Before its spectacular collapse in November 2022, crypto exchange FTX paid seven whistleblowers a combined $25 million to settle complaints alleging “systemic improprieties.”

Among other things, the whistleblowers alleged market manipulation, insider trading, commingling customer and company funds, and flouting regulations and anti-money laundering measures.

That’s according to an independent examiner appointed by the court overseeing FTX’s bankruptcy. The examiner, former prosecutor Robert Cleary, was tasked with reviewing the myriad investigations into FTX’s collapse and certain other matters.

Cleary’s almost 300-page report was made public on Thursday, more than two months after his appointment.

The examiner’s report is the latest to shed light on the breadth of fraud at FTX.

To date, only one person — founder and former CEO Sam Bankman-Fried — has been jailed in connection with the multibillion-dollar fraud that led to the exchange’s collapse.

Members of Bankman-Fried’s inner circle have pleaded guilty to fraud and other charges, but are expected to receive relatively light sentences after cooperating with prosecutors in Bankman-Fried’s trial.

Drawing on its review of an investigation by law firm Quinn Emanuel Urquhart & Sullivan, the examiner’s report suggests that knowledge of fraud at FTX went beyond Bankman-Fried and a tiny group of trusted advisers.

Quinn Emanuel was hired after FTX’s bankruptcy to determine whether attorneys at Sullivan & Cromwell knew about the fraud. Quinn Emanuel found no evidence that Sullivan & Cromwell, which advised FTX both prior to and after it filed for bankruptcy, had been aware of the fraud.

But it did find that in-house attorneys had helped to pay off several whistleblowers.

The whistleblowers included at least three former employees at FTX’s US arm — including one executive — and an attorney at Alameda Research, the trading firm founded by Bankman-Fried.

Settlements

The unidentified executive “claimed that the FTX Group misled regulators and investors and lacked adequate corporate structure” — allegations he detailed in a letter to Bankman-Fried, Chief Technology Officer Nishad Singh, and in-house attorney Dan Friedberg, according to the examiner.

The executive ultimately resigned in September 2022 “and agreed to a settlement worth more than $16 million.”

Former FTX.US CEO Brett Harrison, who resigned in September 2022, addressed the examiner’s report on social media.

“I was not paid $16M and I didn’t enter into any ‘settlement’ apart from my exit agreement,” Harrison wrote.

“The concerns I raised and that are referenced in this report pertained to the management of the company and its ability to meet its representations to investors, given the deep organizational dysfunction I witnessed, not criminal activity.”

In another post, Harrison said it was likely the examiner had converted his post-resignation equity stake to $16 million.

“Even if the equity hadn’t become worthless in November 2022, I wouldn’t have been permitted to sell it on the secondary market until the end of December due to the SEC-mandated cooling-off period for executives,” he said.

FTX settled another whistleblower complaint for $1.8 million after the employee, who’d been hired only two months earlier at an annual salary of $200,000, alleged market manipulation and insider trading, according to the examiner.

An attorney at Alameda was fired after just three months when they “raised concerns about regulatory and governance issues at Alameda and Alameda’s handling of customer funds without a money transmitting license.” That complaint was settled for $2 million.

An employee “hired to work on anti-money laundering compliance” was fired three months into the job after claiming FTX.US “lacked sufficient anti-money laundering controls and compliance measures.”

Aleks Gilbert is a DeFi correspondent based in New York. Have a tip? You can contact him at aleks@dlnews.com.

A woman accused of laundering Bitcoin to help hide some of the proceeds of a multi-billion dollar fraud was jailed for almost seven years by a London court, according to media reports.

Former fast-food worker Wen Jian, 42, who has both UK and Chinese citizenship, was convicted of one count of laundering 150 Bitcoin, worth more than $10 million today.

In their investigation into the larger fraud, British police seized wallets holding more than 61,000 Bitcoin worth more than $4bn today, part of assets stolen from 130,000 Chinese investors between 2014 and 2017.

Wen played a relatively small part in the crime, and was not accused of participating in the larger fraud, which prosecutors said was masterminded by another person.

Wen was accused of three counts of money laundering, and convicted of one in a jury trial in March. She was sentenced to six years and eight months in jail.

The presiding judge said while it was clear Wen had no involvement in the larger fraud, there was no doubt that she was aware that the Bitcoin she laundered was criminal property.

Major Bitcoin miner Marathon Digital Holdings agreed with the Ministry of Energy and Petroleum (MOEP) of the Republic of Kenya to help develop the African nation’s renewable energy infrastructure with technical expertise and foreign investments of more than $80 million.

“The partnership underscores Marathon’s commitment to supporting the sustainable growth of the energy sector and is part of the company’s broader strategy to diversify its operations globally,” Marathon said in a news release.

Although the release contained no direct mention of Bitcoin mining, earlier this month Marathon representatives met with Kenya’s President William Ruto to discuss how digital asset data centres could spur energy development and foster trade relations, according to a social media post.

“This agreement with the Ministry of Energy and Petroleum is a pivotal moment for our business as it provides us with a clear framework to pursue opportunities across the Republic of Kenya,” said Fred Thiel, Marathon’s chairman and CEO.

The agreement is the company’s first direct collaboration with a government to enhance their energy infrastructure, according to the news release.

Under the terms of the agreement, MOEP and Marathon will exchange policy, scientific, and technical information, as well as project investment expertise, to better understand how to optimise renewable energy projects that produce surplus energy amid intermittency and seasonal variations.

Marathon said in a post on X that it planned to establish green data centres to increase Kenya’s renewable energy utilisation and optimisation.

Crypto market movers

Bitcoin is up 02.51% today at $68,656.45.

Ethereum is up 2.07% today at $3,749.36.

What we are reading

The Unintended Consequences of FIT21′s Crypto Market Structure Bill — CoinDesk

Binance, Coinbase lead crypto exchanges’ 1,200 job hiring spree — DL News

Kabosu, the meme-famous dog who was the face of Dogecoin, has died — Fortune

Trading volume on decentralised exchanges surged to $11.2 billion on Thursday, the day the Securities and Exchange Commission approved a set of filings for spot Ethereum exchange-traded funds.

That was the highest amount of trading volume on a single day since March 18.

Uniswap, the largest decentralised exchange, or DEX, especially benefited from the increase, generating $5.5 billion in trading volume on Thursday alone, with Ether accounting for nearly $3 billion of that volume.

Ether is the native token of the Ethereum blockchain.

The figure for Uniswap surpasses the trading volume of any blockchain on which Uniswap operates and accounted for 48.9% of the total volume on DEXs.

Ethereum, the largest blockchain by trading volume, recorded $4.4 billion on Thursday.

The increased trading activity propelled Uniswap to the No. 3 spot in fees generated over the past 24 hours, with $4.9 million. All of these fees go to users who provide liquidity on the DEX.

Uniswap Labs, the company that builds and maintains Uniswap, charges a 0.25% fee on trades through the Uniswap website. It netted $661,000 in fees on Thursday.

Since the fee was implemented in October, it has generated $30.6 million in revenue for Uniswap Labs.

In March, Devin Walsh, executive director of the Uniswap Foundation, proposed directing a portion of liquidity provider fees to UNI token holders.

However, complications arose when Uniswap Labs revealed on April 10 that it received a Wells Notice from the SEC.

Still, that hasn’t had a material impact on Uniswap’s trading activity, as traders have generated $152 billion since the notice went public.

Nevertheless, it has slowed down the proposal from Uniswap Labs, with no official update since April 9.

The governance token for Uniswap, UNI, was recently trading at $9.08, down 1.8% in the last 24 hours and down 17.8% since April 10.

Ryan Celaj is a data correspondent at DL News. Got a tip? Email him at ryan@dlnews.com.

The second-largest derivatives platform on Solana by daily volume, Zeta Markets has mounted a major campaign to claim the top spot. Since it runs on Solana’s public blockchain network, Zeta offers the best of both worlds: the speed and user experience of a centralised exchange, and full self-custody and transparency for users.

Zeta is one of the most-used, fully on-chain Central Limit Order Book (CLOB) perpetuals exchange on the market today.

With Zeta, users enjoy:

Security: Full self-custody of assets, USDC margined;

Capital efficiency: Up to 10x leverage with cross margin;

Price discovery without centralisation: Fully on-chain CLOB;

Institutional liquidity: Programmatic connectivity to smart contracts using SDK / CPI programmes for market makers and other integrations;

Gamification: Leaderboard, referrals, and trading rewards;

User-friendly experience: Extremely fast and intuitive trading UI for web and mobile;

Quick start: Deposit from Solana or other chains in one transaction on the Zeta interface.

Decentralised perpetual contracts exchanges (perp DEX) registered an all-time high in monthly trading volume in March 2024 at $317 billion, representing 395% year-on-year growth, according to DefiLlama. Solana simultaneously witnessed its largest growth in derivatives trading volume, at 244%. Zeta is the major driving force behind this growth in the perp DEX sector, as its volume soared by 397% over the same period.

Last month, the company unveiled plans to release Solana’s first L2 rollup. This month, even more details of future plans emerged when the company published the release schedule and planned incentives for $Z, its soon-to-be-launched governance token.

The token generation event (TGE) will kick-start the following unlocks: An initial airdrop of 8% of the $Z supply distributed to traders, with loyalty boosts for early users. Initial stakers of $Z will qualify for an additional 2% airdrop, issued in the form of staked $Z 1 epoch (28 days) after the TGE.

Traders will receive incentives comprising 30% of the total supply over 90 months, while 22.5% unlocked over 24 months will be committed to the Community Treasury to fund multi-year growth initiatives. These include liquidity provisioning, as well as Zeta’s creator and ambassador programmes. Finally, the $Z token distribution airdrop will see 20% allocated to contributors and 17.5% to investors.

Zeta’s goal is to compete with central exchanges in speed, cost, user experience, and security, while providing the benefits of DeFi, that is, self-custody, accessibility, and the ability to co-own the protocol and participate in governance.

For traders, trading more on Zeta will earn Z-Score, which will determine allocation of $Z upon airdrop and post-airdrop platform incentives. More Z-Score, more $Z. Users can earn more with Z-Score multipliers, for example, a 10% boost if they use a referral link. Users also earn 10% of referred fees, and 10% of referred Z-Score on a lifetime basis for all referrals. In the last two months alone, users on Zeta referred more than $1bn of trading volume.

The company also recently announced it has raised a $5m strategic round, bringing total funding to $13.5m to-date. The round was led by Electric Capital, with participation from DACM, Airtree, and prominent angel investors such as Anatoly Yakovenko of Solana and Mert Mumtaz of Helius. Wintermute, Jump Crypto and Solana Ventures are investors in previous rounds.

To date, Zeta has processed over 6.5m trades and $7.5bn in volume, with more than 100,000 monthly users. Most of these metrics are growing at an average of 50% each month. Find out more about Zeta Markets and experience perpetuals at the speed of light today.

At Otonomos we help our blockchain native clients set up and manage real-world legal entities. Few topics are more interesting to us than that of DAO legal structuring.

DAOs are an essential part of DeFi, and they are growing fast. DeepDAO estimates there are now 13,000 decentralised autonomous organisations (DAOs) in existence, with a total treasury worth $24.4bn. Projects such as Uniswap, Compound, and MakerDAO show the success of DAOs in enabling decentralised management and execution of on-chain finance protocols.

Others, such as Decentraland and Friends with Benefits, demonstrate the role that DAOs can play beyond decentralised finance. The promise of DAOs is vast, and the gains are already all around us. So too, however, are the pitfalls.

Radically democratic consensus mechanisms risk inefficiency, inertia, and voter apathy.

Inefficient governance bedevils DAO projects: A poorly constructed DAO risks re-creating many of the worst issues of pre-blockchain organisational life. Radically democratic consensus mechanisms risk inefficiency, inertia, and voter apathy. Token holding whales, meanwhile, can recreate the excesses of oligarchic control, using their voting power to disadvantage other DAO members.

Catastrophic legal risks: DAO setup problems can go well beyond creating an inefficient system - at their worst, they expose DAO creators and token holders to massive liabilities. Unless good structuring is put in place, DAOs risk being seen as unincorporated associations or general partnerships, with potentially disastrous effects. In 2023, one notorious US decision held DAO token holders jointly and severally liable for the activities of the DAO itself. (1)

To be successful, DAO projects should consider our tips for real-world legal tooling.

Legal structuring, yes. Wrappers, no.

Sensing opportunity and hoping to attract DAO clients, jurisdictions like Wyoming and the Marshall Islands have rushed out new entity types like a DAO limited liability company

As on-chain and decentralised entities, DAOs are currently somewhat at odds with traditional legal structures. Sensing opportunity and hoping to attract DAO clients, jurisdictions like Wyoming and the Marshall Islands have rushed out new entity types like DAO LLCs. However, such efforts are of limited utility in shoehorning an essentially participatory governance protocol into a hierarchical, centralised legacy legal form. We therefore deem the notion of a DAO ‘wrapper’ flawed, as it limits the new experimental forms of decentralised governance.

To be actually useful for the real world, DAO projects may need:

Operational capacity: To create and issue tokens, manage and give real-world effect to on-chain voting decisions, and to be able to distribute grants and rewards to real-world individuals and organisations that help develop the DAO.

A suitable constitution: Governance and consensus mechanisms that work for their needs.

Legal personality: DAOs need to be able to act as a unified entity, a single point of reference that can validly contract with real-world partners.

Limited liability: DAO projects must be capable of limiting liability for project leads and token owners. If not, then every member of a DAO project is potentially liable when things go wrong.

Effective decentralisation: Unless DAO projects are actually decentralised, project members and token holders fall prey to a raft of regulations, including at least one element of the SEC’s ‘Howey test’.

Achieving all of this is well beyond any single wrapper. Instead, DAO projects should proactively use of entity stacks, which would typically include an interplay between a foundation, token issuance entity, and operational companies.

Entities including the Cayman Islands Memberless Foundation or the Panama Foundation, combined with entities in the British Virgin Islands or Panama, which issue and distribute the project’s token, as well as operational “lab” entities elsewhere, go a long way in minimising regulatory risk. As Web3′s leading entity assembler, Otonomos can help you fit your DAO into a multi-jurisdictional entity jigsaw to ensure your projects are both operationally effective and maximally decentralised.

Book a call with Otonomos to learn how we can help you.

Ten of the biggest crypto exchanges have more than 1,200 job openings, with Binance, Coinbase and OKX leading the hiring spree.

The news is a testament to the optimism of the industry, which expects Bitcoin to break its March record high, spot Ethereum exchange-traded funds to launch, and venture capital investments to gain momentum this year.

Sam Wellalage, founder at crypto recruitment firm WorkInCrypto.Global, said the renewed hiring comes as crypto companies don’t want to miss out.

“We are in a bull market like we’ve never experienced before — there’s going to be so much work for us from a recruiting perspective,” he recently told DL News.

The recruitment activity marks a shift after two years of industry job cuts. Since April 2022, 13,500 crypto workers have lost their jobs, according to Layoffs.fyi.

So which crypto exchanges are hiring?

Binance

Binance is on a hiring spree.

Martin C. Grant, former chief compliance and ethics officer at the Federal Reserve Bank of New York, recently joined the board of directors of Binance’s US arm.

Moreover, Binance is looking to fill 460 open roles, the world’s biggest crypto exchange told DL News.

“This is part of our ongoing commitment towards ensuring compliance, prioritising user-focused approaches, and driving innovations in the dynamic crypto industry,” Vishal Sacheendran, Binance’s head of regional markets, told DL News.

Coinbase

Coinbase currently lists 224 roles on its website, ranging from legal and compliance roles, to finance and accounting roles.

“We seek individuals who believe in the long-term potential of this technology and are committed to increasing economic freedom in the world,” L.J. Brock, Coinbase’s chief people officer, recently told DL News.

Bybit

Despite setbacks including the French securities regulator warning customers against using Bybit, the company is still looking to increase its headcount.

The crypto exchange has 69 roles open according to its website. They range from sales and marketing to engineering.

OKX

Hot on the heels of OKX becoming a validator on the Chiliz blockchain, the fourth-biggest crypto exchange is now looking to boost its headcount by filling 414 open positions listed on its website.

Among other areas, OKX is looking to bolster its finance, HR and fraud risk departments.

Crypto.com

Crypto.com recently made rapper Eminem its celebrity spokesperson, taking up the mantle from Oppenheimer star Matt Damon.

And it is looking to make even more hires. The exchange has 335 job openings according to its website.

“We recently announced that we had surpassed 100 million users globally and we are hiring to support this increasing market share in a thoughtful and strategic way,” a Crypto.com spokesperson told DL News.

“Since November 2023, we have welcomed hundreds of new staff members to Crypto.com, with plans for further hiring.”

Bitget

Bitget has 106 job openings according to its LinkedIn page.

Among other roles, it is looking to bolster its marketing and web3 development teams.

Bitstamp

Luxembourg-headquartered Bitstamp has six roles open on its website.

It is looking for a legal counsel, a compliance officer and a head of markets and risk operations, among other roles.

KuCoin

Seychelles-headquartered KuCoin has nine roles listed on its website.

Its more notable recruitment efforts include the search for a senior compliance manager in Turkey and a regional compliance officer in France.

Gate.io

While the South China Morning Post suggests Gate.io has withdrawn its virtual-asset trading platform licence application in Hong Kong, the exchange is still looking to hire.

Gate.io has 37 job openings according to its LinkedIn page.

HTX

HTX has seven openings according to its LinkedIn page, including for an operations manager in Russia and a senior compliance officer in Hong Kong.

OKX, Bybit, Bitget, Gate.io, KuCoin, Bitstamp, and HTX did not return requests for comment.

Eric Johansson is DL News’ News Editor. Got a tip? Email on eric@dlnews.com.

Traders are betting that Ethereum will continue to rally following the US approval for a spot Ethereum exchange-traded fund.

Some $3.4 billion in options that expire on June 28 signals a surge in traders buying calls — or bullish bets — that Ethereum will exceed $4,000.

The positioning in the derivatives indicates many traders are even targeting prices above $5,000, TzTok-Chad, the pseudonymous founder of decentralised options exchange Stryke, told DL News.

Options let traders speculate on price moves or hedge against market volatility. They give holders the right, but not the obligation, to buy the underlying asset at a predetermined price.

The June 28 options expiry is significant because it is the final expiry of the month — usually the most traded.

Ethereum steals the spotlight

On Monday, Ethereum soared as Bloomberg analysts upped their odds that the Securities and Exchange Commission would approve a spot Ethereum ETF.

On Thursday, the SEC validated essential documents for the launch of Ethereum ETFs — a step that all but guarantees their eventual approval.

The shock about-face from the SEC steals thunder from Bitcoin among options traders.

“The spotlight is firmly on Ethereum, with Bitcoin experiencing relatively subdued interest,” Luuk Strijers, CEO of options exchange Deribit, told DL News.

Strijers said that the nod from the SEC, investors are focused on acquiring short-term options, comparing the market volatility to that seen during earnings announcements in traditional financial markets.

A bumpy road ahead

Still, if Ethereum does rally to $5,000, it might not be a clear path.

“Expect some volatility leading into May 31, considering there will be considerable profit-taking from large traders,” TzTok-Chad said.

Positioning for the May 31 options expiry shows traders are less bullish.

The put-to-call ratio for the May 31 expiry shows signs of pessimism — it is 0.82, compared with 0.55 for June 28.

The ratio is a measurement used to gauge the overall mood of a market. A higher put-call ratio — going as high as 1 — signals a more bearish outlook.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Just as US politicians were finding common ground over crypto, the bipartisan bliss vanished over an old divisive issue — central bank digital currencies.

The rift over CBDCs was on full display on Thursday, when the House of Representatives voted to prohibit the Treasury from creating a digital dollar without explicit authorisation from Congress.

The bill, dubbed the CBDC Anti-Surveillance State Act, was sponsored by Tom Emmer, a Republican from Minnesota and one of the crypto industry’s biggest congressional allies.

“For more than two years, we have worked to educate, grow support, and pass this important legislation, which prevents unelected bureaucrats from issuing a financial surveillance tool to fundamentally undermine our American values,” Emmer said in a statement on X.

The renewed political entrenchment came during a week when crypto watchers had noted a sense of bridge-building on Capitol Hill across two pro-crypto bills.

The CBDC vote seemingly shattered that illusion.

What are CBDCs?

CBDCs are digital currencies issued by central banks.

They are also a hot button issue in the escalating entrenchment over digital money in the US.

The pro-crypto and predominantly Republican crowd, led by freshly minted crypto bro Donald Trump, warn that CBDCs could supercharge government surveillance.

The anti-crypto and mostly Democratic camp, spearheaded by long-term industry sceptic Joe Biden, has instead opted to focus on how CBDCs can make digital transactions faster and cheaper, and come with the government’s imprimatur, unlike cryptocurrencies.

Three countries have already launched CBDCs, according to the Atlantic Council, a think-tank: Nigeria, Jamaica, and the Bahamas. Another 36 countries are currently piloting their own CBDCs.

The US is considering doing the same.

“We are looking carefully, very carefully at the question of whether we should issue a digital dollar,” Federal Reserve Chairman Jerome Powell told the Senate banking committee in 2021.

The vote

House Republicans want to put a stop to that.

On Thursday, 213 Republicans voted in favour of the bill. None voted in opposition.

Only three Democrats crossed party lines to support the bill. Another 192 voted in opposition.

The sharp partisan split was a notable departure from Wednesday’s bipartisan vote on the Financial Innovation and Technology for the 21st Century Act, a bill supported by crypto industry lobbyists.

It also came after the Senate voted to repeal the Securities and Exchange Commission’s controversial SAB 121 accounting policy, which has been criticised for putting unjust pressure on crypto custodians.

Even the partial approval of spot Ethereum exchange-traded funds on Thursday could be interpreted as Washington warming up to crypto.

“It feels like someone at the Biden White House made a call and said ‘Guys, we can’t be the party against crypto anymore,’” Galaxy Digital CEO Mike Novogratz told CNBC earlier in the week.

CCP-style surveillance

Speaking on the House floor Thursday, Republican Patrick McHenry defended the anti-CBDC bill.

“If not open, permissionless and private, a central bank digital currency is no more than a CCP-style surveillance tool waiting to be weaponised,” he said.

“We’ve previously seen examples of governments and governments around the world weaponising the financial system against their own citizens.”

Maxine Waters, a Democrat from California, said banning CBDCs would threaten the dollar’s dominance in international markets, and urged her colleagues to reject the bill.

“Compared to other digital assets, CBDCs have a greater potential to maintain a stable value, garner public trust, and become a viable means of payment transactions,” she said.

“A United States CBDC would be designed to protect consumer privacy and other deeply held American values.”

The bill would need approval from the Senate to become law.

Politico reported that the Democrat-controlled Senate is unlikely to vote on it.

Aleks Gilbert is a DeFi correspondent based in New York. Have a tip? You can reach him at aleks@dlnews.com.

Ethereum traders are piling into bets on the cryptocurrency’s price, sending a key market metric to a record.

Crypto traders love to speculate via derivative contracts with no settlement date called perpetuals, dubbed perps.

Ethereum perps’ so-called open interest — which reflects the demand for contracts — soared to all-time highs of over $10.7 billion this week.

That’s according to research firm Kaiko, which attributed the market frenzy to optimism about US approval of Ethereum exchange-traded funds, which has buoyed the cryptocurrency’s price.

Analysts see open interest as a valuable metric to assess sentiment.

Ethereum jumped more than 22% over the last week amid a sudden shift in hopes that the Securities and Exchange Commission would greenlight the ETFs.

The SEC seemed poised to deny the applications as late as last week. That changed when Bloomberg ETF analyst Eric Balchunas flagged that “the SEC could be doing a 180 on this” amid political pressure — investors then considered approval a done deal.

The SEC granted approval on Thursday.

Kaiko noted signs of bullishness elsewhere in the market. The funding rate for Ethereum perps jumped from -0.02% on Saturday to 0.03% by Tuesday.

A high funding rate often indicates heightened demand for long positions in the market — traders holding those positions are willing to pay a premium to maintain them.

That’s a sign of optimism about the longer-term price.

Bitcoin hit new highs just weeks after the US Securities and Exchange Commission approved spot Bitcoin exchange-traded funds.

The move let institutions gobble up more than $12 billion worth of the original cryptocurrency, according to data from pseudonymous analyst Hildobby.

Ethereum investors might not be so lucky.

Several indicators suggest institutional interest in Ethereum is much lower than it was for Bitcoin, according to researcher Noelle Acheson, former head of market insights for Genesis Global Trading.

She isn’t the only pessimist.

Bloomberg Intelligence ETF analyst Eric Balchunas expects Ethereum ETFs to be “10-15% of the assets of the BTC ETFs.”

The SEC had long fought against the approval of spot crypto ETFs, arguing they were vulnerable to manipulation.

After losing a lawsuit filed by crypto asset manager Grayscale Investments, the SEC capitulated in January with the approval of 11 spot Bitcoin ETFs.

Still, it had signalled it would deny applications for spot Ethereum ETFs.

That changed this week, amid a flurry of pro-crypto developments in the US.

On Monday, Balchunas and his colleague James Seyffart updated their odds of spot Ethereum ETF approval to 75% from 25%.

That approval came Thursday, but the actual launch may be weeks or months away. And whether it drives Ethereum to its own all-time high is another matter.

“When/if the ETH spot ETFs eventually launch, we should brace ourselves for a disappointing reception,” Acheson wrote in her newsletter, Crypto is Macro.

That’s in part because institutional investors have shown little interest in existing Ethereum-based products.

In Hong Kong, which approved spot Bitcoin and Ethereum ETFs last month, Ethereum accounts for less than 15% of the assets under management, Acheson notes.

In the US, meanwhile, investors already have access to Ethereum futures ETFs. And they aren’t that interested.

“The [assets under management] of the leading ETH futures ETF (EETH) is around 4% that of the leading BTC futures ETF (BITO),” Acheson writes.

As for the spot Ethereum ETF itself, available data suggests institutional interest might be lacking there as well.

“The CME is the largest BTC derivatives platform in the market, in terms of open interest,” Acheson writes.

“But it ranks only fifth in ETH derivatives. US institutional investors are maybe just not really into the ETH narrative?”

To be sure, open interest in Bitcoin was highest on Binance, with CME taking the top spot just before the approval of spot Bitcoin ETFs in January.

There’s evidence that’s already happening with Ethereum: CME was in the sixth spot at the beginning of the week.

And Wall Street executives have repeatedly said they see potential in Ethereum.

“Remove the regulatory uncertainty around proof of stake and watch how Wall Street runs to ETH,” investor Jim Bianco wrote on X, referring to the method Ethereum uses to confirm transactions and create new coins.

“It is an entire ecosystem with borrowing, lending, insurance, tokenomics, staking (yield), stablecoins, NFTS, primitives, L2s, and on and on. Plenty for them to work with here as opposed to hodl-ing one coin,” he said.

Crypto market movers

Bitcoin is down 3.2% at $67,297 over the past 24 hours.

Ethereum is down 3.4% at $3,679.

What we’re reading

With Ethereum ETFs poised to rock the US market, Europe asks ‘what took you so long?’ — DL News.

Kabosu, The Iconic Shiba Inu Behind Dogecoin, Passes Away At 18 — Milk Road.

Why ETH Isn’t Moving Higher After SEC Approves Key Filings for Spot ETFs — Unchained.

Congress Urges SEC For Consistent Review Of Bitcoin And Ethereum ETF Applications — Milk Road.

UK snap election upends crypto legislation and triggers questions — what will Labour do? — DL News.

Aleks Gilbert is a DeFi correspondent based in New York. Have a tip? You can contact him at aleks@dlnews.com.

Spot Ethereum exchange-traded funds are coming.

The Securities and Exchange Commission validated Thursday essential documents for the launch of Ethereum ETFs — all but guaranteeing their eventual approval.

“BOOM!! APPROVED! There it is. The SEC just approved spot Ethereum ETFs,” Bloomberg Intelligence ETF analyst James Seyffart posted. “What a turn of events. It’s really happening.”

Nine different ETFs — issued by BlackRock, Fidelity Investments, Grayscale Investments, VanEck, Invesco and Galaxy Digital, ARK Invest and 21 Shares, Hashdex, Franklin Templeton, and Bitwise — will likely launch.

These are almost the same firms that launched spot Bitcoin ETFs back in January, with only Valkyrie missing.

After months of radio silence, the SEC seemed poised to deny the applications as late as last week.

But following a major shift in attitude in Democratic Party leadership, the agency began frantically communicating with prospective ETF issuers on Monday, and even told concerned exchanges that it was leaning toward approving the products.

The reason for the rush? Thursday marks a crucial deadline on VanEck’s application. Blowing past that deadline would have amounted to rejecting the application.

But it’s not only VanEck’s problem. Just like with the spot Bitcoin ETFs, the SEC likely wants to approve all potential Ethereum ETFs at the same time to avoid giving an advantage to any one specific product. So every issuer needed to hurry to be ready by VanEck’s deadline.

What now?

Two essential forms need to be finalised for ETFs to be approved by the SEC: 19b-4 filings, and S-1 filings.

On Thursday, the SEC approved 19b-4 filings for the Ethereum ETFs, but because the agency’s change of heart was so unexpected, it likely still needs a few weeks — or even months — to review S-1 filings.

“The SEC spent nearly four months reviewing and iterating Bitcoin spot S-1s and five months reviewing Bitcoin futures S-1s,” Scott Johnsson, an associate at international law firm Davis Polk & Wardwell, wrote.

“If the division of Corporation Finance indeed was told about this potential approval [on Monday], then they’re likely just getting started,” he added.

It’s unlikely that the SEC would ratify one set of documents and not the other. So the 19b-4 approvals indicate the agency will most probably officially greenlight the products in the near future.

In other words, the Ethereum ETFs will likely launch sometime this summer.

Seismic shift in Washington

The SEC’s about-face this week came shortly after a group of prominent Democrats, including Senate majority leader Chuck Schumer of New York, voted with Republicans to repeal a controversial crypto accounting rule called SAB 121.

Since then, the Republican-led pro-crypto bill known as the FIT21 Act passed with a bipartisan vote of 279 in favour and 136 in opposition.

The Democratic Party’s sudden friendliness came as a shock to the industry — for a long time, most of its members seemed content to fall behind crypto critic Senator Elizabeth Warren of Massachusetts.

The trigger may have been the growing contrast between former President Donald Trump and President Joe Biden.

Trump, historically crypto agnostic, recently said he will support the industry if re-elected. Biden, meanwhile, threatened to veto a motion to repeal SAB 121 despite bipartisan support for the repeal.

With Trump leading Biden in the polls six months ahead of the presidential election and with crypto super PACs raising over $150 million to push forward pro-industry candidates, sometimes in swing states, Democrats’ aversion against crypto made less and less sense, according to Galaxy Digital CEO Mike Novogratz.

“It almost became a purity test — Republican good for crypto, Democrat bad for crypto. And the Democratic regime woke up and said ‘This is crazy,’” he said.

Bitwise Asset Management chief investment officer Matt Hougan, for his part, said Ethereum ETFs wouldn’t have gotten the nod without the help of Wall Street banks.

The success of spot Bitcoin ETFs “woke Wall Street up to the reality that there is a lot of money to be made in custodying crypto assets,” Hougan said. So they began lobbying in favour of repealing SAB 121 — and for more crypto assets to play with.

Tom Carreras is a markets correspondent for DL News. Got a tip about Ethereum ETFs? Reach out at tcarreras@dlnews.com

The second-largest derivatives platform on Solana by daily volume, Zeta Markets has mounted a major campaign to claim the top spot. Since it runs on Solana’s public blockchain network, Zeta offers the best of both worlds: the speed and user experience of a centralised exchange, and full self-custody and transparency for users.

Zeta is one of the most-used, fully on-chain Central Limit Order Book (CLOB) perpetuals exchange on the market today.

With Zeta, users enjoy:

Security: Full self-custody of assets, USDC margined;

Capital efficiency: Up to 10x leverage with cross margin;

Price discovery without centralisation: Fully on-chain CLOB;

Institutional liquidity: Programmatic connectivity to smart contracts using SDK / CPI programmes for market makers and other integrations;

Gamification: Leaderboard, referrals, and trading rewards;

User-friendly experience: Extremely fast and intuitive trading UI for web and mobile;

Quick start: Deposit from Solana or other chains in one transaction on the Zeta interface.

Decentralised perpetual contracts exchanges (perp DEX) registered an all-time high in monthly trading volume in March 2024 at $317 billion, representing 395% year-on-year growth, according to DefiLlama. Solana simultaneously witnessed its largest growth in derivatives trading volume, at 244%. Zeta is the major driving force behind this growth in the perp DEX sector, as its volume soared by 397% over the same period.

Last month, the company unveiled plans to release Solana’s first L2 rollup. This month, even more details of future plans emerged when the company published the release schedule and planned incentives for $Z, its soon-to-be-launched governance token.

The token generation event (TGE) will kick-start the following unlocks: An initial airdrop of 8% of the $Z supply distributed to traders, with loyalty boosts for early users. Initial stakers of $Z will qualify for an additional 2% airdrop, issued in the form of staked $Z 1 epoch (28 days) after the TGE.

Traders will receive incentives comprising 30% of the total supply over 90 months, while 22.5% unlocked over 24 months will be committed to the Community Treasury to fund multi-year growth initiatives. These include liquidity provisioning, as well as Zeta’s creator and ambassador programmes. Finally, the $Z token distribution airdrop will see 20% allocated to contributors and 17.5% to investors.

Zeta’s goal is to compete with central exchanges in speed, cost, user experience, and security, while providing the benefits of DeFi, that is, self-custody, accessibility, and the ability to co-own the protocol and participate in governance.

For traders, trading more on Zeta will earn Z-Score, which will determine allocation of $Z upon airdrop and post-airdrop platform incentives. More Z-Score, more $Z. Users can earn more with Z-Score multipliers, for example, a 10% boost if they use a referral link. Users also earn 10% of referred fees, and 10% of referred Z-Score on a lifetime basis for all referrals. In the last two months alone, users on Zeta referred more than $1bn of trading volume.

The company also recently announced it has raised a $5m strategic round, bringing total funding to $13.5m to-date. The round was led by Electric Capital, with participation from DACM, Airtree, and prominent angel investors such as Anatoly Yakovenko of Solana and Mert Mumtaz of Helius. Wintermute, Jump Crypto and Solana Ventures are investors in previous rounds.

To date, Zeta has processed over 6.5m trades and $7.5bn in volume, with more than 100,000 monthly users. Most of these metrics are growing at an average of 50% each month. Find out more about Zeta Markets and experience perpetuals at the speed of light today.

At Otonomos we help our blockchain native clients set up and manage real-world legal entities. Few topics are more interesting to us than that of DAO legal structuring.

DAOs are an essential part of DeFi, and they are growing fast. DeepDAO estimates there are now 13,000 decentralised autonomous organisations (DAOs) in existence, with a total treasury worth $24.4bn. Projects such as Uniswap, Compound, and MakerDAO show the success of DAOs in enabling decentralised management and execution of on-chain finance protocols.

Others, such as Decentraland and Friends with Benefits, demonstrate the role that DAOs can play beyond decentralised finance. The promise of DAOs is vast, and the gains are already all around us. So too, however, are the pitfalls.

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Radically democratic consensus mechanisms risk inefficiency, inertia, and voter apathy.

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Inefficient governance bedevils DAO projects: A poorly constructed DAO risks re-creating many of the worst issues of pre-blockchain organisational life. Radically democratic consensus mechanisms risk inefficiency, inertia, and voter apathy. Token holding whales, meanwhile, can recreate the excesses of oligarchic control, using their voting power to disadvantage other DAO members.

Catastrophic legal risks: DAO setup problems can go well beyond creating an inefficient system - at their worst, they expose DAO creators and token holders to massive liabilities. Unless good structuring is put in place, DAOs risk being seen as unincorporated associations or general partnerships, with potentially disastrous effects. In 2023, one notorious US decision held DAO token holders jointly and severally liable for the activities of the DAO itself. (1)

To be successful, DAO projects should consider our tips for real-world legal tooling.

Legal structuring, yes. Wrappers, no.

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Sensing opportunity and hoping to attract DAO clients, jurisdictions like Wyoming and the Marshall Islands have rushed out new entity types like a DAO limited liability company

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As on-chain and decentralised entities, DAOs are currently somewhat at odds with traditional legal structures. Sensing opportunity and hoping to attract DAO clients, jurisdictions like Wyoming and the Marshall Islands have rushed out new entity types like DAO LLCs. However, such efforts are of limited utility in shoehorning an essentially participatory governance protocol into a hierarchical, centralised legacy legal form. We therefore deem the notion of a DAO ‘wrapper’ flawed, as it limits the new experimental forms of decentralised governance.

To be actually useful for the real world, DAO projects may need:

Operational capacity: To create and issue tokens, manage and give real-world effect to on-chain voting decisions, and to be able to distribute grants and rewards to real-world individuals and organisations that help develop the DAO.

A suitable constitution: Governance and consensus mechanisms that work for their needs.

Legal personality: DAOs need to be able to act as a unified entity, a single point of reference that can validly contract with real-world partners.

Limited liability: DAO projects must be capable of limiting liability for project leads and token owners. If not, then every member of a DAO project is potentially liable when things go wrong.

Effective decentralisation: Unless DAO projects are actually decentralised, project members and token holders fall prey to a raft of regulations, including at least one element of the SEC’s ‘Howey test’.

Achieving all of this is well beyond any single wrapper. Instead, DAO projects should proactively use of entity stacks, which would typically include an interplay between a foundation, token issuance entity, and operational companies.

Entities including the Cayman Islands Memberless Foundation or the Panama Foundation, combined with entities in the British Virgin Islands or Panama, which issue and distribute the project’s token, as well as operational “lab” entities elsewhere, go a long way in minimising regulatory risk. As Web3′s leading entity assembler, Otonomos can help you fit your DAO into a multi-jurisdictional entity jigsaw to ensure your projects are both operationally effective and maximally decentralised.

Book a call with Otonomos to learn how we can help you.

In the US, the crypto industry is buzzing in anticipation ahead of an expected approval of spot Ethereum exchange-traded funds.

But nations across the Atlantic are already miles ahead with similar crypto investment products.

The London Stock Exchange, for one, will begin handling Bitcoin and Ethereum exchange-traded products for the first time by the end of May.

Numerous ETPs

And in Europe, there are already multiple Ethereum financial products, or ETPs, on the market. They include exchange-traded notes and exchange-traded commodities, which operate in similar ways to ETFs.

But the products, which have been on the market for years, haven’t caught much steam. That’s because Europeans are less keen on risky investments and prefer stability, experts say.

“If we’re talking about where’s the alpha going to come from, it’ll be the place with the deeper capital markets and more eager investor base driving the inflows to push these things upward,” Erwin Voloder, head of policy at the European Blockchain Association, told DL News.

Digital asset investment firm 21Shares launched its Ethereum Staking ETP in 2019, and Ethereum ETPs from VanEck and CoinShares made their debutsin 2021.

But inflows are relatively small.

The 21Shares’ Ethereum ETP has over $307 million assets under management, and VanEck’s has a total net assets of $175 million.

Meanwhile, in the US, institutional investors are already prepared to pour $500 million into Ethereum ETFs over the next week if they are approved, according to an analysis by the OKX exchange.

Enthusiasm in the US

The products follow the price of Ether and allow investors a way into crypto through a bank or investment firm without having to open a crypto wallet or an account with a crypto platform.

For proponents, crypto ETFs and ETPs provide digital assets with validation and a bridge to broader financial markets.

The US Securities and Exchange Commission approved 11 Bitcoin spot ETFs in January. The two biggest funds, launched by BlackRock and Fidelity Investments, have vacuumed up more than $30 billion between the two of them as of Thursday.

But there are stark differences between Europe and the US.

Europe has “more of an ecosystemic approach” to innovative finance, according to Voloder.

With legal frameworks for crypto assets starting to come into effect this year and other investment guidelines from regulators, lawmaking sets the foundations.

‘Even if Europe has the regulations, our investor base has always lagged behind America.’

Erwin Voloder

“EU regulators are more proactive and US regulators are more reactive which is why you see broker dealers launching digital asset structured products in Europe,” Voloder said.

“Regulations enable innovation and experimentation,” he added. This is what allows financial institutions to test tokenised financial instruments.

But still the size of the capital markets is reflected by that underlying divergence.

“Even if Europe has the regulations to enable innovation, our investor base has always lagged behind America,” Voloder said.

Crypto ETPs beyond Ethereum

Cardano Staking ETP by Liqwid began trading on Deutsche Börse exchange group on Wednesday. The product is domiciled in Switzerland.

“Switzerland is at the forefront, as staking is regulated here, allowing us to build products incorporating staking—something not yet possible in the US,” Florian Volery, co-founder of Liqwid Finance, told DL News in an email. He is hopeful that the US will eventually catch up.

The DeFi entrepreneur expects to see actively managed ETFs that include other crypto assets like Bitcoin or Solana in an investment strategy.

“This development is a game changer for the crypto industry, making it mainstream and a dedicated investment category within the asset and wealth management industry,” Volery said.

Inbar Preiss is a Regulation Correspondent at DL News. Contact her at inbar@dlnews.com.

Just when the UK was poised to move on new crypto legislation, comes a surprise — a snap election.

Now that Conservative Prime Minister Rishi Sunak called a general election on July 4, crypto leaders are resigned to an unforeseen delay in laws that are designed to stoke blockchain technology startups in Britain.

Ian Taylor, board adviser to trade body CryptoUK, told DL News the development will probably delay long-sought legislation for crypto companies by at least six months.

Even worse, the delay comes as competitors — the European Union, Dubai, Hong Kong, and even the US — are accelerating their rollout of rules and regulations for a burgeoning industry that is going mainstream.

“It’s net negative, really, because we are laggards,” Taylor said. “We’re behind the rest of Europe firstly, and then other jurisdictions in Asia and the Middle East.”

To be sure, the long-term growth of the crypto industry in a nation powered by a global financial centre, ample investment capital, and durable entrepreneurial class shouldn’t be derailed by an election cycle.

“Both parties have committed to language around making the UK a hub for digital financial services,” Isabella Chase, senior policy adviser at crypto sleuthing firm TRM Labs, told DL News.

Yet in the short-term, existing legislation for crypto companies in lawmakers’ pipeline may be stalled.

More crypto rules looming

Zooming out, the regulatory narrative in the industry has been upended in the last month.

In the US, which crypto leaders have long decried as a litigious mess, there is suddenly a dose of clarity as Congress acts on sweeping crypto legislation. Moreover, crypto has become something of a hot-button issue in the 2024 presidential contest.

Donald Trump, the presumptive Republican Party nominee, has discovered his inner Bitcoin bro. And President Joe Biden, the Democrat running for a second term, is confronting some thorny political questions as Congress gets busy on crypto.

Meanwhile, across the English Channel the European Union is moving forward with a raft of crypto and blockchain regulatory changes, including MiCA, the landmark regulatory regime.

Back in Britain, the political state of play has been muddied.

Sunak pledged to make the UK a global hub for crypto asset technology in 2022. But the Labour Party, which is leading the Tories by 21 percentage points in the polls, has yet to lay out a detailed crypto policy.

Entrepreneurs and investors in the UK’s crypto scene must now adjust to the strong likelihood a new government will be in place in six weeks with little affinity for their industry.

“We are still waiting to see Labour’s full plans for the industry,” George McDonagh, co-founder of digital assets investor KR1, told DL News.

Still, there are some clues.

In January, Rachel Reeves, who is expected to become Chancellor of the Exchequer should Labour win on July 4, said there is a need to embrace innovation, including tokenisation of securities and a central bank digital currency.

“But nothing about crypto,” Taylor said.

Any hope that Sunak would pull off an upset and maintain continuity in crypto policy appeared to wash away on Wednesday.

Making his election announcement in pouring rain outside No. 10 Downing Street, Sunak was drowned out by a protester blasting a Labour Party anthem from nearby loudspeakers.

Hardly desirable optics for a prime minister who’s trailed the opposition in the polls for months.

Industry ally

Sunak’s government has positioned itself as an ally to the industry. His ministers have urged regulators not to undermine crypto companies by stifling innovation and enforcing rules too strictly.

Industry observers had also expected to see the government’s rollout of finalised regulations for the industry — including rules for crypto issuance, exchange, investment, custody, and lending — come to fruition in 2024 alongside new rules for stablecoins.

The agenda has now had to hit the breaks.

“That will put companies off coming to the UK, insofar as founders, companies setting up like to have clarity,” Taylor said.

“They like to be able to know what they’re doing and be able to plan for the future,” he continued. “If it’s going to take longer than, say, going to another jurisdiction that already has some legislation in place, then I see that as a problem.”

Inbar Preiss is a Regulation Correspondent at DL News. Eric Johansson is DL News’ News Editor. Got a tip? Email them at inbar@dlnews.com and eric@dlnews.com.

On the second day of Tigran Gambaryan’s money laundering trial in Nigeria, the jailed Binance executive was called to the dock.

He immediately fainted.

Supported by one of his lawyers, Gambaryan was helped to a chair to recover.

The head of Binance’s financial crime compliance unit looked gaunt and stressed, proceedings in the Abuja court monitored by DL News on Thursday showed.

Doctor’s note

Gambaryan’s lead attorney, Mark Mordi, attributed his client’s collapse to his worsening health as he completes his eighth week of incarceration in the African nation’s prison system.

Mordi presented the court with a doctor’s note, but did not disclose details of Gambaryan’s condition.

Mordi asked the court for an adjournment to allow his client to receive medical attention, and Justice Emeka Nwite agreed.

He fixed June 20 and 21 for the resumption of the trial.

The development marks yet another grave turn in the crisis that has befallen Binance, the world’s biggest crypto exchange, in one of Africa’s most important markets.

Nigeria’s Economic and Financial Crimes Commission charged Gambaryan, a colleague, and Binance itself in April with money laundering in connection with $35 million in transactions.

In addition, Nigeria’s Federal Inland Revenue Service, or FIRS, indicted the company and the executives in April on alleged tax violations.

Not guilty

Binance, Gambaryan, and Nadeem Anjarwalla, the company’s regional head based in Africa, have denied money laundering the charges. And Gambaryan has pleaded not guilty.

On May 17, the court rejected his bid to be released on bail during the trial after finding him to be a flight risk.

However, court proceedings for the tax violation trial have suffered numerous setbacks with the most recent happening on Wednesday as legal proceedings were stalled when Gambaryan did not appear in court.

FIRS blamed the Nigerian Correctional Service, which is in charge of the nation’s prisons, for failing to deliver the Binance executive to court.

The tax agency was planning to arraign Gambaryan on the tax charges.

The delay on Wednesday prompted the court to postpone the tax violation arraignment to July 14.

Parlay

Binance’s crisis in Nigeria has escalated from a regulatory dispute to a full-blown criminal case.

Nigeria’s government blamed Binance for causing the country’s currency woes by allegedly allowing foreign exchange racketeers to operate on its peer-to-peer trading platform.

Binance sought to settle the dispute by sending two of its executives to parlay with government officials in February but ended up having its employees detained by the government.

Red notice

Gambaryan, a former special agent of the US Internal Revenue Service based near Atlanta, and Anjarwalla, a British lawyer, were detained in late February and held in a government guest house.

Anjarwalla escaped a month later with a Kenyan passport and is the target of an Interpol red notice.

Binance has condemned Gambaryan’s prolonged incarceration with the company CEO Richard Teng stating that the executive has no decision-making powers and should not be held responsible for company policies and practices.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.

When Ethereum’s Ether token hit an all-time high of $3,800 in May 2021, the increased activity on the chain sent transaction fees soaring as users piled in.

They became accustomed to spending upwards of $100 just to trade tokens onchain. But many didn’t care — there was money to be made.

Fast-forward to 2024, and Ethereum is revisiting those heady prices for the first time in over two years. But this time’s different.

Despite prices jumping from the recent Ethereum spot ETF U-turn, transaction fees on the top smart contract network remain low — only slightly higher than they were during the depth of the 2022 crypto winter.

It’s a sign that demand for transactions on Ethereum isn’t what it used to be.

So, what gives?

Increases in transaction efficiency, coupled with an exodus of activity to Ethereum’s lower-cost layer 2 networks, like Base and Arbitrum, have helped temper demand and make Ethereum cheaper to use.

While this is great for Ethereum users, there are downsides.

With transaction fees on Ethereum mainnet plummeting, the network is failing to burn — crypto speak for destroy — enough tokens to make the Ether supply deflationary.

Critically, if fees stay low, it could throw the network’s economic model into question.

Ethereum becomes too efficient?

When the Ethereum network destroys more tokens from transaction fees than those it rewards to validators for processing those transactions, the total supply of Ether shrinks and becomes deflationary.

This situation is favourable for the network as it rewards those who help run the network without inflating the supply of Ether.

But if users don’t spend enough Ether on transactions, the Ether supply will inflate indefinitely, breaking the network’s economic model.

Persistent inflation, while unlikely, would devalue Ether and make it less appealing for users to lock up in validators to secure the network. After all, an asset that keeps printing units is better spent than saved.

So far, the Ether supply has shrunk in aggregate since Ethereum slashed issuance of new Ether with its September 2022 Merge upgrade.

But that’s changing. Over the past month, the lack of Ethereum activity meant the network added over 50,000 Ether, worth $190 million.

If activity and fees spent on Ethereum don’t pick back up, the supply of Ether will inflate by 0.5% — or $2.2 billion — over the coming year.

Where are the fees going?

In recent years, many Ethereum users have switched over to so-called layer 2 networks.

Layer 2s like Arbitrum, Optimism and Base offer Ethereum compatibility, faster transactions, and lower costs, while still relying on the main Ethereum network for security.

Activity has exploded. Since the start of 2024, activity and trading volume on layer 2s have soared to all-time highs.

These layer 2s still pay transaction fees on the main Ethereum network, but only a fraction of what it would cost had everyone using the layer 2 sent transactions on the Ethereum mainnet.

What’s more, Ethereum’s March Dencun upgrade cut the already low cost of posting layer 2 transaction data, further decreasing mainnet demand.

Elsewhere, developers are improving the cost that governs Ethereum transactions. The result is reduced gas costs, meaning users pay less in fees for the same kinds of transactions.

With Ethereum more efficient than ever, and a thriving layer-2 ecosystem, how will the network avoid economic turmoil?

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

With investors anticipating approval of an Ethereum ETF in the US on Thursday, all eyes are turning to which cryptocurrency may be next.

For many, there’s a clear candidate — Solana.

“You got to think about Solana as probably the next one,” said CNBC presenter Brian Kelly on Wednesday. “Bitcoin, Ethereum Solana are probably the big three for this cycle.”

It’s not a bad call.

Joe McCann, CEO of crypto investment firm Asymmetric Finance and self-proclaimed Solana maxi, said SOL must be on deck given its stature in the market.

SOL is up more than 68% this year, according to CoinGecko. And with a market value topping $77 billion, Solana is the fifth biggest cryptocurrency.

Juiced DeFi market

The advent of an Ethereum ETF four months after spot price Bitcoin funds hit the market is juicing the DeFi market. Ether has jumped 29% in the last seven days, which is around six times better than Bitcoin.

Solana, meanwhile, has done even better thanks to its savvy embrace of memecoins earlier this year, and unorthodox ventures like the rollout of a new mobile phone called Chapter 2.

‘A Solana ETF similar to the ETH vehicles should bring no reasonable objection.’

Michael Cahill, Doura Labs

But the big story is how Wall Street powerhouses such as BlackRock, which used to ridicule crypto, are now falling over themselves to package cryptocurrencies into cheap and easy-to-trade exchange-traded funds.

Along with BlackRock, Van Eck and Fidelity have applied to issue Ethereum ETFs. The US Securities and Exchange Commission is expected to green-light the products on Thursday.

As a proof-of-stake token just like Ether, Solana may benefit from regulators’ familiarity with the product design.

“Technically speaking, a Solana ETF that has similar unstaked characteristics to the ETH vehicles being reviewed should bring no reasonable objection,” Michael Cahill, CEO of Doura Labs, told DL News.

“Given the developer activity, I view a SOL ETF as having a greater than 75% of listing this year, and over 95% next year.”

Then again, the bulls may be getting a little carried away.

Polymarket, the prediction market closely followed by crypto investors, reports that a Solana spot ETF has a 7% chance of approval in 2024.

The betting pool is small, too, with just over $100,000. This signals the proposition isn’t attractive enough for speculators.

Solana futures?

Nate Geraci, co-founder of the ETF Institute and President of the ETF Store, is equally pessimistic. At least not until the market sees Solana futures contracts.

Long before the spot Bitcoin ETF was approved, future contracts for Bitcoin were approved to trade on the Chicago Mercantile Exchange, one of the largest derivatives exchanges in the world. Likewise for Ethereum.

Geraci also said that before a Solana ETF can be approved, Congress must approve a clear regulatory framework for digital assets in the US.

Sweeping legislation

Spot price ETFs, of course, are typically marketed to retail investors, although institutions make good use of them as well.

While regulators have long balked at exposing retail investors to crypto ETFs, a number of developments appear to be ploughing the ground for altcoin funds.

On Wednesday, the US House of Representatives passed the FIT21 bill, a sweeping piece of legislation to govern digital asset markets. The bill garnered support from 71 Democrats, which is important because the party has been less supportive of crypto in the past.

The bill still needs to pass the Senate, and President Biden has signalled he doesn’t like the legislation. The White House said it would work with Congress to develop a regulatory framework for the industry.

Is that enough to make Solana a real contender?

Not for a while, say sceptics.Then again, it was only a few months ago when the prospect of an Ethereum ETF seemed the longest of long shots.

Liam Kelly is a Berlin-based DL News’ correspondent. Contact him at liam@dlnews.com.

Institutional investors are ready to pour $500 million into Ethereum ETFs over the next week if they are approved Thursday, according to analysis by OKX, the crypto exchange.

“It’s probably just as, if not more, important as the Bitcoin ETF approval,” Lennix Lai, OKX’s global chief commercial officer, told DL News.

“The potential approval of Ethereum to be traded as a proxy under a traditional framework could bring about the next wave of institutional demand,” Lai said.

Fever pitch

Anticipation is building to a fever pitch after the US Securities and Exchange Commission appeared this week to drop its long-held resistance to approving a spot price exchange traded fund for Ethereum.

Ethereum has soared 24% since Monday and boosted the proof-of-stake sector — Lido Staked Ether, for instance, is up 27% in the last seven days, according to CoinGecko.

Several applicants — such as BlackRock, Invesco Galaxy, Fidelity, and Franklin Templeton— are eagerly awaiting the SEC’s decision.

Asset manager VanEck is, however, first in line to get either a thumbs up or down from the regulator.

While Van Eck’s head of digital assets research said on Wednesday that it expects the SEC to respect the queue, any approval will likely be extended to other applicants to avoid the agency being seen as kingmaker.

Investors expect Ethereum ETFs to follow a similar course to the rollout of Bitcoin funds in January.

Ten such products have been trading at volumes exceeding $1.5 billion since January.

Record rally

The advent of Bitcoin ETFs and Wall Street’s embrace of the asset class spurred a record rally across crypto. This year, the sector’s market value has skyrocketed 50% to $2.7 trillion.

An Ethereum counterpart could excite animal spirits even more. Bernstein analysts’ predicted this week that Ether will surge to $6,600 if the funds are approved.

“Ethereum could potentially surpass its all-time high soon after a potential ETH ETF approval,” Lai said.

An Ethereum ETF will make it easier and cheaper for retail investors to buy exposure to the second most valuable cryptocurrency.

“Like the Bitcoin ETF before it, an Ethereum ETF will be a significant milestone for the industry,” Jean-Baptiste Graftieaux, CEO of Bitstamp, told DL News.

Cost for exchanges

Yet there may be a cost for crypto exchanges such as Coinbase and Kraken.

ETFs enable traders to access the asset class without using digital wallets or industry-native exchanges. Going mainstream, in other words, has many effects.

Yet Lai downplayed the long-term risk for exchanges and said the ETFs will provide a gateway for newcomers to crypto.

“It may actually expand the overall market size, including volume and participants, meaning it’s complementary rather than cannibalistic,” he said.

Crypto market movers

Bitcoin is down 1% over the past 24 hours to $69,550.

Ethereum is up 2.5% to $3,830.

What we’re reading

Solana dev says new crypto phone ‘feels like madness’ — but it already has $65m in pre-orders — DL News.

Coinbase, Meta, And Ripple Unite To Fight Pig Butchering Scams — Milk Road.

Why Spot Ether ETFs Are Now Likely to Be Approved on Thursday — Unchained.

SEC Chair Gary Gensler Warns Crypto Bill Poses Risks To Investors And Capital Markets — Milk Road.

Three experts on when you can buy an Ethereum ETF — DL News.

Eric Johansson is DL News’ News Editor. Got a tip? Email on eric@dlnews.com.