Is China Secretly Funding the War on US AI Data Centers?

Transcript

There is no greater beneficiary in the entire financial system from US dollar stable coins than JP Morgan Chase. They are the biggest winner. Stable coins are going to bring Euro dollar deposits back. That is going to massively increase trading in treasuries in which JPM is a dominant participant. It is going to massively increase usage and funding advantages in the repo market for US banks of which JP Morgan is both the largest trading party and largest participant. And it's going to give the ability of US banks to reach globally without themselves having to have a branch in every single location. And

what is the largest US bank without an extensive international branch network? JP Morgan, right? And so every sign points to JP Morgan being naturally the biggest supporter of US dollar stable coins globally just from those perspectives before we even get into all the markets implication of doing things like seizing equities market share back from Citadel because you've changed the market structure and can settle with them. So the fact that the guy on top is opposing them tells me good information is not getting up there on frontier topics.

Hey everyone, welcome to Bits and Bits, where we explore how crypto and macro collide [music] one basis point at a time. We're here to discuss the latest stories in the worlds of crypto and macro. But before we begin, >> this episode is brought to you by Cape, America's privacy first mobile carrier. Same premium service you'd expect from any other carrier, but designed so your number, your location, and your data actually stay yours. Get 33% off 6 months at cape.co/unchained.

>> All right, as always, I am your host Austin Campbell, high scholar of Zeronowledge Group. I'm here with my usual co-hosts, Rahm Alawalia, Maester of Wealth, Leader of Lumida, and Chris Perkins, the golden hand of Franklin Crypto. But today we have with us Sam Lyman, head of research at the Bitcoin Policy Institute. And this week we're going to be talking about one of their reports. So just to give everybody some context, um we have CPI that's remained high. We have WS talking about inflation. The House is officially dubbed it crypto week last week. But what hit for us was some news

specifically on data centers, AI and some of the context around market. Now Chris and Rahm and I have been discussing AI and the market for a while on this, but today we have a new report and an author about part of what is going on. So the BPI by SAM released a report on foreign influence in US markets around data centers and AI. We'll call it the Singum ground game this time around. And there is a fully interactive national map of Singum's CCP aligned activist network fighting the US AI buildout as it was described. So in the report we see that the party for

socialism and liberation the PSL ran 21 campaigns across 14 states leading to 10 local moratoria one permanent ban four scrapped and withdrawn projects and it stalled out approximately 23 billion in AI data center involvement. The funding for this was almost entirely undisclosed. So there appear to be three converging vectors here. Chinese state media, Russia's RT, 501c3s that are funded by Singum and the PSL, and two billion through foreign tied charitable vehicles, including the Oak Foundation. The hard data point is

OpenAI banned a cluster of likely Chinese accounts generating anti-AI data center content uh for provincial level government clients. So there has been some push back on this. NPR saying the theory is catching on to quote despite a lack of evidence. They claim it's real rateayer water and grid concerns that predate any foreign money. Um and there's some dismissal by call it labeling uh from the new American Molly White wrote an article the data center gaslighting. The believers want an FBI probe and Sam you have some thoughts on this. So let me start with market context and then Sam I want your account

of the whole thing which is AI buildout has been one of the biggest capex stories out there. You know I saw a chart that one of my friends shared that has it going even faster than canal mania and that the real bottleneck here remains physical space buildout capacity in these data centers. We even have Bitcoin miners who have facilities pivoting into AI power. Uh Trump today fused it all saying clarity plus AI and China are all intertwined. Don't let China win on either subject. So as we're starting there, Sam, outside the OpenAI account clusters, what is the hardest evidence you're finding? What would you

say goes beyond just circumstantial? >> Yeah, happy to dig into that. First, Austin, Chris, and Ron, thank you for having me on. It's great to see you guys. fan of the show. Uh let's dig into this then. So that was one of the biggest questions after the release of our first report. In our first report, we were able to document that indisput indisputably China state English language media has been pushing anti-data center messaging for years at this point. They've been working handin glove with the Singum network nonprofits in order to amplify that messaging across the United States. But that was the biggest question I got after the publication of part one of our report is what is the material impact this is having on the ground. So we took it upon ourselves to answer that question

directly. What we did was we were able to document as you mentioned at the top of the show Austin 21 different case studies where the party for socialism and liberation has had a very significant impact with protests in delaying or stalling data center buildout across the country. So why is this important? The PSL which is a explicitly Marxist Leninist organization uh funded and essentially led by Neville Singham based in Shanghai has been able to block about $ 24 billion in data center buildout here in the United States. So that's significant and that ranges from a whole host of different uh projects stalled or blocked altogether.

So, a great example, I'm based here in Washington DC, right? Just 10 miles up the road, there was a data center that was going to be worth about $5 billion that has been stopped. Uh, and not only has that data center been stopped, but there's been a two-year moratorum declared in Prince George's County where it was going to be built. And who was leading that fight? It was the party for socialism and liberation, which again is Neville Singham's primary political vehicle here in the United States. And again, that's just one case study among 21 where the PSL, this Marxist Londonist organization, was able to stop or significantly delay data center buildout here in the United States. Again, it's a spectrum, but we've seen that they're having a huge impact on the ground that we've even been able to quantify in our

latest report. >> So, I want to dig into that a little bit so that people understand the mechanics of some of these things that you're referring to. When you talk about these referendums, what is the actual functional mechanic here, right? Like are these local government meetings and then council votes? Are we having votes that are put to the people of an entire territory here like say state referendums in California? Like what are the actual on the ground mechanics of blocking these things? >> Great question. It's extremely local. Most of these take place in town halls for example. And I actually saw this play out uh in a job that I had before I went to the Treasury Department. I worked at Riot platforms. Some of your audience may know Riot. It's a Bitcoin

mining and AIHBC company. When I was at Riot a few years ago, we were building a data center in Corsana, Texas, everything was going swimmingly. It seemed like the community was on board until they weren't. Out of nowhere, there was a lot of Facebook opposition to the data center that was being built. And we traced exactly where this opposition was coming from. As it turned out, it was coming from an environmental activist who didn't even live in the city. She came from the city next door. And we looked into what she was doing and her background. And we realized that she had actually partnered with Greenpeace, which at the time Greenpeace had received a huge infusion of cash from a rival cryptocurrency to Bitcoin.

That the explicit purpose of this Greenpeace movement was to FUD or cast fear, uncertainty, and doubt on Bitcoin itself. And so from that experience, that's when I realized we need to follow the money. Um, and in doing so, I was able to translate that follow the money ethos to this national project we're doing right now. But what I'm seeing take place on a national scale is exactly what I saw take place back then. What happens is you'll have a couple environmental activists or just very committed anti-data center activists online. They'll jin up the community and then they'll hold rallies. They'll have petitions and they'll get in some cases hundreds of people to a town hall that typically only has without exaggeration maybe four to five people at any town hall hearing. All of a sudden you have

these town council members who are seeing hundreds of people come to their meetings. You're seeing lines out the door just to get in to protest against a data center project. It's unprecedented in terms of what these council members have seen and it's a numbers game at the end of the day. The town council members see this. They interpret it as mass opposition to these data centers and oftentimes they vote accordingly. >> How many of those people are actually locals, right? Because one of the main push backs that you're going to get here is disambiguation of are these people who live there and have valid concerns and their voices are just being amplified versus how much of this is just straight up astroturfing like concerns that are not real or people from other areas.

>> Yeah, that's an important question and that's a specific point that I want to be clear on. In no way is BPI intimating here that there is not an organic data center movement uh in opposition to data centers. We full wholly recognize that there is an organic movement out there. People have authentic concerns about water usage, electricity consumption. What we have recognized though without a shadow of a doubt is that there is also in parallel to this organic movement an inorganic movement that seems to be funded by foreign actors or people who are aligned with adver adversaries of the United States. And so we're looking at both. And as to your question, who protesting is actually from the specific local where the data center is being built. It's a mixed bag. But a great

example again is Landover, Maryland. Um the specific opposition to that data center project was organized by PSL here in Washington DC, which is close to Landover Maryland, but it's not at all in that jurisdiction. and we realized that it was the PSL chapter here in DC. Again, not in Prince George's County that was driving the petitions and a lot of the opposition to that data center. Another really good case study for this is Boxelder County, Utah. I talked to some people who were on the ground with that specific data center protest and they told me that there were dozens of people there that they never seen in their life and that they were able to see people being bust in or find some kind of transportation to go to Boxelder County, Utah, which I've been there.

it's the middle of nowhere. Uh you have people coming from Salt Lake and other places to protest these data centers. And so it's it's a mix of both. And it's disingenuous to say it's entirely inorganic, but it's also disingenuous to say it's entirely organic because we see elements of both in play. >> Chris, I'm curious what you make of all of this given your background with national security and like how you've been call it structurally looking at these concerns for a long time. I I think it's clear to say that the stakes are super high. Um and and that's really comes down to competition uh with with other nations, particularly China.

Um warfare is changing overnight. Uh the next war I was in a manual war. Uh we're starting to see wars become automated, which is very scary. Um but the fact of the matter is is that that is the future and that's the direction and there's nothing that we can do to put the genie back in the bottle. And so to the extent that you have national competitors, um it makes sense that they may want to slow and delay our processes. And the fact is is that right now I think the Chinese are behind when it comes to chips and compute. Um that's pretty much what people are that that in in some sense I think it may even be a benefit for the Chinese because they're forced to create these open source models. It's almost like the old Soviet uh computer

programmers. The old Soviet computer programmers were the best in the world. Why? They didn't have computers. And so they had to be very very efficient when they got in front of that computer to be perfect. And so I think the Chinese are having to be very efficient in building without some of that compute. Of course, to the extent that um national competitors want to slow down, you know, everything's changing, guys. Like everything is changing. Warfare is changing, finance is changing. I think what bo what continues to bother me is that it's very easy to feed into this natural fear of technology that many people have this natural fear of change and you see across crypto across AI like the people who should be supporting

this technology the most are fighting it and who am I talking about I'm talking about the progressives like crypto on its face is the most um democratizing approach to finance you could It gives people real-time access and yes, there need to be client protections, but it's it's a very progressive technology. AI is absolutely leveling the playing field overnight when it comes to information and education. Um, it's a huge huge opportunity for people who have not had access uh who haven't had like, you know, that opportunity for on the job training because they didn't know somebody. So, this is very progressive technology. And so it's just it's it's just crazy like when you see some of

those pro like progressive technologies coming on with this incredible progress, you know, the some of the progressives saying no, no, we don't like this because it's dangerous. I I think we've got that backwards, but look, this competition is going to get worse before it gets better. Um, and I just think it's pretty interesting that the president once again was out there tweeting about, you know, AI clarity. You know, Lindsey Grahams died. Sorry guys, but we need clarity. We need AI, right? Um, so I think, you know, he he gets it. Um, I think he's right in this case. I don't think he's right about everything, but like we cannot we have to we have to move forward. Um, curious, what is the data? Like obviously the

beginning of Bitcoin, people have said, "Oh, it's consuming more energy than than this country or that country. Power prices are going up. It's g, you know, it's going to kill the water." would be curious like what do the numbers say like you know has this been validated are you know because also in our experience with Bitcoin mining in the past if you're going to be a successful Bitcoin miner or a successful data center you need to drive your energy costs as low as possible so the market works it out u what does the data show right now are these are these concerns around pollution electricity uh what what's the data showing >> utility costs are going up we can do an a prompt but utility costs are going up I I agree with you Chris by the uh you know the progressives are are

light lites on this you know AI is a transformational technology to improve outcomes and raise living standards um you know the other part is that you know this is just very concerning you know the threat to democracy are the institutions of democracy itself and there's kind of a two-prong attack here one is in the digital spaces like you saw with meta we saw this going back to Cambridge Analytica and other online spaces then it's the town hall that town hall attracts a very vocal group. You don't know where they're from and um it shapes the local perception. Um you know these are these are major issues. You know there's reports of paid activism

that's happening to it's hard to get national voter ID in an election much less trying to get some clarity on who represents the local district. So it's it's a major concern. AI is a transformational technology on par of nuclear energy. So of course, China's trying to do whatever they can to undercut American leadership here. China's also advancing deepseek, right? Deepseek is taking greater and greater share of inference. Now, why that matters is if you want to get an intimate view, a first row seat into the thoughts of Americans, you give them AI powered by China. China's already shown a pattern of of hacking

that hasn't relented. Uh, and I hope they respond. They should respond by counter hacking and making public the IP of what they identify from Chinese companies that have an edge in drones and battery battery technology to make the world a better place. >> Yeah. Let me uh chime in like you know in markets if you really want to move a market you go to a a market with low liquidity right that that's what you do and what are we seeing if if you think of elections as a market and I guess they are now with uh with prediction markets you go into the low liquid ones right you go into the early primaries to really shape the outcomes and that's been a very effective tactic >> elections are a market we have Trump token right like it's a market now right

>> it's totally a market but you know what I mean like like that's Why, you know, why are we getting some crazy outcomes? Because no one no one votes in primaries. It's a low liquid market. >> Well, the the interesting part here, and I guess this goes back to Sam, what you were saying about the busing, is moving people from outside the district into the district to create, call it fake opposition, right, to some of these things is the equivalent of spoofing at markets, right? That's not a real trade. As Rahm was saying, you know, the local voter is hard to identify, but they're the people who matters. So, I guess Sam, I'll ask you the question this way. How would a lot of these town halls look if they only allowed in people who actually lived in that town

>> compared to actually happening? >> That's a really good question. I think you would still see high numbers at these data center protests and at these town halls. Definitely lower than they are now, though. What's happening is it's this perfect storm of left-wing activism and right-wing nimiism where there's a lot of people especially in these rural red states that are are very nimi. I mean a lot of us are nimi and you can't can't blame people for being nimi to some extent especially uh when data centers bring with them some of the concerns that have been associated. So typically people on the right don't get out to protest they don't get out to town halls in large numbers. But when you have leftwing activists who are working online to get them there, then

they'll show up in large numbers. And that's what we're seeing take place right now. So even if you were able to prevent the spoofing like you're saying, Austin, I think you would still see a lot of people in these specific local attending these data center protests in large part because the agitation takes place online first. And any kind of agitation that takes place online, borders and boundaries don't matter. It can be somebody in the state over. It can be somebody several states over that's actually jinninging people up. And that's another place where there isn't a lot of transparency um in a potential different avenue for research right now is to what extent are foreign state actors actually working on social media in order to uh increase a lot of

the misinformation about data centers and in order to agitate people and get people to come out to these uh these town halls and these protests. We think there's a fair amount of that taking place, but it's a lot harder to research in an age where VPN is pretty much ubiquitous. >> So, >> for the listeners, uh, just Austin Nimi is, uh, not in my backyard in case people didn't know that. Um, >> go ahead. I was just going to ask what's the solution here, but Austin, what did you have a question? Well, I I was going to say first before we get to solutions, let's draw a parallel to one that we didn't have an effective solution for, which is what you're describing to me sounds a lot like why we got blocked on nuclear power in the United States of America. Which is to say, if you're

really an environmentalist and you understand durability for climate change plus preservation of the environment, you are pro- nuclear power. That is basically the punchline. It is much cleaner than the other forms. Modern nuclear reactors are very safe. Ironically, most of the problems we've had, things like Fukushima, are because we couldn't build the new stuff and continued operating the old stuff that doesn't work the way it should. Because let me tell you right now, we've made a lot of technological advancements from the 1950s to the present. And so on nuclear power in the United States, we really lost the plot. I think only recently have we started to figure out actually wait a minute we should be building a hell of a lot more of this

stuff and like I live in New York City it was clearly an own goal to shut down Indian Point if you look at what's happening with the power grid in the United States and all of the people who advocated for that on environmental grounds shot themselves in the foot and then reloaded and continued firing. So I would ask you what is the potential solution here to avoid the mistakes that we made around nuclear power? Yeah, Austin, that's the perfect parallel. They say that we solved climate change about 80 years ago and then we banned that solution and that was nuclear power. I think nuclear power is an ideal analogy for what we're facing right now because AI has the potential to spread so many benefits across society in a way that progressives should support. I

think the difficulty here in large part comes from the messaging from AI executives themselves. On one hand, you hear that we need to build AI infrastructure and data centers to beat China. Then on the other hand, you have the same executives saying that uh this same artificial intelligence is going to eliminate up to 50% of white collar jobs in the next five years. Who's going to support that? I feel like in large part a lot of the opposition to data centers not only comes from foreign influence, but the call at a certain point is coming from inside the house. You have AI executives who are doing more to spread fear about the technology than they're building than the foreign actors are themselves. And that's something that has to stop immediately. I think those AI executives for years have been

messaging to Wall Street about their technology being the end- all beall. And they've done so at the expense of messaging to Main Street about how this technology will actually materially benefit them in their lives. And there's many ways that we can lay that out right now. For example, we're seeing a bluecollar boom with the AI buildout as we speak. You have about half a million temporary construction jobs that can be directly linked to the AI buildout. In addition to that, you have tens of thousands of permanent data center jobs that will be associated with these data centers being built across the country.

And you have a huge struggle or a huge race to find electricians. There's electricians who have jumped jobs three times over the last 18 months because rates are so high for good electricians. Right now getting these data centers online, people look at only one layer of the AI stack which is the interface with chat GBT and with claude without looking at the whole stack and all the jobs associated with it. And beyond that, we need to help the American people understand that in a in an economy where knowledge becomes to a certain extent democratized and automated. What carries a premium? It's the human being themselves. That need to always have a human being in the loop will only increase as AI becomes more integrated into our economy. So what we're looking

at as with every other technological trend before this one are jobs that are different than the jobs of today but materially better and easier and more human than the jobs of yesterday. I think we saw that with industrialization in the 1800s to the present day. People working a desk job have much easier, better lives than people plowing the fields, for example. I think you're about to see that with AI. It's going to automate a lot of the drudgery that we usually associate with office work to make the work nature itself a lot more human a lot more interpersonal in nature. >> I would add that you need political leadership also. People follow their leaders. Leaders are influential and across both sides of the aisle you have opposition to AI whether that's Ron

DeSantis or or Governor Nuome. So you need political leadership and AI to your point is driving blue collar work and better wages and in the future it's going to enable say a CPA to get 10 times the work or volume done through AI agents. So it's going to benefit American productivity and earnings tremendously. You do need political leadership to get behind this. Trump actually spends more time talking about crypto than AI. I think he needs to dial up more focus on AI.

>> Let's talk briefly about the other thing Trump has been focused on because Sam has to leave at the half hour. Sam, clarity, is it going to pass? >> That has been the question for so many months now, right? My response is I think now or never is the reality of our situation, but I would put the probability of clarity passing in the next few weeks at about 70%. And that's not just wish casting. That's what I'm looking at when I go to these meetings on the Hill and I see the drive and the energy behind this bill. It's all there.

Um, conveniently, we're starting to see a lot of support from hold outs on the left. Um, in particular, there was some concern about BRCA, the blockchain regul regulatory certainty act, uh, which was a critical component of the clarity act in allowing uh, Bitcoin developers to be able to continue to do their jobs. Um there was some resistance from Democrats on that specific aspect of the bill, but just recently we saw that Senator Widen, who's been a leader on a lot of technological issues uh being legislated over the past couple decades, he actually came out and said that the Clarity Act needs to include BRCA. So that's a huge win. I also think with the passing of the late Senator Lindsey Graham, you're going to see even more

momentum for this to happen. Senator Graham was a big advocate for getting this thing across the finish line. We saw Patrick Wit, who is the head of uh digital asset policy at the White House. He talked this morning made a post on X that it's time. It's time to pass this bill. Clearly, President Trump is very much behind it, too. I think they recognize that clarity passing is critical to maintaining our technological edge as a country in addition to leading on AI. So, I think the pieces are coming together. Of course, this is Congress. They say that nothing moves uh members of Congress more than jet fumes. Meaning the call of August recess is looming in the next few weeks. And if anything is going to motivate members to get this thing across the finish line, I think it's

that need to get back to their districts to get home and to start campaigning. And so I do think that we'll get it across the finish line in the next few weeks here. But the probability about 70% right now. >> All right. So, I'm gonna ask you one question before we have to let you go and then Chris and Rah and I can continue to debate this one, which is if you're at 70 now, you're basically telling me, if I'm hearing this right, we're going to pass it by the time we get too far into August because otherwise we go into recess, right? You're not an optimist that we can get this done while everybody is campaigning.

>> I'm I'm not. the legislative window is tightening and that which again is one of the reasons why I think the odds for passing it now are greater. What I've seen with a lot of legislation in the past is as you get closer and closer to that drop deadline, people will move. Uh deals be made at the last minute. You see this frequently with omnibus deals for example. And so because of that I think the odds are greater that'll happen in the next few weeks. Now, if we don't get it across the finish line in the next few weeks, the ability to pass this bill this year is much smaller. I think it probably decreases that point probably down to 35 to 40%. Okay, checks out with me. Deadlines create action.

The question is, are we going to drive this car or just put it in park and walk away and campaign? So, before we argue about this further, Sam, I know you've got to go, so I want to take a moment to say thank you for coming on. appreciate the discussion today. Whether you believe it or not, you should 100% read the BPI report so that you're informed on the topic and have a good think about what's going on there in light of some of the other things going on. With that, for now, we're going to take a quick commercial break and then Rahm and myself and Chris will be back to argue more about Clarity and a few other things.

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number to every app that asks. Go to cape.co/chained and use code unchained for 33% off your first six months. >> All right, everybody. Welcome back. Um, Chris, I want to throw the football over to you on this one because something very interesting around clarity did happen that Sam was alluding to, which is Senator Ron Weiden, Senator from Oregon, Democrat, who was around in some of the original arguments about encryption and structure of the internet, came out and said the BRCA is essential and we need to get that passed. That, I'm going to be honest, was not a signal that I was expecting

from the Democratic side of the House. And it tells me that this debate is starting to transcend the fist fight that we've been having between banks and crypto companies because Widen's point was quite frankly orthogonal to any of their concerns. So, I want to flip this over to you. He's been involved much more in the national security angle of these discussions in the past and the privacy and human rights angle. What do you make of those people starting to pile in and have a louder voice around the clarity debate right now? >> I was on with a bank today uh and they were like, "Damn it, I need the Clarity Act." I met a bank last week and they said, "I need the Clarity Act." Guess what, guys? The banks need the Clarity

Act. And I'm like, "Why aren't you out there like marketing this? Let's go do some joint marketing. I want the Clarity Act as well." Um, so I think you're starting to see a lot of folks are starting to really think and be like, "Wait a second. Stuff's here anyway." You know, we're getting clarity from these regulators. The Clarity Act would really help me deploy resources. And most of all, it gives you federal preeemption, right? As these banks are starting to think about their businesses, they don't want to go to every state and figure out how to operate. It's very complex. One of them has asked me today, "Hey, Chris, where do your traders sit?"

And I'm like, "Really? that that's really what you need to know. And so they're starting to realize the benefits of getting that federal preeemption through clarity. What we're looking for is as follows. We're looking for a vote. And if we can get to a point where we have a vote, then people have to go on the record. And I think if you come out against clarity, um, you better have a real good reason. And yes, they'll they'll they'll say, "Oh, ethics this and ethics that." Everybody knows that ethics needs to be addressed across all asset classes. Uh and so I think I don't think that's fair. I think the country is much better off and you know, God help you. If you vote against it, then history will look poorly on you and

maybe so will um some of the you know, fair shake and others that you're going into midterms. So I I think it's a very bullish time. Now, we all know as you get towards the end, things get really weird. people come out of the woodwork in support that you don't expect when people who you think support are going to come out and and say I'm against it because they have something else that they want politically. So things get weird towards the end. Uh my question for you guys is I've always been Yeah, I think for the last three or four months I' I've kind of pushed into the 51% I think it gets done. You guys have been on the other side of that. Are you are you with me or are you against me?

So, I'll say I remain less than 50%. But I hope we get it done. What gives me heartburn, Chris, is exactly what you were saying about how a vote is going to play out at the end, which is if you put this on the floor and you expose it to the amendment process, which I think you're going to need to do to get to a vote in the Senate, I think the contentious part ultimately does come down to the ethics thing. I was higher and then the Trump crypto disclosures pushed me lower again. I think it creates a very hard setup to get any Democratic votes if you're not going to include some sort of pretty strong ethics language along with the

bill. And I think the problem of the voting history will be if the Republicans vote down the ethics amendment and the Democrats were a monolithic yes and then you vote on the bill and it's Republicans yes and no Democrats. I think that makes it very hard for somebody like Fairshake to go pick a fight in the midterm elections because you're essentially saying we think corruption should be legal as a political stance. Like it the message is much more contentious than you would think if the Democrats were yes on every single other part and that's the hill everybody dies on. So to me the question ultimately of does this move is two things which is one just can we get it done timing wise with Iran kicking up

and everything else going on and by the way two senators just knocked out right now because Lindsey Graham died of a heart attack and Mitch McConnell is still incapacitated and not available for voting. And I will remind everybody the average age of a US senator is approximately 113 which is why this keeps happening. like do we have the bodies literally to get this vote done is question number one. But then question number two is does something break in the interim. The Senate calendar is very tight right now. Like we do need to get this to a floor with the right language to get to a vote. The thing I think people have also gotten really broken on Chris as you were alluding to earlier is the financial interests. Most of the banks

in America deeply benefit from the Clarity Act just as they will figure out over time they are the beneficiaries of the Genius Act. Right? Like more money coming back out of the Euro dollar market to onshore to fund US banking operations is a net good. More trading activity moving from offshore to onshore to fund the US economy is a net good. The banks genuinely don't know what they're talking about here. I've talked with senior leadership at many of them and I consistently without naming names get told things that are factually false about how these markets work. They are not informed participants. So I worry the two-part of are we going to shoot

ourselves in the foot out of ignorance and do we just have enough time before we even get to ethics and maybe none of those individually is a more than 50% but when you do the combined probability I end up at less than 50% that it passes. I'm I'm with Austin on the less than 50%. I had a a lunch with uh one of these crypto super lawyers that goes to DC and advises these policy think tanks and he said, "Hey, Rahm, it's not in the interests of policy makers and politicians to get this done. Especially if you were appointed by fair shake, they need to extract the rents for the next election.

You need to maintain a state of war. You need to keep climbing up the hill. You need to keep jinninging up uh anger and focus and motivation to shake Silicon Valley and the lobby to write big checks. These politicians, that's how Washington DC works. They don't have an incentive to get this pass. Who's who got them elected in the last cycle? And their pol and their rankings are even lower now. They want points for looking as if they want to get a pass. Then at the end it'll say, "Nope, sorry we couldn't get there. We need your help. I'm going to text you a thousand times till you make a contribution."

>> I uh I'm going to suggest something to the fair shake, pro- crypto, and pro- modernization folks that I have not seen enough people realize. if you're actually trying to get things done as opposed to playing into the exact dynamic that Rahm was just talking about which is this. The number one predictor of whether a politician supports crypto and clarity or not is age. There are very pro- crypto Democrats who actually have a superior understanding of this issue to the median Republican. And if you don't believe me, go talk to Richie Torres and his staff, right? Like the

dividing line is actually age. If you really want this legislation to move in the medium term or the long term, here is the tactic that will work. Primary, anybody who is over the age of 65, right? Your preference function for politicians should be people who grew up when the internet was becoming a thing, not people who are still skeptical of PayPal, even though it's 2026. The dividing line is age. If you want this to move, get rid of the super old people.

>> Uh, where do you stand on that, Austin? Which side of the of the fence are you on? I'm just kidding. There's some old people that are good, too. there. But if you took as a heristic, get rid of everybody over the age of 65 spot on 100%. >> Look, look at all the constructive Democrats, right? Like Senator Gillibrand, right, has been one. She gets what's going on. Oaf in Georgia, GGO, Cortez Mastro, right? Like as you look at all of this, it's really the Elizabeth Warren camp that was never really comfortable with electronic commerce and kind of secretly wishes everything would go back to paper tickets that are the ones who are the problems here, right? Like you know the

American banking system was mythologically perfect at some point in the past and we should preserve it in amber and always remain there. >> Yeah. Remember in the internet era there was a lot of fear around putting your credit card online to purchase a good or service. Now we take that for granted and you're seeing the same let out reaction across modern technology. >> We definitely are. And speaking of like a segment of people that remain, for lack of a better way to put it, somewhat lites, like Rahm, you were talking in our chat earlier about bank earnings, right? And so let let's talk about what's going on there and what's coming.

>> Is the master of the transition. I don't know how he does it. >> I just I just >> That was beautiful. That was like the pass that should have been made to Harland on Saturday. Did you guys see that? I'm not even Norwegian, but I felt I felt that in my gut like how how did that happen? So, yeah, look, you know, banks are bank earnings are coming up starting tomorrow. We're going to have a lot of major mega center banks reporting. Banks are the single best way to read the economy. Forget about the non-firm payroll. Forget about the ISM. Forget about the government published data is now being generated by essentially political appointees. It gives you a real-time view in the economy. I expect it what what it'll say is what it said last quarter and the

quarter before that and a year ago and two years before that which is that the consumer is strong. The consumer continues to spend year-over-year. Account balances are up. Consumer wealth is up. Credit delinquencies are low. And I think that's what you're going to see. Now bank bank stocks already rallied into this over the last three weeks in anticipation which also happens fairly consistent quarter quarter. But we're going to get a live real-time pulse on the economy. Uh, from everything I'm seeing, it's a it's no longer a K-shaped economy. You know, the top half, the bottom half, they're both doing well. We might see an AI shaped economy come soon where it's either you're on the side of

AI or you're not on the side of AI. >> Yeah. But right now, everyone's on the side of AI because of all the blue collar work that's being created. >> Yeah. Like for example, like I had I had an Uber driver this weekend and I said, you know, driverless cars going to dist intermediate this technology. He wasn't really appreciating that. We had a debate. I said, but this is going to happen. Like pick your year. Is it two years or three years or four years? Uh I had another chat uh with another individual who has an explosive business providing AI tooling for small businesses that want to be AI relevant.

Imagine having a new web page that's uh chatbot enabled for example or AI agents uh that are capturing notes from calls and providing insights to the salesforce. So I do think banks are unusually strong beneficiaries of AI technology. You're going to see that through lower cost of servicing better underwriting. Imagine you're a life insurance company. Your patients are also going to live longer through better health care options and better technology biotechnology. So it's I think an unusually beneficial story for financials. Financials are an AI beneficiary.

>> Well, I want I agree that No, I was going to say I agree. The consumer is strong. Uh we'll have a number of different uh interesting data that hits the markets this week. But there's one area I think the market's wrong. And I've I've thought this for a while. Um markets are predicting a potential rate hike this year. And I just don't see how it happens. I I I I would love to get your perspective. I think it's going to be very challenging for Kevin Wars to come in uh and raise rates. And and now look, I I think we have some some temporary challenges. Uh you know, oil, WTI, and Brent spiked today because of the renewed Iran hostilities. I do think

we're going to settle into a new normal over time. Um and like you know, bombs away every few weeks. this is going to be the reality of the situation for a while. Um, it will reach a stasis, but like we haven't seen oil hit 200 like people were were suggesting. Um, yes, the consumer is strong, but like politically I just don't see, you know, I I I just don't see a scenario where where he's able to hike rates. I I >> maybe I'm wrong. >> Yeah, I I agree. You know, in the beginning, Wars has got to come out hawkish to establish his >> Yeah, for sure. That's what he's doing now. And he needs to see what we're seeing now, which is that the market is expecting rate hikes. That means he's

doing his job in establishing credibility. >> Then we get to some time pass, see the price of oil drop, see inflation measures improve, and then they're not going to cut. He got the message from Trump, and this is a well discussed topic. >> Yeah. So I I think you he's doing exactly what you'd expect. you know, speak hawkishly, carry a big stick and uh and I think that's very constructive to our for for markets. >> So, to backfill with a little data here, right, as we're looking at banks and what it's saying about the markets and then we'll we'll get into inflation in the rates curve. Currently, consensus on the street for earnings per share year-over-year. Bofa is plus 27%. City

is plus almost 39%. Wells Fargo is plus 12%. JPM is plus 11%. I think all of that is very interesting if you thought this was a K-shaped economy because those are broad consumer-based banks. >> Another one, by the way, is you're looking at bank stocks to keep an eye on if you're really monitoring the consumer is going to be Capital One given the mix of their business. So, keep an eye on their results as well. >> Well said. I mean, all over the world banks are doing well by the way in the Euro zone. >> Yeah. Barclays, HSBC, Santender in Spain, UBS in Switzerland, in Brazil, the banks are doing well in South Korea, in Japan. So we have a global economic

boom. This is characteristic of lay stage. It doesn't mean that parties, but this is what lay stage looks like. So this is like you should be fully invested in joining the earnings growth, but keep an eye on inflation. Another thing that I would say is I think back to your point on inflation, long rates have been somewhat sticky. Like they were going up, they've come back down, right? But nobody's getting them back to three right now. Those are the thing that remains elevated. And what that tells me like as a former rates trader is I think the market is reading the rates hike probabilities wrong. Right? because everybody looks at the frontend rates and assumes, oh, that's a linear sort of like interpolation to one cut. And I don't

think that's what it's telling you. You've got to look at the V surface as well. I think what the market is telling us is we mostly think the prediction is flat with a very small but nonzero probability that something really breaks, right? And that's how you get one rate hike of 25 bips predicted is what it's really telling you is we think there is a small but nonzero probability that something like Iran really causes a huge problem and you have a huge whiplash in rates because like not just the straight of hormuz but like they really throw hands and like now all of Saudi Arabia's capacity is offline right and so that is a v thing right and people look at the

rates curve and price it is linear. But if I told you take Apple, let's say we found out there was some sort of critical blocker for the production of all iPhones and Macs and Apple services with a 1% chance that it happens. That's not me predicting a 1% decline in Apple sales. That's me predicting a 1% chance of a wipeout. Those are two very different things. So Chris, when I look at the rates curve, I think what's being priced in there right now is not that people think with strong like conviction that there's one hike or maybe two hikes coming. I think it's them predicting the tail risk of how unstable the geopolitical situation is. Does that make sense to you as to how I'm reading

that? >> Uh I think that's a read. Uh I I don't know if it's the right read. Again, I think the markets probably got this one wrong. Uh which makes me pretty excited. if you look at frontier assets um hard not to be >> and but look you never know Iran could is there's a lot of uncertainty there uh I personally feel like things are settling um like I said once once the market understands and digests it uh pipelines rewire US starts pumping um you know get Venezuela online you know the market will find a balance and we haven't we just haven't seen uh some of those fear-mongerers ing predictions come to pass.

>> I mean, I would say I think you're definitely correct that the market is having a hard time digesting information. This year, I've seen senior leaders from some of these large institutions saying things that are almost with certainty factually false more often than I have in the past. And it tells me that good information is not always getting up there. Like to go back to clarity, a great example of this has been Jamie Diamond constantly hammering on stable coins because with all due respect to Jamie as somebody who's a longtime JPMmer myself, you've got this one totally wrong on stable coins, I will say it this way. There is no

greater beneficiary in the entire financial system from US dollar stable coins than JP Morgan Chase. They are the biggest winner. Stable coins are going to bring Euro dollar deposits back. That is going to massively increase trading and treasuries in which JPM is a dominant participant. It is going to massively increase usage and funding advantages in the repo market for US banks of which JP Morgan is both the largest trading party and largest participant. And it's going to give the ability of US banks to reach globally without themselves having to have a branch in every single location. And

what is the largest US bank without an extensive international branch network? JP Morgan, right? And so every sign points to JP Morgan being naturally the biggest supporter of US dollar stable coins globally just from those perspectives before we even get into all the markets implication of doing things like seizing equities market share back from Citadel because you've changed the market structure and can settle with them. So the fact that the guy on top is opposing them tells me good information is not getting up there on frontier topics.

Yeah, that that that said, I I hear you. But we still have a problem with utility on stable coins. We can move them around really quickly, but no one wants to hold them. And in fact, they're designed so that you don't hold them. That's the whole idea of suppressing interest. And so we I I guess my question to you, Austin, based on what you just stated was, how do we overcome that? When does the utility arrive? when can you go and buy a cup of coffee with a stable coin uh without having to throw a credit card in the in in the middle of it and charge that vendor 3%. Like that's the missing link. We haven't seen that utility manifest itself, that last mile utility.

And I I I just don't get it. Like, you know, I I do get uh tokenized money market funds. Look where I sit. I I I totally understand that. I understand the yield to the holder. But again, why who who's going to be comfortable using an asset when the interest goes to Jeremy or Brian or maybe Jamie someday? They want it themselves. So So how do we solve that last that that that end mile issue? >> So I think let's disambiguate the problem of interest from the last mile issue because the last mile issue fundamentally is an atoms and technology issue around how do merchants accept payments? Right? If you go to your average grocery store, if you go to like

an electronics retailer, if you go to buy a basketball, they don't really want to think particularly hard about the internal guts and depths of financial technology. They just want stuff to work. And consumers kind of have that same problem from the other perspective. Like I don't want to have to go somewhere, right? Like walk down the street, you know, to buy a coffee and have to think deeply about optimization around payments market. I just want to tap my phone and walk away with >> just want to tap just >> so that is a chokepoint problem of where the distribution occurs from the physical device providers and the payment service providers. Right? That's Visa, that's Mastercard, that's Square.

And the question there is one of economics and distribution in the United States. But I'm saying that's one particular vertical. Nobody involved in that cares a lot about the interests to be totally honest on those balances with those kinds of transactions. The other side of that is very different. Rahm, you want to hop in? >> Two thoughts. Yes. Something I'm passionate about. This is a real opportunity to improve outcomes for merchants and consumers, right? Interchange income, which funds our rewards points, is a tax on the consumer. We get it in the form of rewards points, but we're getting less back than we ultimately pay out. This is one of those incredible opportunities for digital assets that VCs and founders have not focused on. So, there are two ways to look at this. Back in the day,

some of you may remember, I know Austin, you definitely know this, um, Chris, you know this, we had this concept called coupons. Remember coupons? coupons. They're merchant offers, merchant provided discounts. That's what you need to see as opposed to card issuer provided rewards benefits. Do we see this today? Well, you do see in buy now pay later and there's a way for this to happen because the gross margin for a retailer is about 30 to 50%.

Their net margins are about 1%. They barely eek out year-over-year. talking about like a Macy's or a corner of Bodega Delhi, the gross margins are high because they have high margin on their inventory. It's just that after all their fixed costs, wages and locking up inventory, etc. They barely make any money. Now, that interchange, that credit card swipe fee is like two to three points. If they could get that back, they could double triple their earnings because that low net margin gets a solid boost from Better payments. So merchant offers and coupons are a way to do this. There's art in the market of this happening. There have been some credit card firms that have tried to offer coupons and rewards in the statements. Uh consumers need to shift

their behavior uh for this to happen. Um it's it's a great opportunity though. This is the kind of thing that would benefit mainstream America. Like Bessin should be thinking about this stuff. Like AMX is part of an obligopy along with Visa and Mastercard. They legitimately are an igopoly. There's antitrust that goes after them every 10 years and it gets beaten back because they have deep political connections to Washington DC. The other gap on this unlock is access to credit and control of the merchant. So I was in Walmart for July 4th trying to get some fireworks for the bicesentennial. I tried to use Apple Pay. They said no, we do not accept Apple Pay. Why? Because Walmart forces payment on their own platform.

They don't want to share the economics with Apple. Walmart has that control. Other small merchants don't have that kind of control. [clears throat] And credit is the other aspect. The reason why it works in buy now pay later is the merchant can say, "Look, I'm going to give you uh credit because my margin can finance the credit. I got 50% margin. I want to send sell this refrigerator for $3,000. I'll even take on some credit risk because if I lose 10 points on credit, I have enough margin to make it up for that. So these are the issues around this. There's an amazing startup to be built addressing this problem or consortium that gets after this problem.

I haven't really seen traction against it unfortunately. Well, I would suggest there are some places that get traction and the interesting part of it is sometimes it comes from the consumer side of things like if you look at, you know, what Rackerton is doing for instance, which is unionizing consumers to get cash back out of merchants. I do think there are some unlocks here. But Ron, back to your point of like why the market structure is this way, we also have some regulatory hooks around card acceptance in the United States that is to some extent government enforced. So all of these technologies are entering a very delicate equilibrium where we've spent like 20 years stacking plates in very particular ways and moving any one part of it can cause large parts of this

hill to tumble down is the other part of why I think it's so sticky. But Chris, that goes back to your point on the interest too, right? Like banks are fighting this interest part because they see themselves potentially losing balances that they pay zero on while ignoring the flank of everybody sort of weaponizing government money market funds against them in different ways like Fidelity's cash management project. For for those of you who don't know this, you can go to Fidelity and open a cash management account where you're going to get a debit card, banking details, and they hold all your money in the Fidelity government money market fund. that is a superior product to most banking things out there and over time that will just grind away and grind away

and grind away to make that thing work. All of it comes down to banks got kind of fat and happy in the zero rates environment. Don't want to raise deposit rates. But if you go back to the 90s, banks were not mostly paying people zero. >> That's right. >> All right. So Chris, I'm gonna bring this all the way back around to you because now you're at Franklin. Franklin Templeton has an interestbearing tokenized government money market fund, right? If you are somebody in the United States right now, what can you use that for? How can you get your hands on it?

And what would you want to do with that to make this problem better? Yeah, I I I have to be careful about how I I talk about our our various uh I guess strategies, but we have look, we have an incredible technology. It's called Benji technology. What does it do? It it unlocks the power of crypto uh that allows these types of products to pay intraday to exchange amongst users 247. U it unlocks what we've talked about many times in this show, the benefits of crypto. Um and and again 24/7 globally accessible in many cases depending if you're KYC it or not. Uh intraday programmable yield to the minute very cool stuff. Um so yeah I think we're one of many that have

strategies and technology platforms that allow us to deliver this kind of stuff. You're going to see more of it. But like what do we talk about this show all the time? What does it come down to guys? It comes down to yield and sometimes it comes down to leverage. That's what like you think about those two things. you design products with uh those two things and that's what the consumer wants over and over again. Uh this obviously doesn't have uh many of these technologies don't have leverage but those are the big themes that we continue to see in crypto and finance. >> All right. So on that note, next week we'll probably have a much better idea of clarity is going to be moving or not. So keep your eye on that ball. But until then thank you for joining us for this episode of Bits and

Bips. We will be back in one week to discuss more about how the worlds of crypto, macro, and probably Washington DC are colliding. So [music] until then everyone, thank you. Thank you for watching and hope you enjoyed this episode of Bits and Bips. Just remember, nothing we say here is investment advice. And please check unchanged crypto.com/bitsandbips for more disclosures. Hey hey

hey. Hey hey hey.