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Pentagon to start using Grok as part of a $200 million deal with Musk's xAI

Pentagon to start using Grok as part of a $200 million deal with Musk's xAI

Yahoo21 hours ago
The Pentagon has signed on to use Grok, the AI chatbot built by Elon Musk's company xAI, as part of a new $200 million agreement that opens the door for its deployment across the federal government, the company announced Monday.
The announcement comes amid Musk's public breakup with President Trump and days after Grok generated antisemitic responses and praised Adolf Hitler.
The rollout is part of "Grok for Government," a newly launched suite of tools designed for use by federal agencies, local governments, and national security operations. xAI said its products, including its latest Grok 4 model, will now be available for purchase through the General Services Administration (GSA), allowing any federal office to adopt the technology.
The move aligns with the Trump administration's push for more aggressive adoption of artificial intelligence across the government. Since taking office in January, Mr. Trump has championed AI as a pillar of national security and innovation.
Musk himself briefly served in the Trump administration earlier this year, overseeing the White House's Department of Government Efficiency, or DOGE, before stepping down in May amid a public break with Mr. Trump over his sweeping tax and spending bill. Musk has since emerged as a sharp critic of that legislation, even floating the idea of launching a third political party.
Despite the rift, xAI has continued to expand its government work. The new offering includes custom national security tools, AI-powered science and health applications, and cleared engineering support for classified environments.
The announcement comes just days after Grok generated antisemitic responses to user prompts and referenced Hitler as part of what the company called an effort to make the model "less politically correct." Hours later, Musk wrote in a post on X that "Grok was too compliant to user prompts. Too eager to please and be manipulated, essentially. That is being addressed."
The posts were later deleted and xAI said it "quickly" patched the issue. One day later, xAI launched an upgraded version of Grok it described as a major leap forward. Musk also announced that Grok would be used in Teslas.
But the latest version was not without kinks, too: Grok checked with Musk's views before answering a question, according to The Associated Press.
Grok was introduced in late 2023 as a more unfiltered alternative to other chatbots like ChatGPT, and is already integrated into Musk's social media platform X, formerly known as Twitter.
"America is the world leader in AI," xAI said in Monday's post announcing the Pentagon deal. "We're excited to contribute back to the country that made xAI uniquely possible here."
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The GENIUS Act Killed Yield-Bearing Stablecoins. That Might Save DeFi
The GENIUS Act Killed Yield-Bearing Stablecoins. That Might Save DeFi

Yahoo

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The GENIUS Act Killed Yield-Bearing Stablecoins. That Might Save DeFi

Congress may pass the most consequential crypto law of the decade this week while drawing a bright red line through one of DeFi's murkiest gray areas: yield-bearing stablecoins. At first glance, the GENIUS Act appears to be a straightforward regulatory win. It will finally grant over $120 billion in fiat-backed stablecoins a legal runway, establishing clear guardrails for what qualifies as a compliant payment stablecoin. But dig into the details and it becomes clear this isn't a broad green light. In fact, under the law's rigorous requirements—segregated reserves, high-quality liquid assets, GAAP attestations—only about 15% of today's stablecoins would actually make the cut. More dramatically, the Act explicitly bans stablecoins from paying interest or yield. This is the first time U.S. lawmakers have drawn a hard line between stablecoins as payment instruments and stablecoins as yield-bearing assets. Overnight, it turns decades of crypto experimentation on its head, pushing DeFi to evolve or risk sliding back into the shadows. For years, DeFi tried to have it both ways: offering 'stable' assets that quietly generated returns, while dodging securities treatment. The GENIUS Act ends that ambiguity. Under the new law, any stablecoin paying yield, whether directly through staking mechanics or indirectly via pseudo-DeFi savings accounts, is now firmly outside the compliant perimeter. In short, yield-bearing stablecoins just got orphaned. Congress frames this as a way to protect U.S. banks. By banning stablecoin interest, lawmakers hope to prevent trillions from fleeing traditional deposits, which underwrite loans to small businesses and consumers. Keeping stablecoins yield-free preserves the basic plumbing of the U.S. credit system. But there's a deeper shift underway. This is no longer just a compliance question. It's a total rethink of collateral credibility at scale. Under GENIUS, all compliant stablecoins must be backed by cash and T-bills with maturities under 93 days. That effectively tilts crypto's reserve strategy toward short-term U.S. fiscal instruments, integrating DeFi more deeply with American monetary policy than most people are ready to admit. We're talking about a market currently around $28.7 trillion in outstanding marketable debt. Concurrently, the stablecoin market exceeds $250 billion in circulation. Therefore, even if just half of that (about $125 billion) pivots into short-term Treasuries, it represents a substantial shift, pushing crypto liquidity directly into U.S. debt markets. During normal times, that keeps the system humming. But in the event of a rate shock, those same flows could reverse violently, triggering liquidity crunches across lending protocols that use USDC or USDP as the so-called 'risk-free leg.' It's a new type of monetary reflexivity: DeFi now moves in sync with the health of the Treasury market. That's both stabilizing and a fresh source of systemic risk. Here's the irony: by outlawing stablecoin yield, the GENIUS Act might actually steer DeFi in a more transparent, durable direction. Without the ability to embed yield directly into stablecoins, protocols are forced to build yield externally. That means using delta-neutral strategies, funding arbitrage, dynamically hedged staking, or open liquidity pools where risk and reward are auditable by anyone. It shifts the contest from 'who can promise the highest APY?' to 'who can build the smartest, most resilient risk engine?' It also draws new moats. Protocols that embrace smart compliance, through embedding AML rails, attestation layers, and token flow whitelists, will unlock this emerging capital corridor and tap institutional liquidity. Everyone else? Segregated on the other side of the regulatory fence, hoping shadow money markets can sustain them. Most founders underestimate how quickly crypto markets reprice regulatory risk. In traditional finance, policy shapes the cost of capital. In DeFi, it will now shape access to capital. Those who ignore these lines will watch partnerships stall, listings vanish, and exit liquidity evaporate as regulation quietly filters out who gets to stay in the game. The GENIUS Act isn't the end of DeFi, but it does end a certain illusion that passive yield could simply be tacked onto stablecoins indefinitely, without transparency or trade-offs. From here on out, those yields have to come from somewhere real, with collateral, disclosures, and rigorous stress tests. That might be the healthiest pivot decentralized finance could make in its current state. Because if DeFi is ever going to complement, or even compete with, traditional financial systems, it can't rely on blurred lines and regulatory gray zones. It has to prove exactly where the yield comes from, how it's managed, and who bears the ultimate risk. The GENIUS Act just made this law. And in the long run, that could be one of the best things to ever happen to this industry.

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