This episode reveals the Federal Reserve's surprising pivot to embrace technological disruption, signaling a new era where AI and stablecoins are not just market forces but central to future monetary policy.
The Macro Debate: A Goldilocks Economy or an AI-Driven Labor Cliff?
- The Bull Case: Ram Aluwalia, founder of Lumida Wealth, presents a data-driven "Goldilocks" scenario. He argues that rising initial unemployment claims are merely seasonal fluctuations, not signs of weakness. Citing strong productivity growth driven by AI, a low 4.1% unemployment rate, and robust corporate earnings, Ram contends the Fed has no urgent need to cut rates.
- The Bear Case: Joseph Shalom, CEO of Servelt (NASDAQ: SVET), offers a forward-looking caution. He highlights the perspective of Fed Governor Christopher Waller, who fears a rapid, hard-to-reverse downturn in the white-collar labor market driven by AI-led disruption. Joseph notes, "There's a fear that when AI starts to materially disrupt... the Fed may want to get ahead of that labor market potential significant downturn." This view suggests the Fed's rate cuts are a preemptive measure against a looming AI-driven labor shock.
Strategic Implication: Investors should monitor both traditional labor statistics and AI adoption rates in knowledge work. The Fed's unprecedented focus on technological disruption as a factor in monetary policy signals that AI's impact on employment is now a primary concern for central bankers.
The Fed's Pro-Innovation Stance: Embracing Stablecoins and AI
- The conversation pivots to a surprising theme: the Federal Reserve is actively encouraging financial innovation. Chris Perkins of CoinFund recounts attending a Fed payments conference where Governor Waller urged attendees to "embrace the disruption."
- This marks a significant shift from the Fed's historically cautious posture. The top two topics at recent Fed payment symposiums were stablecoins and AI, indicating a full-scale modernization effort.
- The speakers agree this is a historically permissive regulatory climate, with Ram calling it "a bigger deal than Glass-Steagall," the 1933 act that separated commercial and investment banking.
- Austin Campbell notes the blurring lines between retail payments, B2B settlement, and global money transfers, driven by these new technologies. He observes, "This may be the first time the Fed's really been front-footed on innovation... trying to truly lead at transforming that system."
Actionable Insight: The Fed's pro-innovation stance creates a favorable macro environment for crypto and AI ventures focused on payments and financial infrastructure. Projects integrating stablecoins and AI for settlement and fraud detection are aligned with the central bank's new direction.
Global Stablecoin Expansion: Japan's Yen Stablecoin Enters the Fray
- The launch of JPYC, the world's first fully-backed yen stablecoin, is analyzed as a major development in the global financial landscape.
- Backed by Japanese Government Bonds (JGBs) and domestic savings, JPYC aims to issue ¥10 trillion (approx. $66 billion) over three years, with involvement from Japan's three mega-banks.
- Joseph Shalom, drawing on his experience at BlackRock, frames this as a defensive move against the U.S. dollar's growing dominance via stablecoins. He argues that USD-backed stablecoins like Tether and USDC create massive structural demand for U.S. Treasuries, reinforcing the dollar's reserve status.
- Chris Perkins highlights the practical utility, recalling the danger of Herstatt Risk—a settlement risk where one party in a foreign exchange trade pays out but does not receive payment from the other. He notes that yen stablecoins can eliminate this risk, making FX markets more efficient.
Strategic Implication: The rise of non-USD stablecoins from major economies like Japan will reshape the $7.5 trillion-per-day FX market. Crypto AI researchers should watch for the development of decentralized FX trading venues and AI-powered arbitrage agents that can operate across these new currency rails.
The Stablecoin Wars: Citi, Coinbase, and Tokenized Deposits
- The focus shifts to U.S. banks, with Citi partnering with Coinbase to test stablecoins for cross-border corporate payments.
- Chris Perkins, a Citi alumnus, explains that this move challenges Citi's traditional "moat"—the correspondent banking system—by embracing real-time settlement.
- A key debate emerges between stablecoins and tokenized deposits, which are digital representations of commercial bank deposits on a blockchain. JPMorgan has favored tokenized deposits, creating a walled garden, while Citi is pursuing a more open, stablecoin-centric strategy.
- Austin Campbell expresses skepticism about tokenized deposits as a universal settlement asset, arguing their non-fungible nature (deposits at different banks carry different credit risks) makes a treasury-backed stablecoin a more practical "least common denominator" for settlement.
Actionable Insight: The strategic divergence between major banks like Citi (stablecoins) and JPMorgan (tokenized deposits) presents a critical trend to monitor. The winning model will likely determine the future architecture of institutional digital finance.
The Future of Payments: AI Agents and Digital Wallets
- The discussion moves beyond institutional use cases to the future of retail and automated payments, driven by digital wallets and AI.
- Joseph Shalom predicts a massive generational shift, particularly outside the U.S., where younger, digitally-native individuals are more likely to adopt a crypto wallet than a traditional bank account for storing and moving money.
- Chris Perkins introduces the concept of AI Agents—autonomous software programs that perform tasks for users—as the next major demographic for payments. He references the X42 standard, which allows agents to conduct micro-payments between themselves.
- Ram Aluwalia envisions a future with specialized agents for tasks like managing subscriptions, ordering food, and executing remittances, all orchestrated through a central system. Joseph adds, "I think it's going to be sooner than we all think that there's going to be some sort of digital wallet twin that understands our preferences."
Actionable Insight: The emergence of an "agentic economy" is a frontier for Crypto AI. Investors and researchers should focus on infrastructure that supports high-throughput, low-cost micro-transactions and the governance frameworks required to manage autonomous economic agents securely.
JPMorgan Capitulates: Accepting Crypto as Collateral
- JPMorgan's announcement that it will accept Bitcoin and Ethereum as loan collateral by the end of 2025 is seen as a watershed moment.
- This move from a firm led by a vocal crypto skeptic, Jamie Dimon, signals deep institutional acceptance and legitimizes Bitcoin and ETH as portfolio assets.
- Joseph Shalom connects this to the broader theme of tokenization, stating that most tokenized assets are being built on Ethereum. He believes this will lead to a "massive differentiation between stablecoins, Bitcoin, and ETH and everything else."
- The development unlocks trillions of dollars in crypto assets for bank financing, allowing holders to gain liquidity without selling and incurring taxes—a common practice for high-net-worth individuals holding traditional assets.
Strategic Implication: The ability to use ETH as collateral at a major bank like JPMorgan dramatically increases its utility. This could pave the way for more complex financial products, such as lending against liquid staking tokens, which are tokens representing staked crypto that remain tradable. This makes ETH a uniquely productive form of collateral compared to Bitcoin.
The CZ Pardon and Its Implications for Binance
- The episode addresses Donald Trump's full pardon of Binance founder Changpeng "CZ" Zhao, who served four months for Bank Secrecy Act violations.
- The speakers highlight the disparate treatment of crypto executives compared to traditional bank leaders, who have overseen similar or worse compliance failures without facing prison time.
- Joseph Shalom predicts the pardon will reinvigorate Binance.US in the first half of next year. He anticipates an aggressive push to gain market share, potentially by finding a legitimate way to link its deep international order books with its U.S. operations, which would pressure competitors like Coinbase.
- Chris Perkins, a military veteran, expresses strong feelings about the need for robust anti-money laundering compliance but agrees there is a clear double standard. He states, "We have much bigger issues than going after a CEO and like why aren't the other CEOs thrown in jail? Double standard for sure."
Actionable Insight: A revitalized and aggressive Binance.US could significantly alter the competitive landscape for crypto exchanges in the United States. Investors should monitor Binance's moves regarding U.S. market entry and its potential impact on the liquidity and fee structures of incumbent exchanges.
A New CFTC Chair: The Path to Regulatory Clarity
- The episode concludes with the nomination of Michael Selig as the new chair of the Commodity Futures Trading Commission (CFTC).
- Selig, formerly of the SEC's crypto task force and an associate of pro-crypto figures like J. Christopher Giancarlo and Paul Atkins, is viewed as a highly positive development for the industry.
- Joseph Shalom sees the nomination as "bullish," anticipating better coordination between the SEC and CFTC and an end to the inter-agency warfare that has stifled innovation.
- Chris Perkins praises Selig's collaborative approach, arguing that coordination is essential for regulating a complex and novel asset class. He emphasizes the urgency: "Let's get to work, guys. We're running out of time. We got a lot to do."
Strategic Implication: A pro-crypto CFTC chair, working in coordination with a potentially reformed SEC, could finally deliver the regulatory clarity the U.S. market needs. This would unlock further institutional investment and provide a more stable environment for builders and researchers.
This episode highlights a critical inflection point where U.S. regulators and financial giants are shifting from resistance to active engagement with crypto and AI. For investors and researchers, this signals a new phase of institutional adoption, creating opportunities in financial infrastructure, AI-driven payments, and the tokenization of real-world assets.
