Crypto’s Hope for Trump’s Presidency? Bank Accounts

Summary

WSJ What’s News: Crypto’s Hope for Trump’s Presidency? Bank Accounts Release Date: December 12, 2024

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1. Business Restructuring: Warner Brothers Discovery

Warner Brothers Discovery is undergoing a significant restructuring to enhance its competitive edge in the entertainment industry. The company is splitting into two distinct operating divisions:

• Legacy Cable TV: Focusing on traditional cable television services.
• Streaming and Studios: Dedicated to the growing streaming market and film production.

Alex Osula reported, “Warner Brothers Discovery set its restructuring into two operating divisions... seeking to persuade Wall Street that it's set up to compete with other entertainment industry giants and deep-pocketed streaming rivals” (00:31).

The reorganization aims to finalize by mid-2025, positioning the company for potential future mergers or acquisitions, following the speculative media chatter since its April 2022 merger with Blockbuster.

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2. Inflation Concerns Amid Upcoming Trump Administration

Recent economic data has shown a rise in producer prices, signaling potential inflationary pressures:

• Producer Price Index (PPI): Increased by 0.4% in November, surpassing economists' expectations.
• Year-over-Year PPI: Rose by 3%, the highest since February 2023.

These inflation indicators have led to a decline in US stock indexes, with the Dow and S&P 500 dipping by approximately 0.5%, and the Nasdaq falling around 0.7% (02:00).

Justin Layhart, WSJ Economics Reporter, highlighted the complexities of addressing inflation, stating:

“It's really tricky... what economists would say would really help cool inflation are things that take a long time to take hold” (02:53).

President Elect Donald Trump has pledged to mitigate inflation, but economists express skepticism about the feasibility of impactful measures within a four-year term.

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3. Cryptocurrency's Hope Under Trump's Potential Presidency

The crypto industry is hopeful that a Trump administration may foster a more favorable banking environment for cryptocurrency firms. Following the 2022 collapse of major crypto entities like FTX, traditional banks have retreated from serving crypto companies, creating significant operational challenges.

Angel Ao Yang, WSJ Finance Reporter, elaborates:

“The status of the relationships between the banks and the crypto industry is it's still on shaky ground...” (04:57).

Crypto firms are advocating for regulatory changes that categorize crypto clients differently, potentially easing banks' hesitations to engage with them. Legislative efforts are underway, with a House-passed crypto regulation bill awaiting Senate approval. The new crypto and AI czar, David Sachs, has expressed support for this legislation, signaling potential regulatory shifts.

Moreover, there is growing congressional interest, with crypto leaders briefing staffers on the challenges of being "debanked." This advocacy could lead to hearings or investigations aimed at addressing the banking obstacles facing the crypto sector.

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4. Impact of Blocked Kroger-Albertsons Merger on Advertising Networks

The anticipated merger between Kroger and Albertsons has been halted by a judge on antitrust grounds, prompting Albertsons to sue Kroger for alleged breach of contractual obligations. This development affects not only their grocery operations but also their burgeoning advertising businesses.

Patrick Coffey, WSJ Marketing and Advertising Reporter, explains:

“In recent years we've had an explosion of what's called retail media networks... Kroger predicts 20% annual growth for their ad sales platform this year” (08:43).

The merger aimed to create a formidable retail media network capable of competing with giants like Walmart Connect. With the merger blocked, both Kroger and Albertsons may face challenges in scaling their advertising operations, potentially hindering their ability to compete with larger rivals such as Walmart and Amazon.

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5. Department of Government Efficiency (DOGE) Attracts Unconventional Applicants

The newly established Department of Government Efficiency (DOGE), announced by President Elect Donald Trump, is focusing on reducing federal spending and bureaucracy. Interestingly, the department is attracting applicants willing to work 80-hour weeks without pay.

Joseph de Avila, WSJ Reporter, notes:

“A lot of folks talked about getting less money spent by the federal government, getting spending more under control, and working on simplifying regulations... some of them come from looking at it at a sort of patriotic duty” (10:52).

The roles are primarily appealing to entrepreneurs, startup veterans, and retired executives who are motivated by the opportunity to contribute to national efficiency initiatives, despite the demanding work conditions and lack of compensation.

Neither DOGE nor the Trump transition team has responded to requests for comment regarding these recruitment efforts.

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6. New Travel Requirements for Europe

Starting January 8, travelers from the US to Europe will face enhanced entry procedures:

• United Kingdom: Travelers must complete an online authorization form, costing £10 (approximately $13), valid for two years.
• European Union: Visitors to over 25 EU countries, including Italy, France, and Spain, will undergo facial and fingerprint scanning, integrated into a new digital registration system.

These measures aim to bolster security and streamline immigration processes but represent additional hurdles for American travelers planning visits to Europe next year.

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Notable Quotes:

• Alex Osula: “You could have less regulation... improve the skills of the US Workforce... develop technologies. Again, these are really long-term solutions” (02:53).
• Angel Ao Yang: “The messaging is not as loud as that... they were just sent a letter with a very vague reason” (05:32).
• Patrick Coffey: “Combined, the company would have been a formidable competitor to Walmart Connect... and now neither one of them comes anywhere close” (09:59).

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Conclusion

This episode of What’s News from The Wall Street Journal delves into significant business restructurings, economic challenges linked to inflation, and the critical intersection of cryptocurrency with traditional banking under a potential Trump administration. Additionally, it covers the ramifications of blocked major mergers in the retail sector, the unconventional recruitment strategies of a new government department, and upcoming travel regulations affecting American tourists in Europe. Each segment provides insightful analysis and expert commentary, offering listeners a comprehensive overview of pressing current events that influence global markets and political landscapes.

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Produced by Anthony Bansi and Pierre Biename, with supervising producer Michael Kosmidis.

Transcript

[Podcast Host]

How is AI pushing the boundaries of what's possible, not just in the way we live and work, but in addressing some of humanity's toughest challenges? Find out in the latest episode of AI that Means Business, a new podcast from Google and custom content from WSJ.

[Alex Osula]

A restructuring of entertainment giant Warner Brothers Discovery could better position it for deal making down the road, and people involved in cryptocurrency are hoping that the incoming Trump administration will help them finally get bank accounts.

[Angel Ao Yang]

While they want themselves to be an alternate banking infrastructure, they themselves still depend on traditional banks on running their companies.

[Alex Osula]

Plus interested in working 80 hours a week for no pay. That's what the new Department of Government Efficiency is promising applicants and it's got people saying sign me up. It's Thursday, December 12th. I'm Alex Osula for the Wall Street Journal. This is the PM edition of what's the top headlines and business stories that move the world today. We're starting off this evening with some business news. Warner Brothers Discovery set its restructuring into two operating divisions, one focused on the legacy cable TV business and the other on streaming and studios. The proposed reorganization comes as the company seeks to persuade Wall street that it's set up to compete with other entertainment industry giants and deep pocketed streaming rivals. Ever since Warner emerged from a Blockbuster merger in April 2022, there's been speculation in the media world that it would eventually be an acquisition target or combine with another company to build scale. Warner said it expects the new structure to be in place by the middle of 2025. Producer prices in the US a measure of the prices businesses receive for their goods and services, rose by 0.4% in November from a month earlier, a bigger increase than economists were expecting. The Labor Department said the rise was driven by a jump in goods prices. The PPI increased 3% from a year earlier. It's the largest year over year increase since February 2023. In US markets today, stock indexes declined in lackluster trading after the latest inflation reading left intact the case for another interest rate cut. The Dow and The S&P 500 were down about half a percent, while the Nasdaq fell about 0.7%. Inflation played a starring role in the election, and President Elect Donald Trump has said that he will cool things off despite his pledges. Economists worry that some of his plans, like those on tariffs and immigration, might do just the oppos. Any rise in inflation, even a small one, could matter a lot to consumers who are still angry about higher prices. So what can Trump, or indeed any president do about inflation. Wall Street Journal economics reporter Justin Layhart told our your Money Briefing podcast that taking meaningful action isn't straightforward.

[Justin Layhart]

It's really tricky. Presidents have in the past tried to attack inflation. The results have really been mixed. When it comes down to it, what economists would say would really help cool inflation are things that take a long time to take hold. You could have less regulation. That takes time to make its way into the economy. You could improve the skills of the US Workforce. That takes even longer. Right? That's educating workers. You could set up things that create incentives to make firms more efficient, to improve productivity, to develop technologies. Again, these are really long term solutions, not things that you can really get done in the space of just four years.

[Alex Osula]

You can hear more about that story in tomorrow's episode of youf Money Briefing. Coming up, why the crypto industry is hoping that the Trump administration could give them a new in with banks. That's after the break.

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[Alex Osula]

Crypto is hoping for a fresh start with the banking industry. After the 2022 collapse of firms like FTX, many banks backed away from crypto companies. But banking is a big issue for crypto, and so people inside it are looking ahead to the Trump administration. They're hoping for new regulators who champion crypto assets at banks and a change to the policy that urges banks to consider a client's reputation. The question is, will banks engage? Angel A.O. young covers finance at the Wall Street Journal. Angel what does the relationship between the banking industry and crypto look like right now?

[Angel Ao Yang]

Right now, the status of the relationships between the banks and the crypto industry is it's still on shaky ground in 2022 after the collapses of FTX and various other crypto lenders. That really led to the government putting pressure on banks to be more wary of crypto clients or taking on crypto assets. And according to sources and insiders in the industry, that message really hasn't changed from the government.

[Alex Osula]

So when banks refuse to do business with a crypto firm, what exactly does that look like? Do they say in big red letters? No thanks.

[Angel Ao Yang]

The messaging is not as loud as that. From what I've been told by folks who have actually experienced this, there wasn't a message that was, because your assets come from cryptocurrency or because you run a crypto firm, we're going to shut down your accounts. They either got no messaging or they were just sent a letter with a very vague reason as to why their accounts are being closed. It was all very opaque. According to the folks who actually experienced this.

[Alex Osula]

What levers could regulators actually pull here?

[Angel Ao Yang]

So in 2022, after the collapses of FTX and the crypto lenders, what regulators essentially did was just issue formal public statements that categorized certain customers as higher risk. So in this situation, if there really is an issue of the crypto industry being targeted, of debanking policies, the regulators could basically de categorize certain customers as higher risk.

[Alex Osula]

And how about Congress? Are they looking at this issue too?

[Angel Ao Yang]

Yes, they are. In the last couple of weeks, there's been a lot of renewed attention on this issue based on public statements that folks like venture investor Marc Andreessen made on the Joe Rogan podcast messages on X that Elon Musk and other crypto founders have posted. So there has been enough attention and enough of a pressure campaign from these insiders to grab the attention of certain congressional leaders. From what we understand, there have been crypto founders, crypto CEOs, who have been invited to D.C. to basically brief congressional staffers on their experience as a being debanked because of the industry that they operate in. Whether or not this is going to lead to an investigation, to an actual hearing, it's still too early to tell. But we do know that congressional staffers are being debriefed. This issue of debanking is one issue that the insiders want them to address. The crypto industry has also been asking for a set of regulations for years now. Right now there is a bill that lays out a specific form of crypto regulation that has passed the House, has not reached the Senate for a vote, and the Biden administration had previously said that they were against that bill. And this bill is industry backed, and we've got a new crypto and AI czar in David Sachs. And he has publicly said that this is a piece of legislation that he supports. So that is another item that crypto insiders will want the Trump administration to push forward.

[Alex Osula]

That was Wall Street Journal finance reporter Angel Ao Yang. As we mentioned in the last couple of days, the proposed merger of America's two biggest supermarket operators, Kroger and Albertsons, ended in Acrimony. This week, a judge blocked the deal on antitrust grounds. And the next day, Albertsons sued Kroger for allegedly not fulfilling its contractual obligations. It's not only the company's grocery business that will be affected, it's also their advertising businesses. Patrick Coffey, who covers marketing and advertising for the Wall Street Journal, is here to tell us more. Patrick, how does advertising work in supermarkets like Kroger and Albertsons?

[Patrick Coffey]

Well, Alex, in recent years we've had an explosion of what's called retail media networks. And essentially any company that can collect data from its own customers can then pool and sell that data to advertisers. You think of a grocery store like Kroger, for example, they have all kinds of information about who shops in their physical stores, who shops on their websites, in the case of Walmart, like, who watches things on their streaming platform. And they can then sell that data to advertisers in order to help them target ads on their websites in their physical store in the form of, like, digital display ads targeted to people as they walk by and then on other sites around the Web.

[Alex Osula]

How important is this really to the businesses of these supermarkets?

[Patrick Coffey]

Well, it's a very small percentage of their overall revenue, but it's also one of the fastest growing parts of their business. The costs are much lower and the profit margins much higher than groceries, which growth has pretty much been flat. Kroger, for example, predicts 20% annual growth for their ad sales platform this year.

[Alex Osula]

So now that this merger isn't going to happen, what does it mean potentially for these supermarkets? Ability to compete, especially with rivals like Walmart and Amazon.

[Patrick Coffey]

One of the motivations behind the proposed merger was to make them a larger ad sales network. As one of the experts told me, combined, the company would have been a formidable competitor to Walmart Connect, which is Walmart's ad sales platform. And now neither one of them comes anywhere close.

[Alex Osula]

That was Wall Street Journal reporter Patrick Coffee. Hopeful candidates have begun applying for what seems to be a pretty unappealing job. It's 80 hours a week and no pay. That's what Elon Musk and Vivek Ramaswamy's new Department of Government Efficiency, or doge, is promising those joining the new initiative. President Elect Donald Trump announced its creation last month with the goal of cutting federal spending and bureaucracy. WSJ reporter Joseph de Avila spoke with some of the people vying for a spot on the new team. To understand why they want in, DOGE.

[Podcast Host]

Is drawing a pretty wide applicate pool entrepreneurs, people who did startups who came from corporate backgrounds where they're executives nearing retirement or they were at a point in their career where they can afford to not get paid for an extended period of time. A lot of folks talked about getting less money spent by the federal government, getting spending more under control, and working on simplifying regulations. This is a big kind of motivating factor where folks feel like they have a skillset that they could use to help out in this area. Some of them come from looking at it at a sort of patriotic duty to help the nation get better with this big, ambitious project.

[Alex Osula]

Neither the Dogex account nor the Trump transition team return requests for comment. Finally, Americans planning to visit Europe next year will have to jump through some new hoops to do so. Starting on January 8, travelers to the UK will need to fill out an online authorization form ahead of their trip. The application costs 10 pounds, or a little under $13, and is good for two years. And those headed to more than 25 countries in the European Union, including Italy, France and Spain, will also face new regulations. Travelers will have their faces and fingerprints scanned and logged into a new digital registration system. The new requirements will likely begin next year, and that's what's news for this Thursday afternoon. Today's show was produced by Anthony Bansi and Pierre Biename, with supervising producer Michael Kosmidis. I'm Alex Zocella for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.