest is. But it's one of these things where certain people just have to be. have no idea this is going on. And I'm like, how are you not following this? This is like the biggest text story that I can ever remember. It's, I think it's the craziest tech story that has ever occurred at all, period. And what the funniest part is, nothing ended up happening in the end.

Yeah, I guess you had $80 billion, theoretically vaporized, and now it's just back on. It's back. 80 billion dollars is back. The tender offer is back. Probably they're in a better state now than when they started this whole thing a week ago. Well, on the tender offer, so I guess Thrive is doing the tender offer at, I don't know what the actual valuation of the tender is, but the enterprise value of the company at the last round was 80 billion. So maybe it's a discount to that. But they're doing it with an SPV, is my understanding. At least that's been reported by the information. Now, I'd have to imagine a lot people are trying to back out of that right now, right?

If I were looking at the OPI deal, I would feel better about it today than last Wednesday, though, don't you think? I mean, the governance has been fixed, dare I say? Well, it's not fixed until they figure out how to make this thing a for-profit entity. I don't think it's sustainable to have a nonprofit board that has no shares in the company actually be overseeing the most consequential technology company of the era, potentially. Yeah, the unaccountable board mechanic is bizarre. I think we probably learned our lesson about lack of accountability at the founder of board level.

I mean, with WeWork, for instance, you know, we are now revisiting the notion of the godlike solo founder that has sole discretion. Now we're going to revisit the notion of these boards. that can't be fired on fireable boards and they're not the only one you know anthropic too right I mean anthropic is the exact same structure yeah and I remember listening to the Dwar Keshe podcast shout out Dworkesh podcast is listening to the Anthropic episode Dario I think and they were walking through the governance and I was just scratching my head like what is this convoluted absurd structure and then, you know, fast forward a few months, the Open AI board torches the whole

company. And I think it's a great lesson in why we have conventional, ordinary corporate governance. There's a reason it is the way it is. Don't just change it rampantly and expect things to work. You don't need to innovate on corporate governance. It's enough to innovate on technology. It really, you don't need to reinvent the Delaware C-Corps. Yeah, and it really makes me just think deeply about it.

We've spent 400 years trying to perfect the notion of shareholder governments to solve principal agent problems that are introduced when you separate ownership and control and trying to balance the incentives of employees, management, shareholders. And it's taken us forever to get that right. And it only really works in a very narrow context, which is Western common law, right? I mean, there's a reason the U.S. is 50% of global public market capitalization, despite being about 23% of GDP. It works in this specific context, and it basically doesn't work in any other.

Not to sound chauvinistic or anything, but that the kind of Western, liberal, Anglo common law, model of governance seems to be the best one for shareholder value creation. That's the organizational principle. And even within that, the Delaware C-Corp is the way you do things. There's a reason for that. That's not just a coincidence or happenstance. And then the most important tech companies of the day have torn up the playbook and have decided to do some completely insane thing instead. It's just absolutely remarkable. And I mean, obviously the big angle here is around effective altruism. And I was ready to throw that thing away as soon as I started to hear about it with Sandbank-Bin-Fried. And now I feel like everyone is on the same page.

This effective altruism thing is just communism with a different name. Yeah, I completely agree. And I love that this is the consequence of this whole thing that everyone's now wondering what an earth this ideology is that sees Silicon Valley and is really questioning it because it almost blew up the AI space. as well as crypto. And yeah, it's just a poisonous ideology. It's this consequentialist philosophy, which I totally hate,

and I think we've addressed it on this podcast before, mixed with tech pro utopianism. The thing I really object to is it's a very arrogant ideology. The notion that this tribe of EA's specifically has the insight and the foresight to see where the world is going, and they alone should have the, discretion to kind of hit the brakes on the AI development. I just don't like that they're presupposing that they're going to summon these gods,

that they alone can do that, and they alone should have the right to dictate the pace of that development. It just doesn't sit right with me, and I'm very glad that we're now questioning the entire thing. Yeah, I mean, just I think those days are over. If you're an effective altruist and you're on one of these boards, you've got to have a target on your back right now, I'd imagine. I think we need neo-McCarthianism where instead of rooting out communists, we find EAs.

It's like they are common. It's the same thing. It's the same thing. It's the same thing. And by the way, communism was very popular among Western elites before the tyranny of the Soviet Union was known. It was a very trendy ideology in America. And yeah, I think you have to look at your organization and see and determine, whether you have EAs lurking within it that are willing to blow the whole thing up

because their ideology supersedes corporate value creation. I mean, the board was ready to incinerate $80 billion value at a moment's notice. They were willing to do that. You know who comes off great in this is Satya Nadella? What an operator that guy is. So it comes out that I guess they have access to the source code. So they would have been fine, it seems like, or at least that's what he's representing. it's that Microsoft would have been able to continue.

And then he poaches Sam on what was that Sunday night? You know, you wake up and you're like, okay, now Sam Altman is the CEO of a Microsoft division all of a sudden. It was like a scene from succession. Yeah, and there wouldn't have been antitrust considerations because he had been fired by the board. So he almost pulled this. He hired a guy. Yeah.

Yeah. He almost pulled the maneuver off whereby, 90% of the company deserted, joined Sam at the new division, and Microsoft gets an $80 billion asset for free. Just absolutely incredible. Well, there was a big crypto story. I guess we'll get to that. But maybe before we do, good week on the podcast.

We had Mike K. Hill on. I had interviewed him in the past, and this was his second appearance, I guess, on the pod. So Mike is from Dorel Labs, talked about the Pith Network. That was an exciting episode. Yeah, Pith has done their retrospective air job. drop. I think that was a huge success. They did it on Salana. The Salana people are very happy about it. And they are crushing it as an Oracle provider. So definitely recommend that episode. So before we get into Binance, why don't we do some quick deals of the week? And then we'll just

get into the finance story, which is the, I guess the second biggest story in tech this week. So first up, we have CFX Labs, payment processing company. There is $9.5 million from Shima Capital, CMT, Newform Capital, and Cracken. Then we have Artifact Labs. This is a Web3 gaming company that raised $2 million from RW3 Ventures, IOSG Ventures, and Raptor Group. Then we have OM Trade, a crypto exchange focus on social trading. They raise $6 million from Folius Ventures and others. Here's a story.

So Bolish, which is a cryptocurrency exchange, they have acquired CoinDesk, which is the crypto media site that was previously owned by DCG. So good to see a landing here for CoinDask. Obviously, it's a prudent move for DCG to sell off that asset, just given what's going on with the Genesis bankruptcy. I hope these CoinDesk reporters stick around. I think they've really broken some great news. And obviously, some of those folks have since left and some of the downsizing that was happening here. But hopefully this asset continues to exist, because I think it's a really good one. Yeah, I actually thought this is a pretty big story that went almost completely overlooked this week. Great acquisition for bullish. And yeah, I mean, CoinDusk has been the standout

industry-focused publication for, I don't know, a decade now, maybe even more than a decade. And yeah, I hope that they continue to produce work at the same quality because they have, of course, they were the ones that broke the FTX story in the first place. CoinDesk is probably my second most visited website on most days behind Twitter. Really? Lastly, good scoops on credit. They broke the Alameda story. Yeah.

Last up, Coin Gecko, of course, the coin market cap competitor. They've acquired Zash, which is an NFT data company. All right. So why don't we get into this Binance story? Just what a wild one here. On Thursday afternoon, CZ, Changzang Paezau, the founder and CEO of Binance, which is, of course, the largest cryptocurrency exchange in the market, he stepped down and he pleaded guilty to violating U.S. anti-money laundering regulations. As part of the settlement, Binance, the legal entity has also pled guilty to charges around these AML violations, which, by the way, are pretty bad. the company will pay $4.3 billion to settle both civil and criminal accounts.

As part of the settlement, CZ will retain ownership over Binance. Binance will continue to operate. He will not be able to have an executive role at the firm for at least three years. The company will remain operational with a third-party monitor to ensure compliance with global AML regulations. And CZ appeared in a courtroom in Seattle. He is out on personal recognizance, and I guess two individuals put up a bond for him. He will be sentenced in February. So there's a ton to chew off here.

What's your initial take on this? I mean, so much to say about this. I think we kind of knew this was coming. The prior CFTC case had surfaced a lot of these details around Binance. There's a lot more that came out in this indictment. of course, this was the big gray swan hanging over the industry for months. My main reaction was a sense of relief, that it wasn't worse, frankly, that there was no covert insolvency. They appear to have all the client funds safely custodied. There were no allegations of market

manipulation, but of course, their KYC and AML processes, at least for part of the time, appear to have been terrible. I mean, and not only that, but they deliberately overlooked the necessity of having counter-terrorist finance processes built into their compliance program. And the numbers were kind of shocking. I mean, I think in the settlement, the DOJ said it was close to a billion. dollars of transactions between U.S. nationals and Iranian nationals, which are sanctioned transactions. So this kicked off a big debate of, you know, the morality of this. And with current details,

I don't think we know whether those were between kind of ordinary Iranian citizens or government affiliates. But the, Janet Allen also mentioned various terrorist groups that had been able to utilize finance. So whether it was merely negligent or worse, they did break the law and they did have a lot of U.S. citizens trading on the platform. So the U.S. did have standing in this case. Yeah, no, it's remarkable that this was allowed to continue as long as it did. I mean, for a long time, I think everyone in the industry's thought that there was a lot of things going on on that platform that were not kosher. And it came out that they have been discussing this settlement for upwards of three years

with the Department of Justice. So as you point out, the violations are pretty ugly. I mean, you name it, you know, they were using the platform. So terrorist organizations, dark net marketplaces, all sorts of insolubrious categories here. And it wasn't just that they had a bad compliance program. For a long time, they just didn't have one. So anyone could just sign up with an email address and use this thing. And so I, you know, I guess my first reaction is just a very clearly this was a necessary move.

They broke every law imaginable. They were the poster child of playing fast and loose with the regulations. And I get that he was an admired character in the cryptocurrency space and he was very vocal and, you know, marketing genius, really. And frankly, like a great operator in the sense that he was able to get that thing to scale. But he's playing with unfair advantage. I mean, obviously he has a ton of liquidity. You're not K-Y-Cing anyone. So when you compare this to like a Brian Armstrong,

who's built that thing over at Coinbase the right way, you know, you can't give him, you can't give CZ too much credit here. I mean, he's just, yeah, if you didn't have to obey the laws, you'd be doing things a lot differently. Yeah, and this was our main objection to FTX as well, is they were completely unencumbered

by any desire or need to follow the law. and operate in a regulated manner. Now, we didn't know that FTCS was secretly insolvent, but we knew that they had an unfair advantage relative to the onshore regulated exchanges because they could operate with complete impunity, with no oversight. And that's just not how these markets should work.

You can't allow foreign offshore venues to solicit Americans and compete with regulated venues, and let those offshore exchanges win when the regulated guys are playing by the rules. And granted, of course, we've seen now Crack and Coinbase have been sued by the SEC, but Treasury hasn't come at them for rampant compliance violations

or BSA violations or OFAC violations. And so it's a fundamentally unfair status quo if you have these offshore exchanges that can operate freely while the onshore guys are following the wrong. rules. So that is a corrosive feature of these markets, and frankly, I'm glad that it's now changing. Now, as you point out, customers appear to be protected here. And so the DOJ, I would think, would have been within their rights to just shut this thing down entirely, but they didn't do that. And I think that has protected a lot of market participants who have assets on this platform.

It appears that Binance has upwards of $60 billion of customer assets on the platform. There's been some interesting on-chain sleuthing that estimates that Binance the corporate entity has over $6.8, I believe, billion worth of assets, including $3.8 billion of stable coins. So not only does it appear that they can make this fine, that they can pay this $4.3 billion with cash on hand, but it appears that customers will not be impacted. And I guess it's also noteworthy that the worst fear of many market participants that they would just be charged with having a hole or having some rampant market manipulation that was stealing money from customers. That is not the case. So very positive in the sense that this is not an FTX style situation and that the platform is

actually allowed to continue. And so if you are an individual or an institution that is outside the United States, you can still use this thing. Yeah. And the incoming CEO mentioned that they have 150 million clients worldwide, which we kind of knew they'd a lot, but wow, that's astonishing. I mean, we have to be balanced about it. Binance, in my view, has done more to introduce people to crypto globally without losing their money than any other exchange. I think that's just a fact that's undeniable. And they are a de facto crypto bank for over 100 million people worldwide. that they've done a lot of good. And they did institute a proof of reserve procedure,

which I actually rated poorly, according to my own rubric when it first came out. But I think the fact that they've done that monthly for 12 months now consecutively post-FTC collapse, that preempted any kind of a bank run situation. Barring that, if you didn't have that, I think we would be looking at a liquidity crisis significant fears of insolvency,

but they went ahead and registered all their wallet addresses. You can go into their proof reserve dashboard and read what they have. Have they faithfully reported the liabilities? That's where there's a question mark. We don't know. But yeah, as you say, I think it was Connor Grogan did an analysis, found that they have $6 billion or so what looked like corporate assets so they can use the pay to the fine.

That's not even counting any Fiat assets that they have in banking. accounts, which presumably they have that somewhere. So in terms of Binance being able to move on from this, it looks like they have all the client assets and it looks like they can pay the fine. So as far as harm reduction is concerned, it's actually a great situation overall. Yeah. And people have been asking me about these monitors that get put in place here. In a lot of ways, when some of these banks have these big violations and they need to have a monitor come in and oversee a trading operation, it actually gives market participants more trust in that institution. And so there's a world here where Binance doesn't slowly just bleed out

and wither away, although I'm sure we should talk about that in terms of the types of market participants that will probably leave the platform. But I actually think there's a world where this thing stays operational for a while and actually maybe attracts more capital over time just because there's a DOJ certified monitor there. You know, it's not a DOJ employee, but it's a third-party monitor that kind of has to report to the DOJ. Yeah, I mean, it's the best possible auditor you could ask for, right?

I mean, finance would never be able to get a real audit from the big four, but now the U.S. government is going to be looking over their shoulder for, I don't know what the time period is. This is reminiscent of when Tether settled with NIAG and had a two-year monitoring program in place too. which I think should have assuaged any doubts as to Tether's reserve composition because NIAG was getting those attestations quarterly.

So this is going to be the kind of the same situation here. So, you know, definitely signs of a maturing market here. It's very bullish, in my opinion, for a spot Bitcoin ETF approval in the U.S. And so one of the biggest reasons why these historically have been denied is because of the underlying spot market. And at times, Binance was 80%. of the spot market for Bitcoin. I think it's about 60% right now. And it's not that this thing is now kind of properly regulated in a U.S. context, but the DOJ is in there and, you know, CZ is not

running it. And so I think you can point to a maturing market. I think, you know, having finance as a Wild West operation, you probably still should have been able to get an underlying spot ETF approval just because of the CME contract. So I never really bought that argument on the denials from the SEC, but I think from a narrative perspective, this is great. And so it's, okay, BlackRock and Fidelity and others are getting these ETFs, presumably. You know, we have licensed venues coming on board and we just took out the top nefarious actor. Yeah, I mean, when we look back at this time period in history, this settlement will be seen as the closing of the curtain of the rampant kind of wildcat era of offshore unregulated exchanges.

That was a period that characterized crypto for a decade. Now with the collapse of FTX and bringing Binance to heal, I think we can put that behind us, and we're going to be looking at highly regulated onshore spot exchanges, offshore exchanges that themselves submit to meaningful regulation. whether it's in Dubai, UAE, Hong Kong, Singapore, etc., or Europe. So I actually do think this is the specific end of an era. And a lot of people are not happy with that, actually.

A lot of people are eulogizing CZ. They're saying he was an icon, and they're actually mourning this era. And that's fine. You know, that was a different time, the time when you could sign up for these exchanges with no KYC, find the best liquidity freely. and operate with relative impunity. That time is over now, and the market, yeah, it might look a little more boring now,

but it'll just fundamentally be a better and safer market. Yeah, so let's talk about where the volumes go. So as you point out, I think this is to the benefit of regulated venues. So Coinbase and the CBOERSX venue in the U.S. probably see significant share gains, I would expect, as this situation continues. unfold. You know, I think these ECNs that are popping up, these electronic communication networks that bifurcate custody from trading, these will become very popular. They're quite popular in the

FX world. But I think there's a world where some of these, you know, offshore unregulated venues that are maybe second or third tier behind Binance probably start to see some volume uptick here as well, because there are certain market participants on Binance that they're not going to be able to pass KYC at Coinbase. They're going to go somewhere. So I think you'll see some of this go it'll be a whack-a-mole-style game with some of the other venues. Yeah, I think the race is on now for those runners-up in the offshore exchange world to seize market share. I mean, it looks to me like OKX and Bybit and Deribit and Deribit have been gaining at the expense of finance, even prior to the settlement. I think they'll continue to seize some of that market share.

And the question is, can they, whether it's a matter of reforming themselves or finding, stable regulatory domiciles and ensuring that U.S. entities are not, U.S. individuals aren't trading there. Can they make themselves sufficiently secure and functional such that this doesn't happen to them too? So I think there will be winners there, won't just be to the benefit of the onshore players. Now, what do you think about the price of Bitcoin, just basically not doing anything on the result of this news? I would have thought that this would have been one of the most bullish news stories you could ever imagine. It was kind of surprised. Yeah, I think it's enormously bullish. This was the big critique. The dark cloud still hanging over the crypto industry. There were

really two, Tether and Bynance. I'm not actually concerned about Tether. I know that's a dangerous thing to say, but I'm not. In fact, Tether appears to be crushing it. Binance, a lot of people thought the resolution would be a lot worse, right? A lot of critics were using Byniants. A lot of as an example in saying that it would be an FTX type situation, it would be a catastrophe, you know, Bitcoin would have, and it would be disaster. That didn't happen. The optics are going to be challenging in the near and medium term, I think, because it doesn't really help the industry defend itself against assertions that it's used for terrorist finance or illicit finance. So that's just going to be, we'll have a hangover from that. So I kind of understand that we

sold off at the time. But yeah, fundamentally, it's a very positive development, one of the most positive of the year, barring the ETF. Now it's Thanksgiving, so we have to talk about the kids table, and Gary Gensler appears to be at the kids table as it comes to top flight regulators. Everyone was on that podium, taking a victory lap, except for Gary Gensler. The SEC was nowhere to be found on this. So you had the CFTC, you had, you know, yelling up there, you had Merck Garland up there. I mean, everyone was up there taking their victory lap. And my guess here is that either they just don't get along with Gensler or he just didn't play a ball on this investigation. So there's no SEC settlement. And the SEC had been going after Binance US. And maybe Binance just thinks,

look, I mean, Gensler's losing all these cases. He's clearly in the wrong on the Coinbase case. We'll talk about the Cracken case. He's clearly in the wrong on that. They probably just said, hey, we'll pay you the $4.3 billion. And we're not rolling over for this Gensler guy. it'll be interesting to see what happens there it was curious that every major financial regulator and financial enforcement entity in the government was up on stage and Gary wasn't there I was also wondering about that the other interesting thing is now the fate of CZ so I mean he pled guilty to a felony right so typically that it that means jail time now there there's been some discussion about this.

I think he'll be allowed to stay in the UAE prior to sentencing. Also, it's not that clear if as a non-US resident or individual, he'll be able to actually serve his sentence under house arrest, like the BitMet's leadership. So there's still the possibility of jail time. I think people were kicking around 18 months. so we don't know exactly what that will look like. But the prosecutors seem much more positively disposed towards him than SBF, for instance.

I mean, it's a great trade for CZ. You still own the thing. You have a ton of cash, it appears, on the sidelines. I'm sure he's got a war chest piled away somewhere. And you do 18 months, and then you go about your life and you're not on the run like Kyle Davies, the rest of your life. You know, you're not looking over your shoulders for the rest of your life. you can actually enjoy yourself and you can, you know, you can move around. If you want to go to New York, you can go to New York.

If you want to hop on a flight to L.A., you hop on a flight to L.A. It's a lot better than Sam Bankman-Fried. I'll tell you that. Yeah, it just makes me think being a major exchange operator in crypto is the most cursed job imaginable. I mean, not a lot of people emerge from that unscathed. Well, you got to tip your cap to Brian Armstrong. I think he's really, you know, we'll see what happens. with this SEC lawsuit. I certainly think that Coinbase is in the right on it, but he's someone

that has done things the right way. Yeah, I mean, it's really remarkable. His longevity, his persistence. I mean, he's run Coinbase for over 10 years now. He's rolled with the punches, and he built it the right way. They never lost a dime of customer funds. And, you know, they're the dominant player in the U.S. It's very, very impressive. So that was the Binance story. So I mentioned Gens. So the day before this broke, he charged Krakken with basically the identical charge that Coinbase has been charged with. So running an unlicensed venue, you know, basically saying that a bunch of the assets on the platform are securities. And it looks like the analysis from the legal profession here is that this is just a hedge by the SEC. And so they're trying this

case in California. Coinbase is being tried in New York. I'd say there's a pretty good chance Coinbase wins this. And so the theory would be, okay, well, if Coinbase wins in New York in that circuit, if the SEC is able to win in California, it keeps the muddy waters in place. And the SEC still asserts that they have the right to oversee all of these platforms when in fact, they clearly don't. And there's just a gap in the regulatory framework. I can see why Cracken would be extremely frustrated by this, as they had already settled with the SEC for 30 million. million dollars over their staking product. And it's just Groundhog Day. They find themselves being sued by the SEC yet again. Yeah, a really tough, tough break right there. All right. So some happier stories here.

So Fidelity has hopped into the spot Ethereum ETF raise. So this filing happened about a week after BlackRock filed. I think this is going to be the next thing in a hurry. It'll be interesting. If you approve a Bitcoin spot product, I don't know how you disprove an Ethereum. spot product. Yeah, we asked James, say for this on our Pubkey podcast, what is the structural conceptual difference between a Bitcoin, ETF spot application? And, you know, he said that each one is their own independent analysis. And I guess there's market structure features of Ethereum that are different. But end of day seems to be considered commodity here. And it's a large market similar in nature to Bitcoin. So I can't imagine to be that far behind a spot Bitcoin

ETF approval. I might be wildly off on this, but I wonder if there's an angle here for the SEC, not to give them any ideas. So maybe we shouldn't even say this, but like the defy markets are obviously not overseen by anyone. And there's a good deal of Ethereum transacted in the defy markets, you could make a strong argument, I would think, that that's an issue. Like in the same way that Binance was an issue in the Bitcoin spot market, the fact that so much of ETHs spot volume is actually happening on defy. And you heard in the Binance press conference, they mentioned defy three or four times. So I don't know if that's a warning shot. How to think about that. Yeah, for the sake of our industry, Matt, let's leave the pro-SEC strategizing to a minimum.

Yeah, I don't want to give them any ideas because they haven't had a good idea in a very long time, to be clear. So there was another very funny development this week, which was that Javier Malay won the presidency in Argentina. And is recently, as a month ago, he wasn't the favorite. And I don't know what he did exactly, but he won. And I mean, he's a literal anarcho-capitalist, like a true libertarian died in the wall. he makes Eric Voorhees look like a progressive, you know? So this is very good. And I was very impressed by the performance of the prediction markets on this one.

So that's how I followed the election. The prediction markets were on it. In fact, the prediction markets are doing great. So I keep looking at polymarket for things. So they're actually crushing it. And before the mainstream press was willing to make any kind of call in the election, Millay was trading at 95 cents on the prediction markets. What do you think Malay would have said about this open AI situation?

I don't think he likes effective altruists if I had to hazard a guess. So he hasn't, I don't know if he said that much about Bitcoin. I think he's kind of mentioned Bitcoin in the past. But as far as just the welfare of the Argentine population is concerned, I think it's good and exciting. I mean, he's very credibly committing to dollarization in Argentina. And it's funny to me, there's a ton of think pieces out there now about how difficult dollarization is. Where are they going to get the dollars? I think those concerns are a bit overblown.

But the context here is that Argentina has had 200% inflation for the last 40 years on average. annual. So that's the inescapable backdrop of this. It's time to try something else. And dollarization has worked in, for instance, Ecuador has worked in Latin America. And Argentina has already partially dollarized. We know this. Argentina is ground zero of crypto adoption with stable coins. So the local populace has already begun informally dollarizing, is what it's called. So I think the conditions are there to ratify that and dollarize at the state level. And there are also some articles saying this isn't good for crypto because the dollar will just be the dominant feature. But I think that's completely wrong as well.

Like I think as an Argentine, you have historically, within living memory, there is a time where you had dollar liabilities in banks. And those were forcibly converted into pesos and you lost a lot of money into devaluation. That was the Corolito. in, I think, 2001. So there's something different about a stable coin, as opposed a dollar stable coin held in your own self-custody, where you're facing off against a foreign issuer like USDC or something like that. There's something different there as compared with a dollar liability in a local bank.

So I think you're still going to think you're going to consider a stable coin as a kind of a higher quality dollar asset than a local bank deposit that's dollar denominated. I mean, it'll be interesting to see how deep into the crypto industry this guy actually is, because there's a lot you could do. I mean, you could make your banking apparatus a lot more conducive to just participation and start banking startups and start enabling some of these on and off ramps. You could really run a crypto euro dollar market out of Argentina right now and probably attract a lot of capital, is my guess. Yeah, and it's notable that stocks actually surged in Argentina after the election. the market likes it. I mean, he's a markets driven guy. And I think people just want something different. And I mean, also the guy he was running against was, I think, the Ministry of Finance,

who is partially responsible for the quagmire they find themselves in. So, look, democracy has spoken and the people have said they want dollarization. So I don't quite understand the critics that are like, oh, well, yeah, maybe the status quo is okay. The status quo is terrible. Um, just breaking before we went to air here. Forbes has released a big expose on Bhutan's crypto mining activities or Bitcoin mining specifically. So that just dropped minutes ago. And Forbes has identified via Google Earth where the Bitcoin mines are in Bhutan. So we look, if you're a listener of the show, you would always. to show you would already know this.

Okay, Brink Nation already knows that there's meaningful Bhutanese Bitcoin mining activity, quite meaningful. But now Forbes has confirmed the scoop. That's pretty interesting. I mean, obviously we knew that Bhutan was mining, but to see that come out in the press is pretty fascinating. Yeah, it's interesting to see state level Bitcoin adoption in a bunch of different ways. But yeah, for the energy-rich states that,

are, you know, looking for GDP catalyst. This one makes a lot of sense. And Bhutan, I believe their mining is with entirely renewables. So not really a lot of downside there. One thing that I forgot about in the finance section of this podcast is, what's going on with Justin's son? How is this guy still running around? Teflon Justin, we call him.

I mean, it is incredible that after everything, he is kind of, of the last man standing. I mean, that's remarkable. It's, I mean, his excellency has been kicked out of all sorts of jurisdictions here. I mean, this guy can't be long until he gets apprehended by DOJ, right? I mean, there's another hack on one of his things this week. This guy is a total clown. Meanwhile, though, Tether on Tron remains the de facto currency of emerging markets.

In fact, Tether hit 88, Tether hit 88 billion in, supply this week. I mean, it's going to be $100 billion soon enough. Well, if you want to keep tether growing and growing and growing, just keep on delaying the stable coin bill. I mean, you pass a stable coin bill in the U.S., you're going to see a bunch of capital flow to U.S. regulated financial institutions that do stablecoins. So, I mean, it's just a product of a bad policy in the U.S.

I will note that a few weeks ago I called the bottom on stable coins supply, and the bottom is 100% in confirmed. Stable coin supply is now growing again. I don't know if that's leading or lagging, but it seems good. All right, so I forgot that we do this segment every year. What is this? Are we in year four of this podcast?

What's happening? It might be year four. No, I think it's your five now. I think we're coming up on 500 episodes. I use chat GPT the other day to ask about our podcast, and they have us as having more episodes than, iTunes has. So I don't know how that works. Maybe that was just one of those communists changed the thing. The EA's got their hands on it. Jad GPD wasn't working this weekend. I mean,

it's Sam Alman leaves. Yeah, because no one was there. They were, they forgot to turn on the servers. So we started in 2019, fall 2019, right? So this is year. Oh, it was 2019. I thought maybe it was 2018. This is year four entering year five. And we do a Thanksgiving. episode where we say we're thankful for. I haven't prepared any names, but you have some. So who are you thankful for? I'm thankful for the FTX prosecutors this year. Danielle Sassoon and I think it was Nicholas Ruse. Just a remarkable job. Just absolute beatdown. I've never seen anything like it. This was like Mike Tyson taking out Peter McNeely in 89 seconds. It was masterful. And I think the careers of these two individuals, I wish I could own stock in because I think they're both going places. And well-prepared,

just dismembered the guy. And I'm thankful that they were able to make that go fast because I didn't want to have to have Sam in my life for a second longer than he was around. And for that matter, can we just go get some of these other F-TX bad guys? They're out there. It's like we all know the senior executives that were in the mix on all this stuff, knew about it. So, you know, if I had one ask, it would be to go get them. But I think Danielle Sassoon and Nicholas Ruse, remarkable job this year. Very thankful for you. I am thankful for truth-seeking executives at chain analysis firms. So I'd say specifically, actually, chain analysis.

I'm probably going to get in trouble for saying that. But I thought they did a great job of setting the record straight on the Hamas issue. actually just interviewed Kim Grauer. We talked about that. And they produce this geography of crypto adoption report, which is an absolutely stellar report, which I use all the time to explain why crypto. I mean, it shows where people are adopting it.

It's very easy to correlate that against the conditions in those countries. That's a great report. They don't have to do that. They do do it. So, yeah, I mean, look, some people don't like the blockchain analysis. firms, but I'm thankful for the people to work there that are truth-seeking.

That's a good one. That's a good one. All right, I have one more, and it's a category. I am very thankful for the people at these companies and just in the general crypto community that are standing up to the SEC and pointing out all of the issues with the SEC's arguments. So Paul Grewell, Brian Armstrong, both at Coinbase, John Deaton, who I think has done some great work. He's a XRP-related lawyer, but he's done some incredible work, and it seems like he played a very big role in Ripples, winning of that case, or at least winning of the temporary motion in that case. So just the folks that are putting themselves out there on a limb, it's one thing to just be, you know, saying it from the cheap seats, but there's a lot of people that have dedicated a ton of man hours and really personal reputation to fighting for the industry, and I'm thankful for those people. And I'll be thankful. I am thankful for Brink Nation, of course. We have to say that one. I'm always astonished when I go to conferences and people tell me they listen religiously every week.

It's part of their Friday routine. Mainly people tell me it's when they're commuting or like on a run or something. I always got a kick out of the things that people tell me a part of their routine when they listen to Brink. But yeah, I mean, it's honestly an incredible group of people. And we love the feedback and the engagement. And that's why we do it. You know, I mean, this is not fun to do this podcast, or at least I don't find it fun. I find it very fun. Thank you.

I take insult to that. So Matt likes it. I'm more dissolution with the podcast. But it is always incredible to put faces to the analytics because I have no idea. who is listening. But there's a lot of you, and you all seem very engaged. So thank you. We appreciate it.

Best listeners. Best listeners in the business, for sure. And I can't tell you how many bits of advice I've gotten on how to kill a turkey or how to keep them out of your yard. It's just a very engaged listener base. Yeah, Brink Nation is fired up. So follow safety precautions this Thanksgiving. Don't put a frozen.

turkey in a deep fryer. Just don't do it. Now. That will light your house on fire. So you're not doing a turkey. So you're you're doing a brisket, you said, huh? Yeah, we've gone non-traditional this year. And I've been elected to smoke a 10 pound brisket, which I've done in the past, but never successfully. It's always been a failure. So tons of pressure. So I don't know how to do it. So any tips? Certainly appreciated. I've never smoked a brisket, but yeah, I kind of like that idea. I like turkey, but a brisket, that's a great meal.

Yeah, good. But the problem is I have to run a 10K in between beginning the smoking and finishing the smoking. And so it's just going to be in God's hands during that point. I mean, also, who came up with this tradition running a 10K on Thanksgiving morning? that's terrible. Well, my old tradition used to just be to go out on Wednesday night until the wee hours of the morning and not run the next day. But I'm running a 5K tomorrow.

I feel like that's a more healthy Thanksgiving tradition. So, yeah, someone told me today that there's this thing called Blackout Wednesday the day before Thanksgiving where you just drink to excess and then you can chill out on Thanksgiving. I just found out about that. I haven't heard that phrase, but I mean, that jives with kind of the city of what that looks like on Wednesday. That's just a normal Wednesday.

So I don't support that. I will be, I'll make some mold wine tonight. I'll have a reasonable amount of mold wine. How about that? Yeah, well, don't have too much. You got to win that 10K. I might come in last, Matt. I might come in last place.

All right, well, we'll compare notes on our respective times next week. All right, everybody. Thanks again to the Brink Nation listeners. hope everyone has a safe and healthy Thanksgiving and a safe and healthy weekend and we will see you on Monday.