Kyle Olney: Open Source Is the Last Line of Defense
Transcript — TFTC
Article: https://www.tftc.io/kyle-olney-open-source-last-line-of-defense
Transcript page: https://www.tftc.io/kyle-olney-open-source-last-line-of-defense-transcript
Published: 2026-08-05
Machine transcription, lightly cleaned; may contain errors.
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[0:01] Marty Bent: Kyle Olney, I welcome you back to the show, but under under some pretty heady circumstances here, we've got we've got a battle for for freedom in the digital aid. It's it's raging on. Probably more more More pressing than it was when we spoke last November.

[0:20] Kyle Olney: Yeah, absolutely. The the battle for the future of Freedom Tech is now.

[0:26] Marty Bent: Yeah. And I think AI is really accelerating the battle. And that's I actually it's one thing I'd be interested to get your thoughts on 'cause I I think I've described AI as equally exhilarating and unnerving. It's typically in the context of my gosh, this is so powerful. It's so cool playing with these tools. I've been able to do more than I ever thought would be possible as a one man team playing with a clanker, not the number one man team. We have a six person team here at TFTC, but I think you catch my drift. And it's unnerving 'cause it's like, gosh, what's this going to mean for the state of the job market if if this is truly disruptive?

[1:52] Kyle Olney: Yeah. I mean, I think you nailed it right on the head, like the whole world changed in the last two weeks, out here in Silicon Valley at least, right on the front lines of what's happening with AI, both you know, with the anthropic change on the pricing models and people kind of being forced to confront the real cost of tokens that they're using. and then, you know, in very quick succession, the US government, you know, coming in to you know pull back and implement export controls on Fable Five and you know kind of the newest class of models that Anthropic had released. It's heads are spinning, heads are spinning out here in Silicon Valley and people are still trying to figure out what this actually means and and kind of where things are going.

[3:31] Marty Bent: Yeah, let's start with BRCA and Clarity, because I think that's taken a backseat to the AI stuff in the last month as as everybody sort of looks at the sable rattling between Anthropic and the US government and obviously last week's actions by the US government with those export controls. But I think the last I heard on BRCA and Clarity was that it's getting held up in an ethics committee because they want some language in the bill about insider trading or the the ability of the Trump family specifically to play with with any of these assets. And then the other one was the law enforcement blockchain association letter that went out a couple weeks ago where you had, I think, a couple hundred law enforcement officials sign a letter basically saying we want clarity because we've been promised that it's gonna expand the Patriot Act to make it much easier to track people using this.

[4:31] Kyle Olney: yeah, it was it was quite a quite a turn of events to to see a bunch of law enforcement officials coming out in favor of clarity. but yeah, you you kinda hit it on the head. So there are a number of different counterbailing issues. I don't know how many of these that we discussed in in November, but as you just mentioned, there's kind of the overarching issue that it you know has been I I would say more navel gazing for the last, you know, nine months, which is, you know, Coinbase and you know, kind of the stable yields fight against Wall Street. you know, that's one dominant thread that is still unresolved.

[6:52] Kyle Olney: you know, developers and basically you know, kind of in inviolates the safe harbor in circumstances where, you know, the government deems that you had knowledge or should have had knowledge of your ability to be helping nefarious actors you know, with the technology, which, you know, I I've said elsewhere, but you know, to me as a a builder, as a you know, entrepreneur or somebody who's, you know, been involved in the building of this technology, like that feels like a loophole big enough to drive a truck through, and should be very concerning to everybody. And then yes, the third issue, as you just mentioned, which n nobody really knows how it's gonna land because it's all kind of up to one man, is the ethics concerns.

[8:35] Marty Bent: Yeah, what what is it er is Congress in a recess right now? Are people on the hill or

[8:39] Kyle Olney: I believe the Senate is actually in town this week, but Congress is off this week. Then Congress will come back for a couple weeks, and then we basically have the fourth of July holiday and and the summer recess. So there's less than thirty days left in the legislative calendar before we, you know, actually get to the election season. and you know, we've now I think blown past six self created deadlines for getting this bill done over the last nine months. And you know, the latest deadline that they were hoping for was to get it on President Trump's desk by July fourth. that clearly is not gonna happen.

[10:07] Marty Bent: Yeah well i i it would look like a signature win for Trump, but as it stands today, I don't think it would be a sign signature win for Bitcoin or specifically.

[10:16] Kyle Olney: No. I mean, yeah, if we I would say that we've marched right up to the line of what is tolerable or acceptable to Bitcoiners, with the latest carve outs in that BRCA provision, six four in the bill. Yep.

[10:33] Marty Bent: Well, dive into that specifically. Like what what is the car about? And OU loosely characterized it, but what are the specific things they're leaning into?

[10:43] Kyle Olney: Yeah, well s I don't have the language right in front of me. I'd have to pull it up. But basically the clause that was added to the to section six four of you know, which is the BRCA section of the Clarity Act, was basically this language that says that the safe har well, so actually maybe to take one step back. The original construction of the BRCA was that it created a safe harbor for developers of open source software so that they didn't have to fear prosecution. under any circumstance if they w never took custody of customer funds. Right? So that's a pretty clear, bright line that everybody would be able to understand.

[13:00] Marty Bent: Well, I think it's important to bring up the precedent that's been set here already, which would completely I mean, if it gets passed with that language would render it completely ineffective 'cause Roman Storm, right, th in his case, they were using an email that he never responded to as evidence that he had knowledge that somebody nefarious may have been using Tornado Cache, correct?

[15:45] Kyle Olney: would seem to just be completely violated and kind of you know thrown in the bin by trying to take this approach that they're trying to to take by having their cake and eating it too. And so this is actually kind of the worst of all policy outcomes in my opinion. It's it's where we've come to the point where if anything were to happen with this bill or or rather if this bill were to be passed even with its current language, It's unclear that this would even stop or forestall the desire for blockchain developers to leave the United States, exit the US jurisdiction, and go elsewhere, and practice you know, or build their companies in places where you know, that threat of prosecution just doesn't exist.

[16:34] Marty Bent: Well, I mean I've seen the lawyers, I saw Peter Volkenberg and Zack Shapiro making the intent case. And it's like, well, you can say that it's really hard to prove intent, but like again, samurai devs are in jail, Roman Storms on trial. Like they they without the language even existing there, they they sort inferred intent. And again, that I think the Roman Storm case of he had an email in his inbox that he never responded to and saying if you check the emb email like you knew it was happening, therefore you're guilty. And so it's it's complete bullshit in my mind. I think it's a non starter in terms of actually protecting devs.

[17:54] Kyle Olney: Yeah, exactly. I th I think at this point, you know, the odds of this bill getting passed even in its current language is pretty low. and we know for a fact that it can't pass in its current language. Right? Like we know for a fact that the Democrats in the Senate are going to try to weaken the BRCA even further, because to them, even the current carve out that allows prosecutors, you know, kind of this loophole to continue charging people for violating, you know, kind of you know, whatever theory, legal theory they can come up with around, you know, facilitating bad intents or bad actions in the real world.

[20:16] Kyle Olney: you know, again, I think as Bitcoiners we we kind of find onerous and yeah, abhorrent. So yeah, it's it's challenging times for freedom lovers in the blockchain community.

[20:20] Marty Bent: Yeah. Yeah, well we were talking about the BSA on the first episode and how that should really be the the focus is is repealing the Bank Secrecy Act. And since then we've met in person and had had a dinner in Austin and I think there was an update on your end from the the language of the Bank Secrecy Act and particularly the appeal Was there appeal the Supreme Court in the seventies or eighties? And what what's this story? Because there is it seems like there's a chink in the armor of the BSA that we didn't talk about the first time you were on that lead wanted to lean into and has to do with I think reasonable like reasonable amounts of of lower thresholds of triggers that would trigger a s suspicious activity report.

[21:01] Kyle Olney: Yeah. Yeah, so you know, I guess I'll caveat by saying I am not a lawyer, and this does not constitute legal advice. But I am a legal nerd, I suppose. almost went to law school, so I'm very interested in such things. And yeah, I mean I think without turning this entire episode into a BSA episode, I guess what I would say is that the Both the legislative and the judicial history of the Bank Secrecy Act raise a lot of questions about how it has been applied and extended in the modern era. And there are a number of concerns that people who like I and you and others who have looked at this, and I should say a a lot of the other policy organizations, again like Peter von Wolkenberg Coin Center has been quite vocal about this over the years.

[23:48] Kyle Olney: song and dance about it, right? I mean, it's and it was all because of, you know, the the SAR reporting and BSA flags and all of these sorts of things that have to happen in the background, which are just massive compliance overhead headaches for the banks. I mean, again, as a kind of former bank regulator in in a prior life, like, you know, my per personal opinion is that you don't even need these kind of surveillance tools that the BSA provides you know at in order to do proper regulation, it's really just an excuse to dragnet surveil everybody in broader society. And I back to the the kind of jurisprudence of of the BSA, you know, there were two challenges that happened in the seventies after it was first passed.

[26:11] Kyle Olney: Again, I d I just think that like if you were to look at kind of the original construction intent of the bill, we've drifted so far away from it. And if you were to show, you know, the justices in the seventies who, you know, f barely found the BSA passable in the contemporary moment, what has happened today, and how it's being applied, I think they they would flip the table, frankly. And so I think, you know, broadly, broadly speaking, I think that we should feel the same way as Bitcoiners and we should push back and do everything that we can to to fight against this, you know, you know, what I would call an unconstitutional invasion of our privacy rights.

[26:48] Marty Bent: Not even just as Bitcoiners, just as Americans. You should flip the table. We should take it back to the Supreme Court. the reasonable threshold of ten thousand dollars that existed back in the seventies and was a point of contention for for justices who thought at the time, like, the amount of people that are making a ten thousand dollar transaction so low, it doesn't really bother anybody. But today that would be interesting data to get. I'm sure somebody's run the numbers, but the frequency of ten thousand dollar payments on a daily basis today versus nineteen seventy and adjust that for population and I'm sure it's still orders of magnitude higher.

[27:26] Kyle Olney: Yeah, well, and I think again, kind of more importantly to the point, like it's really theater, right? It's kabuki theater, even in its current incarnation, because we see people like Jeffrey Epstein getting a thousand suspicious activity reports from bank compliance officers moving a billion plus dollars through the pipes over a 10 year span, and literally nothing was done about it. So if you needed more proof that you know they're not really using these suspicious activity reports, at least not proactively, for, you know, kind of their stated purpose. I don't know what better example you could find than that one.

[28:07] Marty Bent: Yeah. And bridging this back to section six four of the BRCA and maybe a segue bridge to the AI conversation too. It's like I'm sure you've been paying attention to it, but like what Calais has been doing with Cashew, particularly with the ability to run a mint in a trusted execution environment, which would completely separate the mint operator from anybody using it. Like they would have no visibility into this. And I think we discussed this in November when you were first on, but we have the ability to re architect the banking infrastructure on top of Bitcoin natively in a new way, more efficiently, more privately, with better payments rails.

[29:24] Kyle Olney: Yeah. Yeah, well I mean there's a reason that Cali isn't an Anon. right. I mean I he's probably wise to remain in Anon and continue doing what he's doing without attaching his, you know, r real world or government identity to you know what he's doing for those of us who are fans of the technology and and think that it, you know, ought to be something that we're able to engage with freely, you know, in normal society. But yeah, I I think the through line here is so this is this is kind of like, you know, we were talking just before the call and I I was trying to like kind of s sketch this picture and and I want to like, you know, kind of connect the constellation for everybody here, right?

[31:57] Kyle Olney: easy easily inside their own company, right? Like they have foreign nationals who work at Anthropic, who have access to the source code. They have, you know, they use it every day. They probably have to use it in order to do their job. And so the ability for them to comply with that order just broke right on its face, even internally inside the company, right? On day one, to say nothing of the millions of people around the world who are using the the commercial version of the model. And again, that is something that you know we've now gone from the level of you know kind of export controls on physical hardware, chips, you know, things of this nature to software and ideas, right?

[34:24] Marty Bent: Well expand on that a bit. What what are people recognizing? What are they saying? what are they saying as it pertains to Anthropic's battle with the US government? And I'll I'll add that it was a bit disconcerting last week to see the reaction of people laughing at Anthropic, which I think to a degree rightfully so, of Dario being very public about his desire to have this technology licensed and tightly controlled by people on the frontier in collaboration with the governments and it's a almost like a ha ha look, you got what you wish for. but you you're not gonna be the one. It seems like the US government doesn't wanna ordain you as the the frontier model that's gonna write the licensing regime and really, really push this forward.

[36:42] Marty Bent: it seemed like just observing the amount of software updates that have been pushed out in the last few months that they were able to unearth some. And so you this this push pull where it's like they are powerful. And just to play devil's advocate, does the government have a good argument to be made to to to throw export controls on this because it is that powerful? And if so, how do you move forward and ensure that individuals have access to to the software without digital ID or anything like that.

[37:18] Kyle Olney: Yeah, I mean there's there's so much to unpack in this, based on everything you just said. I guess the first thing I want to touch on and and not let just kind of like go by is that clearly the US government and you know kind of authorities around the world have an interest in making sure that truly sensitive, existentially dangerous capabilities do not leak through something like a frontier model. right. I mean, there are real use cases like bioweapons, you know, chemical weapons, things of this nature that like, you know, you just you don't want any random person with access to a, you know, an anthropic account to be able to spin up a bioweapons lab that can cause a mass pandemic.

[39:44] Kyle Olney: air quotes, are you know the things that are determining you know everyday access to intelligence for the average person. And then the second thing is like, you know, is it actually effective for preventing the thing that we're discussing, right? Which is the catastrophic tail risk outcomes. So on the first measure, you know, I would say that cutting the world's access to the model and restricting anybody's ability to utilize that model in both inside the country and outside the country, clearly is not extending the lead of the American model companies, right? Like you're literally shutting them down, preventing them from doing business. This prevents more people from adopting that particular technology.

[42:05] Kyle Olney: Thrust around open source software and information theory and kind of the physics of the internet, right? Like you can't dictate, you can't stop knowledge from spreading around the world, right? Like that is not something that is really a a capability of any state authority, right? Like we and we know this as Americans. Like we, you know, the whole idea to win against the Soviet Union was to, you know, drown them in Levi's and rock and roll, right? I mean, and Despite the fact that, you know, the Russians and you know the the Soviets didn't want those things coming in and kind of disrupting their social, you know, system, they did, right?

[44:27] Kyle Olney: Zuckerberg and kind of Obama and you know the various things that were happening there, and there was a thrust, but they've since kind of faded in their position. And because of this reason, not only would it seem that the Chinese models are going to have wider distribution than the American models from like a cost perspective, but now just pure accessibility perspective. the other reality is that we can't stop any of those non American models from eventually converging to the same level of intelligence and capability that the Frontier models have. you know, because at the end of the day, this technology is just kind of a probabilistic engine, right?

[46:14] Marty Bent: What are the people in the valley saying? How scared? How how how big of a shot across the bow was this?

[46:20] Kyle Olney: I mean it was massive, right? I mean, it was almost a an eight point earthquake, I would say, right? I mean, the the rest of the economy is not fully adopting AI just yet, but you know, everyone here in Silicon Valley is trying to integrate it. Everyone's been token maxing for months now, right? And and actually this is what the lesson you know that taught everybody why token maxing on proprietary closed source models was not a good idea. So two weeks ago, when Anthropic changed their pricing scheme and basically, you know, kind of dropped the veil on what it actually costs to provide inference to the end users. I'm sure you actually I think I heard you talking about it on one of your prior podcasts. You had even had the moment of hey, this is getting really expensive. Like maybe I need to figure out how to lower these costs and and make this more more tolerable for our business, right? Like you had that experience, didn't you?

[47:20] Marty Bent: Yes, yes.

[47:22] Kyle Olney: Yeah, so you know this quite well. Like, and it affected, you know, you know, an outfit even of your size, right? Let alone the Ubers and the Facebooks of the world where they, you know, blew through a probably a multi-hundred million dollar budget for the year, you know, in one quarter. Right. The challenge is that these proprietary models are insanely expensive. and they're insanely expensive both in on an absolute basis of like what it requires to pay for the actual cost of the delivered tokens right now. But also they're incredibly expensive compared to the open sour source alternatives that you could pull off of the shelf.

[49:42] Kyle Olney: Be a fully agentic engineering organization at enterprise scale, like that's 10 or 20 or 50 times what we had budgeted in our CapEx for engineering spend this year. Like that's a huge problem. And structurally, you need to refactor that machine in order to make it work just from a budget PL perspective. But then the US government comes along the next week. while Silicon Valley was already digesting, like, okay, like what are we gonna do? Maybe this is the equivalent of buying a super expensive machine, but like I don't ever need a human to operate the machine again. And so, like, maybe the payoff period is like, you know, five to eight years, but like we get enough, you know, on the backside that it like the you know, upfront costs make sense.

[52:03] Kyle Olney: you know that the businesses we're operating on under the new kind of token maxing model has been lost just since Friday last week. Right. I mean, I would argue that the economic impact across the broad economy is probably totaled in at least the hundreds of millions of dollars at this point. Probably billions. Right? so I'd say like those are the first two layers of you know the layer cake that everybody in Silicon Valley is kind of working their way through and trying to understand. and again, I think like I've seen more people who did who never understood the the purpose or the value of open source software just wake up suddenly once their access to this intelligence model was taken away from them. Suddenly, with no warning and no clarity around when it's going to return.

[52:56] Marty Bent: Yeah. Well th that last point is like when is it gonna return? Are they gonna allow it to return? Like what does that mean for anthropic training new models? Like do they have any clarity on what they're allowed to train and release and

[53:08] Kyle Olney: Yeah, I mean I don't I we don't know what the backroom negotiations are like, I guess, between the administration and Anthropic. But but yeah, I mean you can imagine that this is this has gotta be damaging for Anthropic's business too. Right. I mean, again, if you were interested in an American champion being the primary leader of this paradigm, which I would say inarguably anthropic would seem to be at the moment, kneecapping them and putting an indefinite suspension on their ability to compete with whatever their best product is in the market certainly would not seem to be helping them you know, be more efficient or more productive or more cash flow generating.

[55:24] Marty Bent: Well I do too, but you have to ask the question, if they're doing it to anthropic, what's to stop them from doing it to any of these open source labs?

[55:33] Kyle Olney: Well, I mean, i in America, I suppose the argument would be that once you've published the software, it's out there, right? so I guess they could come preemptively stop you from trying to publish the software or you know, again you could end up in the scenario that we are talking about with you know with the samurai devs where they went and talked to a regulator and asked for guidance. They were given guidance, they followed the guidance and then the government still charged them anyway. you know, we could see that kind of behavior. I mean, I think one of the fears that I certainly have looking at what's going on now is, you know, we've been lucky f so far to have avoided kind of draconian or onerous you know, state licensing or you know, national security restrictions on this technology until Fable.

[57:51] Marty Bent: No, I mean my hope for this export control move by the government on Anthropic is that it was just a p pedantic move, stemming from Anthropic's sort of confrontational relationship with the Department of War specifically. And hopefully it was them. I mean not even hopefully, I mean I guess best case scenario, it's the government just saying we're gonna shove you in a quarter anthropic because you wanna give a skill decision leveraging your technology. which is a fucked up thing to say. But again, I think that's best case scenario. Worst case scenario it's like, shot across the bowel, full licensing regime coming, we're gonna completely cuck the models, gonna limit the access to these models to certain individuals with certain that meet certain ID credentials. and we're gonna very aggressively try to stamp out any development on the open source side because it's systemically dangerous to to the safety of our country and the children and national health and security.

[59:08] Kyle Olney: Yes. Well it's it somehow is always for the children. you know, if you but you know it

[59:13] Marty Bent: That's the other thing. Like the UK age verification laws just went in.

[59:19] Kyle Olney: Yeah, I know. This is and I think this is kind of what I mean about the policy policy regime feels like it's shifted now in a kind of scary way, right? Like the stuff that we're seeing out of the UK with chat control and digital ID and you know kind of banning the use of social media under the age of sixteen, regardless of, you know, kind of your feelings on that last point, right, like just the fact that they like the how they implement it. Right. The only way to implement it is to create a national ID and to have you sign into every device that you touch with a KYCAML identity.

[1:01:22] Marty Bent: Completely. Completely agreed. And it's really I'm sure just a coincidence that the UK age verification laws were sort of rushed to market two days before the the UK rape gang inquiry report was released by by the the restore Britain party. all right, with all this in mind, what's the call to action for the audience out there? I I I'm very happy that you were able to do this on quick notice because I I know that you're on top of this. And I I I I think I agree with you that most people don't understand, outside the valley at least, don't understand the gravity of the precedents that are being made right now.

[1:03:06] Kyle Olney: Yeah, I mean I think you said it right, right? Like if your access to intelligence, if your access to, you know, free, you know, kind of unsurveilled money exchange in the broad economy can be revoked by a bureaucrat you've never met for a reason that they don't have to disclose at the drop of a hat. I think that we have to ask, like, whether you you actually have rights. or whether you, you know, are kind of just a permissioned node in the network. Right. So you know as far as call to action for everybody who would be listening to this, I mean, I think starting at the top, like, first of all, the game's not over with the Clarity Act and the BRCA.

[1:05:27] Kyle Olney: i is the next most important thing for everybody to do here. right. Like being you know unapologetic about the fact that, you know, as Americans, we deserve access to open source freedom technologies. that is, you know, literally should be our right, you know, as as citizens of this country based on, you know, the social contract that we all sign up for. and It's incredibly important that everybody begin to orient themselves and understand you know both the value of open source software and freedom technologies in this area that we're moving into, because if you don't have the ability to run your own model and control your own weights, then you are subject to the whims and fancies of whoever else that's not you controls that model.

[1:07:18] Marty Bent: Couldn't have said it better myself, Kyle. thank you for continuing the fight, the good fight. As you made pretty clear the fight is not over. It may be just be beginning, so I'm sure we'll have many more checkups in the future as both these stories progress in parallel.

[1:07:36] Kyle Olney: Awesome. Well, great to be with you, Marty. And yeah, look forward to catching up and and continuing the the talk about Freedom Tech and the need for open source software.

[1:07:46] Marty Bent: yeah. Peace and love freaks. Take a