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- [00:07]
Kyle Olney
You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Probably should be, probably should be.
- [00:37]
Marty Bent
Kyle Olney, I welcome you back to the show, but under some pretty heady circumstances here. We've got, we've got a battle for freedom in the digital aid. It's raging on, probably more, more, more pressing than it was when we spoke last November.
- [00:56]
Kyle Olney
Yeah, absolutely. The battle for the future of freedom tech is now.
- [01:02]
Marty Bent
Yeah. And I think AI is really accelerating the battle. That's actually one thing I'd be interested to get your thoughts on because I think described AI as equally exhilarating and unnerving. It's typically in the context of, oh my gosh, this is so powerful. It's so cool playing with these tools. I've been able to do more than I ever thought would be possible as a one man team playing with a clanker, not the number one man team. We have a six person team here at tftc. But I think you catch my drifts. And it's unnerving because it's like, oh gosh, what's this going to mean for the state of the job market if this is truly disruptive? I think on the job market side I've become more convinced that I'm not sure it's going to be as disruptive as many people are fear mongering about. But the other side of that coin is exhilarating because you can do all the things that I just described and it's unnerving because we're sort of speed running into it, making it an integral part of our workflows and it's almost like it's a bit of a honey trap where we're getting addicted to it and the government, the governments of the world are obviously observing. And over the last week I think we've seen the first big shot across the bow of how the governments think we should be able to utilize these tools. Particularly with the export ban on Fable 5 last week.
- [02:28]
Kyle Olney
Yeah, I mean, I think you nailed it right on the head. Like the whole world changed in the last two weeks out here in Silicon Valley, at least right on the front lines of what's happening with AI, both with the anthropic change on pricing models and people kind of being forced to confront the real cost of tokens that they're using. And then in very quick succession, the US Government coming in to pull back and implement export controls on Fable 5 and kind of the newest class of models that Anthropic had released. Heads are spinning. Heads are spinning out here in Silicon Valley and people are still trying to figure out what this actually means and kind of where things are going. But those of us in the kind of Bitcoin community and the Freedom Tech community are well aware where this is going. We've seen this before. We've been fighting this battle for years now. And I think I don't want to jump too far ahead with the AI stuff. I actually think it's great to maybe take one step back or two steps back and kind of start with, you know, the BRCA and Clarity and market structure and kind of like the debate around, you know, our ability to access these freedom text freedom technologies generally that's going on in Congress. And then I'd be happy to connect that through line straight from what we see going on in BRCA and Clarity to, you know, kind of AI and Anthropic and, you know, the Department of War, the US Government, all that.
- [04:07]
Marty Bent
Yeah, let's start with BRCA and Clarity because I think that's taken a backseat to the AI stuff in the last month as everybody looks at the saber rattling between Anthropic and the US Government and obviously last week's actions by the US Government with those export controls. But I think the last I heard on BRCA and Clarity was that it's getting held up in an ethics committee because they want some language in the bill about insider trading or the, the ability of the Trump family specifically to play with, with any of these assets. And then the other one was the Law Enforcement Blockchain association letter that went out a couple weeks ago where you had, I think, a couple hundred law enforcement officials sign a letter basically saying, we want clarity because we've been promised that it's going to expand the Patriot act to make it much easier to track people using this.
- [05:07]
Kyle Olney
Yeah, it was quite a, quite a turn of events to see a bunch of law enforcement officials coming out in favor of Clarity. But, yeah, you kind of hit it on the head. So there are a number of different countervailing issues. I don't know how many of these that we discussed in November, but as you just mentioned there's kind of the overarching issue that has been, I would say more navel gazing for the last nine months, which is Coinbase and kind of the stable yields fight against Wall Street. That's one dominant thread that is still unresolved. It's worth mentioning we've heard that there's a deal that's been reached between some different parties who are representatives of the banking industry in the Senate. But clearly we saw Jamie Dimon come out two weeks ago and kind of drop a gauntlet on Brian Anderson and what was going on with Coinbase. So I would say we're definitely not out of the woods on that front, that Wall street is not going to just roll over and accept a completely crypto native reframing of the finance industry. Right. And I think that that's the, that's one major problem or category problem that we have with the Clarity Act. Then, as you mentioned, there's this other aspect of things that we care about as Bitcoiners deeply, which is the BRCA and developer protections and the ability to know that if you're developing tools and open source software that utilize blockchains and you're not having actually taking custody or providing operating the service yourself, that you won't be prosecuted by the government. This is still an unresolved issue and frankly is I would say, the most concerning issue, again from a bitcoin perspective, because the language that they inserted in the Finance Committee in order to get it voted out and brought to the floor, added a clause or what I would call a loophole that allows prosecutors to continue charging developers and basically kind of inviolates the safe harbor in circumstances where the government deems that you had knowledge or should have had knowledge of your ability to be helping nefarious actors with the technology, which I've said elsewhere, but to me, as a builder, as a entrepreneur, as somebody who's been involved in the building, building of this technology that feels like a loophole big enough to drive a truck through and should be very concerning to everybody. And then, yes, the third issue, as you just mentioned, which nobody really knows how it's going to land because it's all kind of up to one man, is the ethics concerns. And what we're hearing is that, or actually what's been stated clearly by the senators, the two Democratic senators who voted it out of the Finance Committee the floor of the Senate, they said very clearly that they would not vote for a bill that didn't contain strong ethics provisions against kind of the Trump family crypto dealings. And clearly that would seem to be a deal breaker for, if not the entire Republican Party, Donald Trump. So we've got three different layers of problem and they're still confronting, you know, the Clarity act and its ability to get passed into law. And it's very unclear at this point whether any or all of those are going to be able to be resolved and certainly before we make it into the election later this year.
- [09:11]
Marty Bent
Yeah. What is, is Congress in recess right now? Are people on the Hill?
- [09:15]
Kyle Olney
I believe the Senate is actually in town this week, but Congress is off this week. Then Congress will come back for a couple weeks and then we basically have the Fourth of July holiday and the summer recess. So there's less than 30 days left in the legislative calendar before we actually get to the election season. And we've now, I think, blown past six self created deadlines for getting this bill done over the last nine months. And the latest deadline that they were hoping for was to get it on President Trump's desk by July 4th. That clearly is not going to happen. It's literally a physical impossibility at this point to make that happen. So I think the game that they're playing is to try to cram something in before everybody goes home for the summer recess and know, hope to have something that would be signable, you know, maybe in September when everybody gets back from Labor Day. But that's getting really close to the election and it's hard to say why Democratic senators would vote in favor of a bill that would broadly be perceived to be handing Donald Trump a signature win going into the next election. So, yeah, the politics and the policy are both very challenged at the moment.
- [10:43]
Marty Bent
You know, it would look like a signature win for Trump, but as it stands today, I don't think it would be a signature win for bitcoiners specifically.
- [10:52]
Kyle Olney
No. I mean, yeah, if we, I would say that we've marched right up to the line of what is tolerable or acceptable to bitcoiners with the latest carve outs in that BRCA provision 604 in the bill.
- [11:10]
Marty Bent
Dive into that specifically. Like what, what is the carve out? And ou loosely characterized it, but what are the specific things they're leaning into?
- [11:19]
Kyle Olney
Yeah, well, I don't have the language right in front of me. I'd have to pull it up. But basically the clause that was added to the to section 604 of which is the BRCA section of the Clarity act was basically this language that says that the safe hart well, so actually maybe to take One step back, the original construction of the BRCA was that it created a safe harbor for developers of open source software so that they didn't have to fear prosecution under any circumstance if they never took custody of customer funds. Right? So that's a pretty clear bright line that everybody would be able to understand. If you're developing software, it would be clear and obvious to you whether you're taking custody of user funds, whether you have the control, the actual ability to move somebody's funds on their behalf. And that was one of the reasons that the BRCA has been very popular for multiple sessions in Congress. Now it's been bipartisan. It was voted out almost three to one out of the House with that language. This is a common sense sort of application of the regulatory guidelines that we had already been given by FinCEN years ago. And it was just meant to anchor it into law so that it was clear to everyone that this wasn't a regulatory interpretation. It is literally actually the law. It should be the law. If you don't touch customer funds, you are not a money transmitter. The problem is that by adding this clause that they've added, where you now have to consider the intent of the builder in building or publishing the software as to whether they were aware or should have known that their technology, their tool, was going to be used for nefarious purposes or was being helped to abet the funds that were gotten through illegal activities. This would violate the safe harbor and then you would now be able to be charged as a developer for intent, right, to conspire or collaborate or whatever word you want to use with, you know, these people who are doing bad things with your technology.
- [13:36]
Marty Bent
Well, I think it's important to bring up the precedent that's been set here already, which would completely, I mean, if it gets passed with that language, would render it completely ineffective. As Roman Storm, right. In his case, they were using an email that he never responded to as evidence that he had knowledge that somebody nefarious may have been using Tornado Cache, correct?
- [13:58]
Kyle Olney
Yeah, correct. And in the case of the Samurai developers, you know as well, like literally the reason that they created this subclause, which I think is D subsection D in 604, it, they created it so that they didn't, quote, lose the ability to charge Samurai developers or the Tornado Cash developers. So the government or the people who, you know, the senators who have added this language, the presumptive reason for the compromise is to be able to continue to allow the ability for prosecutors to prosecute people like the Samurai devs and the tornado cash devs. So that in itself should tell you everything about kind of how the BRCA has been modified already.
- [14:51]
Marty Bent
Now,
- [14:53]
Kyle Olney
if you ask the lawyers in Washington, people like Coincenter and others who are kind of on the front lines litigating on these things, BPI as well, the lawyers are less concerned by this language because they think that the legal standard for proving intent is pretty high and you would have to have some meaningful paper trail. Like you can't just accidentally fall into intending to help bad actors with your software. That would be the theory that the lawyers would like to feel good about. But again, as a builder, as somebody who's developed technology and is an open source proponent, I don't think you can ever know how somebody is going to use your tool. And once it's been published to the outside world, and in doing so, nobody is going to run the risk that they might get ex post facto rounded up and thrown in jail for 20, 30, 50 years. Right? So the kind of policy objective of making America the crypto capital of the world and trying to keep the industry in the United States and harvest the economic gains as a policy objective that come from the blockchain economy would seem to just be completely violated and kind of thrown in the bin by trying to take this approach that they're trying to take by having their cake and eating it too. And so this is actually kind of the worst of all policy outcomes, in my opinion. We've come to the point where if anything were to happen with this bill, or rather if this bill were to be passed, even with its current language, it's unclear that this would even stop or forestall the desire for blockchain developers to leave the United states, exit the U.S. jurisdiction and go elsewhere and practice or build their companies in places where that threat of prosecution just doesn't exist.
- [17:10]
Marty Bent
Well, I mean, I've seen lawyers, I saw Peter von Valkenberg and Zach Shapiro making the intent case and it's like, well, you can say that it's really hard to prove intent, but like again, samurai devs are in jail, Roman Storms on trial. Without the language even existing there, they sort of inferred intent. And again, I think the Roman Storm case of he had an email in his inbox that he never responded to and saying if you check the in email, like you knew it was happening, therefore you're guilty. So it's, it's complete bullshit in my mind. I think it's a non starter in terms of actually protecting devs. And that gets to the question like what is, what is the state even. I mean, it seems like despite the language in the BRC section, in section 604, it seems like even without that being a point of contention, it seems very unlikely this gets passed anytime soon due to the procedural process that you referred to earlier with the lack of timing between now and midterms and then who knows what happens after midterms.
- [18:30]
Kyle Olney
Yeah, exactly. I think at this point the odds of this bill getting passed even in its current language is pretty low. And we know for a fact that it can't pass in its current language. We know for a fact that the Democrats in the Senate are going to try to weaken the BRCA even further because to them, even the current carve out that allows prosecutors kind of this loophole to continue charging people for violating, you know, kind of, you know, whatever theory, legal theory they can come up with around, you know, facilitating bad intent or bad actions in the real world, it's just not tenable. Right. Like it's not tenable for, for anyone really at this point. And so it's, it seems like, you know, we're, we're heading toward a bad conclusion if, you know, from a political perspective at least. Right. It's not going to be the win that everybody was hoping it to be when we started out on this process. And again, from the perspective of bitcoiners, this may actually be a good thing. Back to our earliest conversations about clarity, we were saying that no bill was better than a bad bill. And we've seen all of the trade groups in the industry line up and say that a bill without strong BRCA protections is a non starter for them. I think most people on that front have been just kind of, I won't say it was naive hope, but they've been kind of, you know, hoping that we were going to get something better than it seems we're going to be able to get. And so, you know, kind of now I would say that, you know, our backs are kind of against the wall as a, you know, freedom tech and liberty oriented community. Like, you know, at this point, if we can't get strong BRCA protections, then I think we would prefer not to have any bill because the alternative is that it radically expands BSA surveillance requirements for every licensed or, you know, kind of above board operating company in America. Right. That touches a blockchain. Like, if you touch a blockchain, you basically have to surveil all of your customers and report all of that information to the government. Which, you know, again, I think as bitcoiners we, we kind of find onerous and yeah, abhorrent. So yeah, it's challenging times for freedom lovers in the blockchain community.
- [21:05]
Podcast Host / Announcer
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- [22:09]
Marty Bent
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- [23:14]
Podcast Host / Announcer
Opt out of health insurance.
- [23:16]
Marty Bent
I'm uninsured baby, and I love it. Use the code tftc@joincrowdhealth.com and you'll get $99 a month for the first three months that you're on the crowd health platform in the community. Bitcoiners, you found sovereign money, now find sovereign health and sovereign healthcare. Yeah, well, we were talking about the BSA on the first episode and how that should really be the the focus is repealing the Bank Secrecy act. And since then we've met in person and had a dinner in Austin. And I think there was an update on your end from the language of the Bank Secrecy act and particularly the appeal was there appeal to the supreme court in the 70s or 80s and what's the story? Because it seems like there's a chink in the armor of the BSA that we didn't talk about the first time you were on. I wanted to lean into and has to do with, I think, reasonable, like reasonable amounts of lower thresholds of triggers that would trigger a suspicious activity report.
- [24:23]
Kyle Olney
Yeah. So, you know, I guess I'll caveat by saying I am not a lawyer and this does not constitute legal advice, but I am a legal nerd, I suppose almost went to law school, so I'm very interested in such things. And yeah, I mean, I think without turning this entire episode into a BSA episode, I guess what I would say is that both the legislative and the judicial history of the Bank Secrecy act raise a lot of questions about how it has been applied and extended in the modern era. And there are a number of concerns that people who, like I and you and others who have looked at this and I should say a lot of the other policy organizations, again like Peter von Valkenberg at Coincenter has been quite vocal about this over the years. You know, the BSA has been wrongly applied and it is basically unconstitutional and it only survived its very earliest sort of challenges for this. You know, I don't want to call it a loophole, but this like kind of factual oddity which was the when the BSA was passed in the 70s, the threshold for reporting was, you know, the inflation adjusted equivalent of about $130,000. So, you know, the bank would not have to produce a suspicious activity report, you know, unless it was $10,000 in, you know, again, the 1970. But in the statutory construction of the bill, there was no inflation indexing that was ever done. And so obviously, everybody listening to the show will be familiar with how much inflation we've had in the last 50 years in the United States. But $10,000 now, today, just to give you an example of how commonplace and every day a $10,000 transaction is, it's like I moved out of an apartment in San Francisco and the landlord wrote check for my security deposit in my first month back. And I couldn't even deposit the check at the bank because it was over their limits and they needed to, like, do a physical ID check and, you know, wait a bunch of time for it to clear. And they gave me this whole song and dance about it. Right. I mean, it's. And it was all because of, you know, the. The SAR reporting and BSA flags and all these sorts of things that have to happen in the background, which are just massive compliance overhead headaches for the banks. I mean, again, as a kind of former bank regulator in a prior life, my personal opinion is that you don't even need these kind of surveillance tools that the BSA provides in order to do proper regulation. It's really just an excuse to dragnet surveil everybody in broader society. And back to the kind of jurisprudence of the BSA, there were two challenges that happened in the 70s after it was first passed. And in both of those, some of the most famous justices on the supreme court in the 21st century were strongly opposed to the BSA and thought that the arguments in favor of it were kind of ridiculous and kind of undermined core constitutional guarantees that we have in the Bill of Rights. But they felt that the threshold for application was so high that it was something that was tolerable in that moment. And so, yeah, again, the chink in the armor here, I would say, is that as we see even more onerous overreach on the behalf of government to surveil kind of the everyday transactions and data stream that surrounds all of us living in a society where digital payments are ubiquitous, it's becoming obvious now that you basically don't have an expectation of privacy in the United States anymore. If the BSA continues to be rolled out to the level of every $4 micro transaction that you might, you know, engage in in the economy on either a stablecoin rail or, you know, a layer two of a native blockchain, you know is going to be surveilled.
- [29:09]
Podcast Host / Announcer
Right.
- [29:10]
Kyle Olney
Like that's not. Again, I just think that, like, if you were to look at kind of the original construction intent of the bill, we've drifted so far away from it. And if you were to show the justices in the 70s who barely found the BSA passable in the contemporary moment, what has happened today and how it's being applied, I think they would flip the table, frankly. And so I think, broadly speaking, I think that we should feel the same way as bitcoiners and we should push back and do everything that we can to fight against this, what I would call an unconstitutional invasion of our privacy rights.
- [29:49]
Marty Bent
Not even just as bitcoiners, just as Americans. Flip the table, we should take it back to the Supreme Court. The reasonable threshold of $10,000 that existed back in the 70s and was a point of contention for justices who thought at the time, like, ah, the amount of people that are making a $10,000 transaction so low it doesn't really bother anybody. But today that would be interesting data to get. I'm sure somebody's run the numbers. But the frequency of $10,000 payments on a daily basis today versus 1970, and adjust that for population, I'm sure it's still orders of magnitude higher.
- [30:28]
Kyle Olney
Yeah, well, and I think again, kind of more importantly to the point, it's really theater, right? It's kabuki theater even in its current incarnation because we see people like Jeffrey Epstein getting 1,000 suspicious activity reports from bank compliance officers moving a billion plus dollars through the pipes over a 10 year span and literally nothing was done about it. So if you needed more proof that, you know, they're not really using these suspicious activity reports, at least not proactively for, you know, kind of their stated purpose, I don't know what better example you could find than that one.
- [31:08]
Podcast Host / Announcer
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- [31:12]
Marty Bent
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- [31:17]
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- [31:26]
Marty Bent
All right, freaks.
- [31:26]
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- [31:36]
Marty Bent
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- [32:34]
Marty Bent
Check it out. And bridging this back to section six of four of the BRCA. Maybe a segue bridge to the AI conversation too. It's like, I'm sure you've been paying attention to it, but like what Calais has been doing with Cashew, particularly with the ability to run a mint in a trusted execution environment, which would completely separate the MIN operator from anybody using it. Like, they would have no visibility into this. And I think we discussed this in November when you were first on. But we have the ability to rearchitect the banking infrastructure on top of Bitcoin natively in a new way, more efficiently, more privately, with better payments. Rails and you could see something like the BRCA passing in its current form with that loophole language in just completely curbing this. But if you look at that single example of running a Cashew mint in a trusted execution environment in a secure enclave, it's almost impossible. I think it is impossible for a MIN operator to know anything that's going on with the Mint unless somebody explicitly tells them. But this is like technology I want to see. And it makes you worried for developers like Callie and others working on the protocol. Like, are they going to get in trouble for really pushing the limits of what's possible with this new tech?
- [33:59]
Kyle Olney
Yeah, well, I mean, there's a reason that Kali isn't anon right I mean, he's probably wise to remain in Anon and continue doing what he's doing without attaching his, you know, real world or government identity to, you know, what he's doing. For those of us who are fans of the technology and think that it, you know, ought to be something that we're able to engage with freely, you know, in normal society. But yeah, I think the through line here is so this is, this is kind of like we were talking just before the call and I was trying to sketch this picture and I want to connect the constellation for everybody here. The fight that we're having right now over the BRCA and the Clarity act and the right to utilize open source software that doesn't harm other people is, I think, becoming the primary through line that we're going to experience in all of the technology battles that we're encountering probably for the next at least five years, if not the next decade. Because the action that the US Government took by implementing export controls on the model and the weights that are coming from Anthropic and again, trying to make it in the export control so that it was targeted at individuals of foreign national origin, that is a very scary escalation of the precedent that we were already dealing with in the brca. And it's now taking it and extending it to the level of basically digital id. Right. Like how, you know, part of the reason that it sounds like Anthropic was forced to and we don't really know what happened here, we've seen lots of different characterizations from everybody. And so, you know, kind of there's kind of a fog of war. But nonetheless, what we've been told is that Anthropic couldn't comply with the US Government's edict to restrict access to foreign nationals because they can't even do that easily inside their own company. Right? Like they have foreign nationals who work at Anthropic who have access to the source code they have, you know, they use it every day. They probably have to use it in order to do their job. And so the ability for them to comply with that order just broke right on its face. Even internally inside the company, right on day one, to say nothing of the millions of people around the world who are using the commercial version of the model. And again, that is something that, you know, we've now gone from the level of, you know, kind of export controls on physical hardware chips, you know, things of this nature, to software and ideas, right? And that I think should really scare every American all around the country. Because if you know your ability to access a core tool that most people will need in order to engage in daily civil society moving forward is being controlled by a bureaucrat somewhere who has very limited understanding of the actual technology underneath it, and you're incapable of challenging their restriction. And you can't even be told exactly why or how it's being applied. I don't think that that means that we are sovereign anymore as citizens inside this country. Right, like that. That would seem to argue that, you know, your access to a common tool or commodity that you need in order to live your life exists at the end of the discretion of a state agent and how they feel about your ability to access that technology or that tool today versus tomorrow or next week. And so, yeah, I think that this is a very scary precedent that hopefully is waking up a lot of freedom tech advocates around the world. I know for a fact the last two weeks here in Silicon Valley, a lot of people suddenly woke up and realized the importance of open source software and open source weights and models and open source intelligence in a way that they really hadn't for the prior two and a half or three years of the AI debate that's been going on here in the Valley.
- [38:50]
Marty Bent
Well, expand on that a bit. What are people recognizing? What are they saying? What are they saying as it pertains to anthropics battle with the US Government? And I'll add, it was a bit disconcerting last week to see the reaction of people laughing at Anthropic, which I think to a degree, rightfully so, of Dario being very public about his desire to have this technology licensed and tightly controlled by people on the frontier in collaboration with the governments. And it's almost like a haha, look, you got what you wish for, but you're not going to be the one. Seems like the US Government doesn't want to ordain you as the frontier model that's going to write the licensing regime and really, really push this forward. But a lot of people were throwing shade at Anthropic and David Sacks a lot of respect for him. And obviously he was the crypto and Izar for Trump for a bit there. It's no longer there. But he was giving the governments. He had that tweet. I think he sent it out Friday or Saturday, basically saying, giving the government's perspective is we asked Anthropic to do this, they pushed back. We said, you can't do that, you got to shut it down, blah, blah, blah. But everybody was positioning it as the US Government had the right to do this because Anthropic wasn't playing ball. But to your point, it's like, how do we know what the intent of the U.S. government? It's a slippery slope. If we do it now for this, what kind of precedent does that set? And I think that's one thing that many people are trying to grapple with is again, this idea that on one side you have this incredibly powerful technology. It's nation. Anthropic specifically has fear mongered about the particular model. Mythos. Fable 5, which got export controlled, is a guardrail version of Mythos. But Dario basically said this is the strongest model ever. It's going to destroy all these critical systems. And they had the operation Glass Wing where they gave access to the model to all large software companies to make sure they could harden their systems and operating systems. And it seemed like just observing the amount of software updates have been pushed out in the last few months that they were able to unearth some. And so you have this push pull. It's like they are powerful. Just to play devil's advocate, does the government have a good argument to be made to, to throw export controls on this because it is that powerful? And if so, how do you move forward and ensure that individuals have access to the software without digital ID or anything like that?
- [41:44]
Kyle Olney
Yeah, I mean, there's so much to unpack in this. Based on everything you just said, I guess the first thing I want to touch on and not let just kind of like go by is that clearly the U.S. government and, you know, kind of authorities around the world have an interest in making sure that truly sensitive, existentially dangerous capabilities do not leak through something like a frontier model. Right. I mean, there are real use cases like bioweapons, you know, chemical weapons, things of this nature that like, you know, you just, you don't want any random person with access to an anthropic account to be able to spin up a bioweapons lab that can cause a mass pandemic. That's very obvious. I don't think any of us would disagree with that. I think all rational observers would say, yes, that is a valid and legitimate goal of the US government and authorities to prevent broad impact to their citizens. In this regard, however, I think what we have to do is we have to take a step back and really ask whether the approach that they've taken serves their overall policy objectives. And I think this is the place where they probably missed the mark the hardest. And this is where I would argue that we suffer greatly in Washington D.C. and kind of like legislative policymaking in the United States for there being very few software people on the east coast and in Washington D.C. like they don't really understand the physics of the Internet, they don't understand information theory. It's clear that they don't understand how this is actually going to work once they took the actions that they took. Because I mean, there's a much larger conversation that I'd like to have around the various other pieces of what happened and kind of the impact in Silicon Valley. But like specifically as it relates to the US Government's objectives, right. What are the two things that they would want? They would want the US A sort of regime or model of the world, the US Champions to be the winners, the people who are setting the standard around the world. We don't want to live in a world where Chinese models air quotes are the things that are determining everyday access to intelligence for the average person. And then the second thing is, is it actually effective for preventing the thing that we're discussing, right. Which is the catastrophic tail risk outcomes? So on the first measure, I would say that cutting the world's access to the model and restricting anybody's ability to utilize that model, both inside the country and outside the country clearly is not extending the lead of the American model companies. Right. Like you're literally shutting them down, preventing them from doing business. This prevents more people from adopting that particular technology. It pushes people into competing platforms which are likely to be non American.
- [45:07]
Marty Bent
Right.
- [45:07]
Kyle Olney
And outside of the reach of US jurisdiction. So I would say just on the face of the first objective, clearly it's a failure. Right. You can't really argue that you're advancing the US sort of strategic dominance equation on model adoption or kind of Americanization as the standard when you're restricting everybody from accessing the leading American offering. More importantly, what I would say is that that policy error could make sense in a universe where you actually had secure ability to prevent that information or those capabilities from leaking out elsewhere.
- [45:54]
Podcast Host / Announcer
Right.
- [45:54]
Kyle Olney
Like if you did legitimately have a monopoly on the supply chain or the physical material or any of the kind of skeuomorphic comparisons that we would make to like nuclear enrichment for instance. Right. Like there are specific pieces of technology, specific, you know, production methods, specific, you know, raw materials that need to go into non proliferation. Like those are places where you can execute just a full blanket blackout and probably still maintain control. But again, this is the whole thrust around open source software and information theory and kind of the physics of the Internet, right. Like you can't dictate, you can't stop knowledge from spreading around the world, right? Like that is not something that is really a capability of any state authority, right? Like we, and we know this as Americans, like, you know, the whole idea to win against the Soviet Union was to, you know, drown them in Levi's and rock and roll, right? I mean, and despite the fact that the Russians and the Soviets didn't want those things coming in and kind of disrupting their social system, they did, right? Because you can't stop these things that are decentralized with decentralized production and decentralized distribution from making their way to the average person in any economy or around the world. And so I think the challenge here is that the, at least from the outside, the charitable read would be that the US government understands that they can't prevent this knowledge, this intelligence, this capability from leaking out around the world. And they're kind of just relying on the idea that we're that far ahead of our competitors, that this is maybe buying us around or two around the board before the next guys catch up. But again, if you're paying close attention, you know that the Chinese models are only 30 to 90 days behind the US frontier labs and they've taken an open source approach to the distribution and production of their AI technology. And so they are becoming the global standard, right? If you are somebody in Africa or let's just say the Global south, right? Like South America, Africa, any non G10 G20 country, you can't afford a Frontier model subscription, right? Like the only thing that you're going to be able to afford is an open source model. And so there we've already got the playing field tilted in the direction of, you know, what at the moment are primarily Chinese open source models. Because the US market is not investing at the moment in producing open source intelligence, at least at this moment. A couple years ago, Mark Zuckerberg and Olama and the various things that were happening there, there was a thrust, but they've since faded in their position. And because of this reason, not only would it seem that the Chinese models are going to have wider distribution than the American models from a cost perspective, but now just pure accessibility perspective. The other reality is that we can't stop any of those non American models from eventually converging to the same level of intelligence and capability that the frontier models have. Because at the end of the day, this technology is just kind of a probabilistic engine running over text. And you can't classify probability, you can't classify Text, plain text. Right. Like there's no way to do that without implementing full blown censorship on speech. So, you know, it's kind of an inevitability that capabilities are going to rise in the non American intelligence market. And again, all this is like a very long way of saying, I don't think that either of the US Government's policy objectives were well served by the decision that they made to implement these export controls in the last week. It would seem that they, again, it's kind of a desperate plea to buy time and hope that maybe we can get smarter on the policy internally in the United States in the brief respite that this restriction provides. So that's kind of the challenges. I see it, at least from the geopolitical and kind of like government perspective.
- [50:40]
Marty Bent
What are the people in the valley saying? How scared, how big of a shot across the bow was this?
- [50:47]
Kyle Olney
I mean, it was massive, right? I mean it was almost an eight point earthquake, I would say, right? I mean, the rest of the economy is not fully adopting AI just yet, but everyone here in Silicon Valley is trying to integrate it. Everyone's been token maxing for months now. Right. And actually this is what the lesson that taught everybody why token maxing on proprietary closed source models was not a good idea. So two weeks ago, when Anthropic changed their pricing scheme and basically kind of dropped the veil on what it actually costs to provide inference to the end users, I'm sure you actually, I think I heard you talking about it on one of your prior podcasts. You even had the moment of, hey, this is getting really expensive, like maybe I need to figure out how to lower these costs and make this more tolerable for our business. Right? Like you had that experience, didn't you?
- [51:47]
Marty Bent
Yes, yes.
- [51:48]
Kyle Olney
Yeah. So you know this quite well. Like, and it affected an outfit even of your size, right? Let alone the Ubers and the Facebooks of the world where they, you know, blew through probably a multi hundred million dollar budget for the year in one quarter. The challenge is that these proprietary models are insanely expensive. And they're insanely expensive both on an absolute basis of what it requires to pay for the actual cost of the delivered tokens right now. But also they're incredibly expensive compared to the open source alternatives that you could pull off of the shelf. I think the last number I saw is that they're 10 to 20 times the price per token of what you get from open source intelligence or open weights and models. And so if you are,
- [52:44]
Marty Bent
I used
- [52:44]
Kyle Olney
to work at Uber, so I'll just use Uber as an example here. I don't want to put words in anybody else's mouth. And to be clear, this is a contrived example. He didn't actually say this. I just happened to work at the company previously and I understand how it works and what was going on. So none of these numbers are real. And you know, none of this should be taken as, as, you know, a statement from Uber. But you know, if you're the CTO at Uber, right, and you've got a multi billion dollar budget on a yearly basis, that has to support tens of thousands of engineers who are operating at breakneck pace in 180 countries around the world. And your primary barrier to servicing greater customer demand that you can't even keep up with is how quickly you can ship software and iterate and get it to market and build this deep backlog of features and capabilities that you're going to keep your team busy for the next 10 years. Of course you're going to lean into something like agentic engineering where you can spin up 100 or 1000 agents that can work 24, 7, 365 and do all the things that you need to be done while you're sleeping. Like that's an obvious conclusion, right? The problem is twofold. One, when the real cost of those tokens comes home to roost, as we just saw, all of a sudden the real dollar cost of, oh, this is what it's going to cost me to be a fully agentic engineering organization at enterprise scale. Like, that's 10 or 20 or 50 times what we had budgeted in our capex for engineering spend this year. That's a huge problem. And structurally, you need to refactor that machine in order to make it work, just from a budget P and L perspective. But then the US Government comes along the next week, while Silicon Valley was already digesting, okay, what are we going to do? Maybe this is the equivalent of buying a super expensive machine, but I don't ever need a human to operate the machine again. And so maybe the payoff period is five to eight years, but we get enough on the backside that the upfront costs make sense. People were already furiously working through the economic model of how do we rationalize this? After six months of token maxing, then the government comes along and says, oh yeah, you can't serve that model to anybody in the outside world. You know, shut that thing down immediately. Well, if you're the risk officer or, you know, the CTO or the CFO inside, you know, Uber. And all of a sudden you know, you can't build and ship your product now on a daily basis or your velocity drops by 10x compared to what it was last week and you got no warning that that was going to happen. And you have no idea how long that freeze is going to be implemented. How do you operate a business? Right? This is the very reason that publicly traded companies have a risk management team on the board. And the risk management team often will not let you single source core technology from a provider. You need to have backup providers. Because what happens if this one guy that you use for this thing goes out of business, right? Are you going to have continuity? Are you going to be able to stay in the game? Are you going to be able to continue generating revenue? Like when Uber, when a, you know, again, like a backend service at Uber, right? Like when you're serving at the scale of billions of users, like if you have something that goes down for an hour, you're talking about potentially tens of millions of dollars in lost revenue. I mean, how much impact to velocity, to dollars served, to everything, you know, that the businesses were operating on under the new kind of token maxing model has been lost just since Friday last week. Right. I mean, I would argue that the economic impact across the broad economy is probably totaled in at least the hundreds of millions of dollars at this point. Probably billions. Right? So I'd say like those are the first two layers of the layer cake that everybody in Silicon Valley is kind of working their way through and trying to understand. And again, I think I've seen more people who never understood the purpose or the value of open source software just wake up suddenly once their access to this intelligence model was taken away from them, suddenly with no warning and no clarity around when it's going to return.
- [57:22]
Marty Bent
Yeah, well, that last point is like, when is it going to return? Are they going to allow it to return? What does that mean for anthropic training new models? Do they have any clarity on what they're allowed to train and release?
- [57:35]
Kyle Olney
Yeah, I mean, I don't, I, we don't know what the back room negotiations are like, I guess, between the administration and Anthropic. But, but yeah, I mean, you can imagine that this is, this has got to be damaging for anthropic's business too, right? I mean, again, if you were interested in an American champion being the primary leader of this paradigm, which I would say inarguably, anthropic would seem to be at the moment kneecapping them and putting an Indefinite suspension on their ability to compete with whatever their best product is in the market certainly would not seem to be helping them, you know, be more efficient or more productive or more cash flow generating. Right. Like this can't be good for Anthropic's business. It's definitely not good for any of the people who are using or relying on Anthropic. So again, I think that this level of chaos, we've kind of become accustomed to it a little bit in the Trump administration with all the tariff madness and kind of like the general reordering of the chessboard. But these are really consequential, really meaningful twists and turns on the roller coaster that are, I'd say, shaking everybody up across Silicon Valley. Because everybody, I think, is being forced to ask the question for the first time, like, okay, well, if I don't actually have access to the underlying model or the weights myself, can I put this in any kind of a, you know, critical path workflow in my business when the US Government can just come in and shut it down any day of the week with no warning and. Or Anthropic shutting it down any day of the week for no warning, with no warning. Right. It's, it's kind of the same problem on, you know, just a different impetus or a different person instigating the challenge. So I think all of this is to say that like, you know, open source is poised to really have a moment right now and I think we should really lean in and support that, you know, as Bitcoiners and Americans, because it is really the path to greater liberty and prosperity for everybody in the economy.
- [59:51]
Marty Bent
Well, I do too. But you have to ask the question, if they're doing it to Anthropic, what's to stop them from doing it to any of these open source labs?
- [60:00]
Kyle Olney
Well, I mean, in America, I suppose the argument would be that once you've published the software, it's out there. Right? So I guess they could come preemptively, stop you from trying to publish the software. Or, you know, again, you could end up in the scenario that we are talking about with, you know, with the samurai devs, where they went and talked to a regulator and asked for guidance, they were given guidance, they followed the guidance, and then the government still charged them anyway. We could see that kind of behavior. I mean, I think one of the fears that I certainly have looking at what's going on now is we've been lucky so far to have avoided kind of draconian or onerous state licensing or national security restrictions on this technology until fable. And this would signal to me that there's been a change of feeling in D.C. about the fact that they are going to move in the direction of doing licensing and regulation over intelligence and AI. And I think that that is going to be incredibly dangerous because we know that the government, I mean, here we are 15 years later in Bitcoin and we still don't even have sensible market regulations that we're talking about having been turned into law. Can you imagine, you know, if, if, you know, we have to go, you know, basically the fear that I have is that the government may have learned the lesson in the wrong direction. They think that they waited too long on the bitcoin thing and like now they're going to try to do it way early on the AI side and that's just going to lead to disaster because I think even some of the smartest people in the world on AI don't really know how to land this plane and get it to where we're going. Right. Because the reality is that I don't think we really know. It's kind of like 3D printed guns or something like that.
- [62:00]
Marty Bent
Right.
- [62:01]
Kyle Olney
Like, if it's just information, you know, how do you prevent that information from moving around the world at the speed of light? Right. You kind of have. It's not really something that we understand how to do in the, in the physics of the modern Internet.
- [62:18]
Marty Bent
No. I mean, my hope for this export control move by the government on Anthropic is that it was just a pedantic move stemming from Anthropic's confrontational relationship with the Department of War specifically. And hopefully it was them. I mean, not even hopefully. I guess best case scenario it's the government just saying we're going to shove you in a corner, Anthropic, because you want to give this kill decision, leveraging your technology, which is a fucked up thing to say. But again, I think that's best case scenario. Worst case scenario, it's like, oh, shot across the bow, full licensing regime coming. We're going to completely cuck the models, going to limit the access to these models to certain individuals with certain, that meet certain ID credentials and we're going to very aggressively try to stamp out any development on the open source side because it's systemically dangerous to, to the safety of our country and the children and national health and security.
- [63:34]
Kyle Olney
Yes, well, it's, it somehow is always for the children, you know, but you know, that's the other thing.
- [63:41]
Marty Bent
Like the UK age verification law just Went in.
- [63:45]
Kyle Olney
Yeah, I know this is, and I think this is kind of what I mean about the policy. Policy regime feels like it's shifted now in a kind of scary way. Right? Like the stuff that we're seeing out of the UK with chat control and digital id and you're kind of banning the use of social media under the age of 16, regardless of, you know, kind of your feelings on that last point. Right. Like just the fact that they like how they implement it. Right. The only way to implement it is to create a national ID and to have you sign into every device that you touch with a KYC AML'd identity. Right. That is incredibly terrifying. It should be incredibly terrifying to everybody because that means that every web search, every inference request, every, everything, anytime that you're touching anything with a screen, you're being surveilled, monitored and 100% of your activities are being associated to your, you know, real world identity. Right. Real world government identity. And again, this is something that, you know, as freedom loving Americans who believe in, you know, the right to free speech, you know, and free commerce and free, you know, transactions between two willing parties. Like, I just don't know that we can consent to a regime that looks like that. Right. I mean, again, we've kind of been moving in this, you know, kind of surveillance, total surveillance direction for 25 years now, since September 11th. But we really have to draw a line in the ground somewhere and say enough is enough and start pushing back. And that would be my contention. I mean, I think that the, the importance and the momentous moment that we need to have with Freedom Tech right now, it's never been more important than it has, you know, then it's become, I should say, this month. Right. The only other time I can think of that is even equivalent is, you know, the original encryption wars.
- [65:48]
Marty Bent
Right, Completely agreed. And it's really, I'm sure, just a coincidence that the UK verification laws were sort of rushed to market two days before the UK rape gang inquiry report was released by, by the Restore Britain party. All right, with all this in mind, what's the call to action for the audience out there? I'm very happy that you were able to do this on quick notice because I know that you're on top of this and I think I agree with you that most people don't understand, outside the Valley, at least, don't understand the gravity of the precedents that are being made right now. Like I said earlier, it was disconcerting last week to see everybody cheering on the government's move because they viewed it as like a haha, look, you got what you wish for anthropic. But, but I think if you go a layer deeper, it's much graver than the US government versus anthropic. Specifically. This is a fight for freedom in the information age and he who controls the information is going to have the most power as we continue to transition into this age. And so having the ability to leverage these intelligence tools and give them context that is specific to the information and the data sets that you care about is going to be important to give the individual leverage against stronger forces than himself. And if these licenses, regimes and digital ID get thrust through, the ability to do that is severely hindered and therefore you're not really free at the end of the day and the government has all the power and all the leverage.
- [67:33]
Kyle Olney
Yeah, I mean, I think you said it right, Right. Like if your access to intelligence, if your access to, you know, free kind of unsurveilled money exchange in the broad economy can be revoked by a bureaucrat you've never met for a reason that they don't have to disclose at the drop of a hat, I think that we have to ask whether you actually have rights or whether you are kind of just a permissioned node in the network. Right. So as far as call to action for everybody who would be listening to this, I mean, I think starting at the top, like, first of all, the game's not over with the Clarity act and the brca. I mean, we can still have an impact here. I think it's incumbent upon everybody listening to this. If you haven't already, pick up the phone, call your Congress people and your senators in particular right now, make sure that they know that this is super important to you, that, you know, developer protections and open source software are your most important issue that you care about and that you're going to vote with and that you will not support any candidate who doesn't, you know, share your views in that way. I think, like, that's not a fruitless endeavor, although it is an uphill battle at this point. And I think again, it's like super urgent that people do that as much today as it has been for the last 12 months or so. And then I would say that understanding the connection here to what is now going on in AI and the fact that this is really the same fight and that it's going to continue and extend into AI and your ability to access intelligence freely in the future and utilize it for your own reasons, that is another existential risk that we're staring at right now. And so it's important to make sure that your representatives understand your feelings on this issue. On both of them or how it applies to both of them, I should say. And then I would say, like, getting organized and in the fight and for open source is the next most important thing for everybody to do here, right? Like being, you know, unapologetic about the fact that, you know, as Americans, we deserve access to open source freedom technologies. That is, you know, literally should be our right as citizens of this country based on the social contract that we all sign up for. And it's incredibly important that everybody begin to orient themselves and understand both the value of open source software and freedom technologies in this area that we're moving into. Because if you don't have the ability to run your own model and control your own weights, then you are subject to the whims and fancies of whoever else that's not you controls that model. Whether it's anthropic, saying, well, we've developed mythos, but only a small chosen priesthood of people will get access to it in order to protect themselves from the worst of the effects that we expect to come back from this technology. Or whether it's the US Government saying, well, we just don't think anybody should have access to this. And so we're just going to unilaterally shut it down in a way that nobody can appeal and that there is no due process around. That is just, again, I think, a bridge too far. And it's something that we as Americans, as bitcoiners, as freedom loving, you know, sovereigns in a country that is supposed to be, you know, by, of and for the people should not tolerate.
- [71:44]
Marty Bent
Couldn't have said it better myself. Kyle, thank you for continuing the fight, the good fight. As you made pretty clear, the fight is not over. It may just be beginning. So I'm sure we'll have many more checkups in the future as both these stories progress in parallel.
- [72:03]
Kyle Olney
Awesome. Well, great to be with you, Marty. And yeah, look forward to catching up and continuing the talk about freedom tech and the need for open source software.
- [72:12]
Marty Bent
Oh yeah. Peace and love, freaks.
- [72:13]
Podcast Host / Announcer
Okay, thank you for listening to this episode of tftc. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show and if you can leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and ad free, make sure you download the Fountain podcasting app. You can go to Fountain FM to find that $5 a month gets you every episode a day early ad free helps. The show gives you incredible value, so please consider subscribing via Fountain as well. Thank you for your time and until next time.