Why AI Censorship and Reg NMS Repeal Matter for Crypto Markets: DEX in the City

**Vy Le** (0:00)
So I would say AI is not just slightly scarier.
I would put it on the level of the nuclear bomb because it has civilizational implications. And to me, every time I listen to Jessi's beautiful explanations and analysis of all this stuff, all I think about is, maybe this sounds like very anti-capitalist of me, but I really do think that AI is different than all of those things that you just named KK., right? Like it really is something that I think should not just be left to the private sector. There should be some sort of, I've said this before, but like some sort of public-private collaboration, right? Like similar to what we did with the Manhattan Project and other sorts of efforts, like historically. Like I just think AI is just totally on a different level, that we can't just leave it to the private sector and decide like whether we want to trust them or not. I mean, the answer to that is no, they're a business. We can never fully trust them, right? And so to me, it's just different.

**Katherine Kirkpatrick Bos** (1:03)
Hi all and welcome to DEX in the City, where the wallets are cold and the takes are hot. Before we get going, as always, remember, we're lawyers, but we're not your lawyers. And nothing you hear on DEX in the City is legal or financial advice, and it doesn't create an attorney-client relationship. For the fine print, check unchainedcrypto.com.
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**Katherine Kirkpatrick Bos** (2:06)
We're back. First, we have Jessi, Web3 prosecutor turned Web3 protector at Ribbit Capital, and Vy from the SEC to Web3. I'm your host, Katherine, KK, fluent in TradFi and conversant in deep tech over at StarkWare.
This was one of those weeks, frankly, where we always discuss what are we going to talk about, and some weeks were like, there's a lot of news but nothing worth discussing. This week, I think we had 15 potential topics.
None of them seemed absolutely massive, like not a massive hack or a huge new law, but all of them were significant in their own right. But possibly the most juicy of the topics we discussed, and the craziest topic that we discussed, was so appropriate for this podcast, and our resident AI expert, Jessi. So Jessi, take it away, tell us about this anthropic drama and all of the stuff that is going on in AI this week.

**Jessi Brooks** (3:04)
Finally, my time to shine, letting me go first with my AI update. So essentially, what happened this week is the federal government bricked an AI model. And this happened on Friday afternoon, but the saga has continued into even this morning. So in case you missed it, which I'm sure you didn't if you watch any news, the government forced Anthropic to take Fable 5 and Mythos 5, which are related models, offline globally. And to me, that's not even the most staggering part, because although this started as a cyber risk story, it turned into an export control story. And then in my mind, a KYC story, which I'll get to, know your customer, which we talked about, and then devolved into this crazy personality clash between the admin and a company that may have committed the cardinal sin of having the wrong political vibes, or at least the wrong messaging or messenger.
And to me, this is all not just fun and games for crypto, who can watch from the sideline, because we need to be thinking about the applications as an industry. This is not just an AI story, it's a censorship story, or at least a choke point story. And we know lots about choke points. I think Vy talked a long time, a few episodes ago, about Operation Choke Point 2.0, and it's relevant to bring that context into this, because what happened there in many ways is happening to AI and model access. And so we shouldn't just be sitting here being like, crap, I loved Fable, I can't access it anymore. We should be worrying if the government can use a secret process to shut down a frontier AI model without transparency, notice and comment, any real insight, then we all should be a little bit worried. So with that grounding context, I just want to break down a little bit of what happened for those who weren't paying attention every single second who maybe have a life on the weekends. So Anthropic releases Fable, Fable 5, and it's a more secure version of Bithos, which we talked about the crazy, scary cybersecurity struggling model.