Robinhood is acquiring one of the industry’s oldest crypto exchanges Bitstamp, expanding the stock-trading app’s crypto footprint.

The acquisition is worth approximately $200 million, according to Robinhood’s announcement. The deal is expected to close in 2025.

“Through this strategic combination, we are better positioned to expand our footprint outside of the US and welcome institutional customers to Robinhood,” said Johan Kerbrat, general manager of Robinhood Crypto, in the announcement.

Robinhood’s acquisition highlights how a slew of fintech companies — such as Revout, Stripe, and PayPal — are making crypto a cornerstone of their business.

However, the fintech has also found itself in the Securities and Exchange Commission’s crosshairs because of its crypto services.

Robinhood’s crypto push

Robinhood is betting big on crypto.

Kerbrat has told DL News it wants to be “the on-ramp to the crypto world.”

DL News recently revealed that the stock-trading app is recruiting for its crypto team on the back of launching a crypto trading service in the European Union, and expanding its crypto wallet with an Arbitrum add-on.

The efforts are paying off.

Before the Bitstamp acquisition hit the wire, research firm Bernstein estimated that Robinhood’s crypto push would catapult its market cap to about $26 billion in 2025, up from almost $19 billion today.

The company’s crypto arm drove its growth in the last quarter of 2023, with its cryptocurrency revenue surging to $43 million of the company’s total $200 million in transaction-based revenue.

For 2023 as a whole, cryptocurrencies made up for 17% of the company’s $785 million in transaction-based revenue.

The new acquisition fits into this drive.

What is Bitstamp?

Bitstamp markets itself as one of the world’s oldest crypto exchanges, having been founded in 2011.

Today, it serves users in Asia, the US, Europe, and the UK. It also already offers services like lending and staking, which are key components of crypto markets after buying and selling tokens.

The exchange posted more than $232 billion in trading volume in the last day, according to CoinGecko.

The SEC

The announcement comes as the SEC has made Robinhood a target due to its crypto business.

In a May 8-K filing, Robinhood revealed that the SEC had contacted the firm to notify them of its recommendation to file an enforcement action.

The markets watchdog said that Robinhood was offering unregistered securities by letting users buy and sell various cryptocurrencies, a line of reasoning found in its actions against Coinbase and Consensys.

“We firmly believe that the assets listed on our platform are not securities,” Dan Gallagher, Robinhood’s chief legal officer, said at the time.

Robinhood and Bistamp did not immediately respond to DL News’ request for comment.

Liam Kelly is a DeFi Correspondent at DL News. Eric Johansson is DL News’ News Editor. Got a tip? Email them at liam@dlnews.com and eric@dlnews.com.

The Arbitrum DAO is poised to give developers of blockchain-based video games more than $200 million in crypto.

A vote to fund a new “Gaming Catalyst Program” with more than 200 million ARB tokens has received overwhelming support through Wednesday, with more than 149 million votes in favour and almost 31 million votes in opposition.

If approved, the scheme would have 135 million ARB worth about $150 million to invest in game developers and studios, and another 65 million ARB to distribute in the form of grants.

The vote has also attracted opposition, however, with critics calling it an outsized sum for an industry that has produced few blockbuster hits despite receiving billions in venture capital.

“It is too much money to spend on a niche category,” crypto influencer and investor Eric Wall wrote on X.

“I’m just not sure we need to fund this for a quarter billion dollars. Who is it helping?”

Wall, an Arbitrum DAO delegate, was one of several to vote in opposition to the proposal.

The Arbitrum quarrel highlights the precarious state of web3 gaming.

While backers contend that it’s “not a bubble,” the absence of success stories combined with a brutal crypto winter have ground the flood of investments into web3 games to a trickle.

In 2021, web3 gaming projects raised $2.3 billion, according to DefiLlama. Last year, that figure dropped over 70% to $576 million.

Web3 gaming projects have only raised $213 million so far this year, despite venture capitalists slowly returning to the crypto industry.

An ‘aggressive budget’

Karel Vuong, founder of video game developer Treasure DAO, co-authored the Gaming Catalyst Program.

He pitched it as a way to turbocharge game development on the largest Ethereum-based, layer 2 blockchain.

“As a network, Arbitrum falls behind several major competitors across total games migrated, games launched, and total gamers,” the proposal reads.

“We believe that earmarking an aggressive budget to attract builders and retain talent will result in a few major wins.”

The scheme would funnel money toward game publishers and developers over a three-year period.

The “core of this initiative is to create an investment arm for the DAO that would be making investments instead of just giving out grants,” Krzysztof Urbanski, a member of Arbitrum delegate L2BEAT, told DL News.

“The revenue for the DAO does not necessarily have to be coming [just] from sequencer revenue, it may be coming from the return on said investments.”

Criticism

Several Arbitrum delegates — members who use others’ tokens to vote on their behalf — voiced their concern with the size of the Gaming Catalyst Program.

DAO governance firm GFX, an Arbitrum delegate, has led a late campaign to scuttle the proposal.

“This is an enormous amount of money for an industry vertical with no visible winners,” GFX wrote in the Arbitrum governance forum. “This is highly speculative and looks like a YOLO.”

The comment highlights how few web3 games have reached — and held onto — a wider audience.

The most popular, Axie Infinity, found an audience in the Philippines before crashing amid a $600 million hack and broader lull in crypto markets.

Despite a comeback, deposits in Axie’s blockchain, Ronin, are still a fraction of what they were at their 2021 peak, according to DefiLlama data.

Arbitrum delegate Lito Coen voted against the proposal, on the grounds the upfront sum was too great.

“I would prefer if funding was for one year and or one third of the amount and having the GCP group apply for new funding after,” he wrote on X.

Backing the gaming scheme

Nevertheless, most major Arbitrum delegates back the programme.

“For me the benchmark is not Elder Scrolls but rather games like Stardew Valley,” Urbanski said, referring to a big-budget video game series that has sold tens of millions of copies worldwide.

“Or games like Forge of Empires, Travian, or Eve Online. Those are maybe not your cover-making titles but they are money machines.”

And Arbitrum DAO isn’t the only one poised to invest big in crypto gaming.

Recent gaming funds raised by Andreessen Horowitz, as well as Arbitrum competitors Starknet and Polygon, all topped $100 million.

“In web3, such an initiative is not extraordinary,” Urbanski said.

Aleks Gilbert is a DeFi Correspondent at DL News. Got a tip? Email him at aleks@dlnews.com.

Crypto companies need to disclose more information about their tokens, Securities and Exchange Commission Chair Gary Gensler said Wednesday on CNBC.

But his statements were notable for what they left out: the assertion that “most” crypto tokens were securities subject to SEC oversight.

It was the latest suggestion that political winds are shifting in Washington.

In a surprise move last month, the SEC approved spot Ether exchange-traded funds. Additionally, more than 70 House Democrats broke ranks to vote for crypto legislation, a move seen as a major symbolic win for the industry.

“Right now, without prejudging anyone, these tokens, whether they’re the ones Jim [Cramer] listed or other tokens, have not given you the disclosures that you not only need to make your investment decisions,” Gensler said, referring to the CNBC host, who had asked whether the SEC would approve spot ETFs for the BONK memecoin.

In past appearances this year, Gensler had used similar language when asserting most tokens are securities — a classification vehemently opposed by the industry.

“Here we have an asset class, all of these 15 [thousand], 20,000 crypto tokens, many of which — without prejudging any one — many of which are something called investment contracts or securities,” he said on CNBC in February.

Nevertheless, Gensler continued to suggest Wednesday that he viewed the industry as a financial “Wild West.”

“These crypto exchanges, Jim? They’re doing things that we would never allow this New York Stock Exchange to do. Our laws won’t allow you to trade against your customers,” he said.

“Some of the most leading lights of this field are in jail, about to go to jail, or awaiting extradition.”

Aleks Gilbert is a DeFi Correspondent at DL News. Got a tip? Email him at aleks@dlnews.com.

Wall Street giants — from investment banks like JPMorgan to the world’s largest asset manager BlackRock — are touting the benefits of issuing and processing securities onchain.

These firms say so-called tokenisation of assets, from stocks and bonds to art and real estate, will automate what are currently inefficient and error-prone operations in financial markets.

However, all these benefits could be achieved with other kinds of ledgers and databases than blockchain, a finance academic told Congress on Wednesday.

“Crypto runs on permissionless public blockchains, and tokenisation does not need to,” Hilary Allen, who is a law professor at the American University Washington College of Law, said.

Allen was testifying in a hearing convened by the House’s Subcommittee on Digital Assets, Financial Technology and Inclusion to debate whether tokenisation will facilitate efficient markets.

‘Blockchains suffer from inescapable inefficiencies and operational fragilities that make them unsuitable as supporting infrastructure for real-world assets.

Prof Hilary Allen

Consensus concerns

Wall Street has dabbled in tokenisation for years, mostly — thanks to competitive and regulatory concerns — on closed, so-called “permissioned” blockchains.

More recently, however, banks have started testing the capabilities of public blockchains like Ethereum.

The problem is, these blockchains “suffer from inescapable inefficiencies and operational fragilities that make them unsuitable as supporting infrastructure for real-world assets,” Allen said.

For instance, consensus mechanisms — protocols for bringing the nodes of a blockchain into agreement to verify transactions — are ineffective and wasteful, she said.

That’s often by design — many blockchains have built-in delays, for instance — but this does mean they can’t process large volumes of transactions.

Additionally, governance is an issue.

The world’s financial markets run on centralised databases that are monitored for cybersecurity and operational risk, and that are subject to strict controls, rather than by unregulated and sometimes anonymous core developers.

When financial firms experiment with blockchain, they often address these scalability and governance issues by re-centralising control of certain processes, Allen said.

But that raises the question — “Why use the public, permissionless blockchain in the first place?” she asked.

Allen also took aim at the claim tokenisation projects make in their marketing — that they’re democratising finance by offering fractional ownership of assets usually inaccessible to ordinary Americans.

“I urge you not to pin your hopes on tokenisation as a means of improving financial inclusion,” she said.

“With so many Americans living paycheck to paycheck, the problem is not a lack of investment opportunities, but a lack of money to invest in the first place.”

Better rules

Allen sounded the lone sceptical note at the hearing.

Other witnesses represented firms exploring or actively involved in handling tokenised securities.

These witnesses called on Congress to ease legal and regulatory obstacles to tokenisation.

“Existing statutes and regulations were not designed with blockchain in mind,” Carlos Domingo, co-founder and CEO of Securitize, told lawmakers.

Securitize is the transfer agent for BlackRock’s tokenised fund BUIDL.

Among other measures, he called for improvements in the Securities and Exchange Commission’s licensing regime to allow brokers to safeguard digital assets.

The SEC introduced a special broker licence for this purpose in 2021.

However, Domingo said, it is “frustratingly difficult to achieve, limited in scope, and it isn’t clear which tokenised securities are eligible” for the licence.

Email the author at joanna@dlnews.com.

The way Alan Scott tells it, he thought he was being scammed.

As a co-founder of the Railgun Project, a group that educates on and contributes code to the Railgun privacy protocol, he is accustomed to federal agents’ scepticism.

So, when an invitation to speak at the Virtual Currency Symposium — which Scott describes as the biggest international conference for law enforcement agencies looking to catch crypto bad guys — darkened his inbox, he thought it was a con.

“It’s not every day you get somebody from the FBI write to you and say, ‘Hi, we would like you to talk at our conference,’” Scott told DL News in an exclusive interview.

The invite turned out to be genuine.

In late August, Scott stepped up on a Milwakue stage after the deputy director of the FBI’s keynote to tell people policing privacy protocols like his that — contrary to popular belief — these tools are not just for criminals.

That’s a hard sell.

Authorities have spent the past few years cracking down on privacy protocols and crypto mixers.

In April, the Department of Justice arrested two co-founders of Samourai Wallet, a Bitcoin wallet with a built-in crypto mixer.

A Dutch court convicted Tornado Cash developer Alexey Pertsev of laundering $2.2 billion in illicit assets in May, and the European Union is looking to ban crypto mixers and privacy tokens.

But Scott is on a campaign to convince law enforcement agencies, politicians, and the public at large that privacy tools can bolster honest users’ security.

Vitalik’s favourite privacy tool

Railgun has largely flown under the radar since its 2021 debut.

But in recent months, Ethereum co-founder Vitalik Buterin used Railgun on several occasions and promoted the protocol on X to his 5.3 million followers.

The high-profile attention had an effect. On May 27, the protocol recorded its highest-ever weekly volume of $47 million.

Railgun distinguishes itself from similar projects, such as Tornado Cash, with its Proof of Innocence feature, which is designed to prevent bad actors from using it.

This lets users create a cryptographic proof that shows the money they put into the protocol didn’t come from wallets associated with stolen funds or illicit activity, while at the same time keeping the origin of the money secret.

The thinking is that if honest Railgun users generate these proofs, bad actors attempting to launder crypto through the protocol will be the only ones left without them — empowering crypto exchanges and law enforcement to identify them.

Currently, Proof of Innocence only flags crypto addresses that the Office of Foreign Assets Control has put on its sanctions list, but Scott said Railgun contributors want to change that.

Contributors are working on a secure way to allow law enforcement and crypto security experts to update the list of bad actors in real-time — even if the addresses are not yet on the official OFAC list.

“What if law enforcement around the world would be able to contribute to this?” Scott said.

Scott’s main Railgun contribution is to research as well as facilitate communication and collaboration with other projects.

In recent months, he’s been advocating on behalf of the Railgun protocol and other privacy protocols — telling everyone from casual memecoin traders to the FBI why so many people treasure privacy.

“Overwhelmingly, the response is quite positive,” Scott said.

Privacy protocols under siege

While Scott’s been busy talking with federal agents, anonymity advocates are absolutely alarmed at how privacy is being threatened.

They point at Pertsev’s conviction as well as the US Department of Justice charging two more Tornado Cash developers for running a scheme that enabled criminals to launder over $1 billion of illicit funds.

Privacy advocates argue that these developers are unfairly penalised by others using the tools they created to commit crimes.

“It definitely creates a negative bias in privacy,” Scott said. “There’s even a bit of a chilling effect around privacy because people are like, ‘I don’t want to go to jail for writing code.’”

Such chilling effects include developers choosing not to write and publish code relating to privacy, stifling innovation.

Another example of the chilling effect is that traffic to Wikipedia articles containing keywords tracked by the Department of Homeland Security dropped following revelations about NSA surveillance in 2013.

However, Scott said, he’s not all that worried about Railgun facing a similar fate as Tornado Cash.

“I do find it unfortunate that those dudes are in jail,” he said, adding that “there’s a lot of people developing privacy who aren’t in trouble.”

He pointed to long-running crypto privacy projects like Aztec and Zcash, among others that aren’t facing the same issues as Tornado Cash.

Privacy nuances

There are also signs authorities are starting to recognise the nuances around crypto privacy.

“We believe that there is a difference between obfuscation and anonymity enhancing services that support privacy,” Brian Nelson, the Treasury’s Under Secretary for Terrorism and Financial Intelligence, said at the recent Consensus crypto conference.

Nelson said he understood the desire for privacy in the context of public blockchains, and that the Treasury wants to work with the crypto industry to identify and collaborate on tools that can enhance privacy.

Nelson’s comments, while positive, mean Scott and other privacy advocates like him will likely have a busy time ahead of them.

Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.

BlackRock and speed trading firm Citadel Securities are backing a new stock exchange in Texas designed to challenge giants such as the New York Stock Exchange.

Founder and CEO of TXSE Group James Lee, who posted the plans on LinkedIn, said the companies are among the deep-pocketed backers of the Texas Stock Exchange, to be based in Dallas.

The new bourse’s $120 million in fundraising makes it the most well-capitalised exchange to file a registration with the Securities and Exchange Commission, he said.

“Investors behind it mean to pressure exchanges on fees and seek to disintermediate them too, if they can, as they hold themselves to be a large source of liquidity and flows in their own right,” Xavier Rolet, former CEO of the London Stock Exchange, told DL News.

Sean Stein Smith, a professor at the City University of New York and board member at the Wall Street Blockchain Alliance, agreed. The move sends a message that Blackrock and Citadel want to compete with New York exchanges, he said.

TXSE will list public companies and facilitate trading in what it calls “the growing universe” of exchange-traded products. These are cheap and accessible offerings that typically index a basket of securities.

BlackRock, the world’s biggest money manager with $10 trillion in assets, has already shaken up one industry this year: crypto.

‘Monopolistic behaviour was always the exchange industry’s Achilles heel’

Xavier Rolet, ex LSE CEO

Its introduction of Bitcoin and most recently Ethereum ETFs has loosened the crypto industry’s grip on retail investors.

CEO Larry Fink has said he wants to bring costs of trading down for ordinary investors — indeed, his Bitcoin ETF costs a fraction of the fees that rivals such as Grayscale charge.

Fink has also set his sights on tokenisation — the digital trading of stocks and bonds — in what could be an opportunity worth trillions.

US dominance

Rolet said the new Texas exchange also highlights the dominance of US exchanges in the global capital markets.

London companies are jumping ship to the US to list their shares publicly. UK chip designer Arm shunned the London Stock Exchange and last year chose instead to list on the Nasdaq.

The IPO valued the company at about $55 billion, the biggest US stock debut since 2021.

The US overwhelmingly dominates in stocks — about 60% of the total value of global equities is on US exchanges.

Rolet said that’s some 10 times the daily liquidity of UK and European equity markets.

“Monopolistic behaviour was always the exchange industry’s Achilles heel,” Rolet told DL News. “They can afford some fragmentation.”

Sean Tuffy, a market structure expert and former Citigroup executive, told DL News that BlackRock’s and Citadel Securities’ reasoning is simple:

“Two of the biggest players in US capital markets are looking to disrupt the existing exchanges because it could be good for their existing businesses to do so.”

Nubit advances blockchain scalability with $12m total funding, integrating major L2 frameworks and supporting multi-chain ecosystems, while pioneering an innovative data availability solution to unlock limitless applications in AI, SocialFi, and GameFi.

This latest round brings Nubit’s total funding to $12m, advancing its mission to develop the most secure and scaleable data availability (DA) layer for multi-chain ecosystems

Nubit has successfully closed an $8m seed funding round, led by Polychain Capital, with participation from Nomad Capital, Spartan Group, L2IV, Big Brain Holdings, GCR, Protagonist, Gate Ventures, Animoca Ventures, Mask Network, and others.

This latest round brings Nubit’s total funding to $12m, advancing its mission to develop the most secure and scaleable data availability (DA) layer for multi-chain ecosystems, supporting limitless applications including artificial intelligence (AI), SocialFi, and GameFi.

“I have known and collaborated with Professor Yu Feng and the Nubit team for a long time. Their historical achievements in Zero-Knowledge (ZK), security, and blockchain give me confidence that their innovative DA solution can unlock numerous application possibilities across various sectors,” said Luke Pearson, senior research cryptographer at Polychain Capital.

Founded by Feng, a computer science professor at University of California, Santa Barbara, Nubit draws on a decade of research to advance blockchain scalability. Nubit leverages Bitcoin’s economic security and optimises key metrics such as fraud detection methods, attestation security, and accessibility with ZK technology.

This allows it to ensure unparalleled trust and reliability, while achieving scalability through a high-performance consensus algorithm and innovative data structures like the Kate-Zaverucha-Goldberg (KZG)-based Namespaced Merkle Tree.

As the crypto landscape evolves, enabling unlimited innovations with the most secure and scaleable DA layer is crucial next step. Bitcoin’s block space is preferred by users due to its unparalleled security, however, limited space and high costs makes it an impractical solution.

Nubit addresses this challenge by leveraging Bitcoin’s economic security to provide an innovative DA layer that ensures both security and scalability. It brings Bitcoin-level security to various applications and infrastructures, effectively bridging the gap between Bitcoin-native solutions and the broader multi-chain ecosystem.

Debuting as a leader in Bitcoin Season 2, Nubit has integrated major players such as Babylon, BounceBit, Unisat, and Merlin Chain.

In April 2024, Nubit launched its Pre-Alpha Testnet, engaging 155,115 users, deploying 5294 modular services, and processing 561,862 transactions

Furthermore, to address the insecure execution layer in the Bitcoin ecosystem, Nubit is committed to developing a programmable, modular, and trustless execution layer for meta-protocols like BRC-20 and Runes. The academic paper “Stateless and Verifiable Execution Layer for Meta-Protocols on Bitcoin” lays the foundation for new possibilities in the Bitcoin ecosystem.

Beyond the Bitcoin ecosystem, Nubit recently extended its support to all major L2 frameworks, including Polygon Chain Development Kit (CDK), OP Stack, Arbitrum Orbit, and Scroll, making it a universally applicable DA solution. As Nubit expands, its strategy now includes a broader scope, focusing on unlocking new possibilities for AI and Machine Learning, as well as on-chain gaming across multi-chain ecosystems.

In April 2024, Nubit launched its Pre-Alpha Testnet, engaging 155,115 users, deploying 5294 modular services, and processing 561,862 transactions. The team will launch the Alpha Testnet in June, the final phase before the mainnet launch later in 2024.

Wolfgang Münchau is a columnist for DL News. He is co-founder and director of Eurointelligence, and writes a column on European affairs for the New Statesman. Opinions are his own.

As a young financial journalist in the mid-1980s, I met the late Ivan Boesky, an investor who called himself a modern arbitrageur.

He had me fooled.

Old arbitrage was the exploitation of price differences between exchanges. If bills of exchange in sterling were cheaper in mediaeval Paris than in Bruges, a merchant banker would buy them in Paris and sell them in Bruges.

This would lead to an equalisation of prices. Even though everybody is in it for the money, there is social value in this transaction. It increased the efficiency of markets.

But this is not what Boesky did. He made the implausible claim that he would arbitrage information — merger arbitrage as he called it.

That sounded intriguing to us, but it turned out to be a euphemism for insider trading.

A few months after our meeting he was arrested. What appeared to me as a financial innovation turned out to be old-fashioned fraud.

He served time in jail, got barred from the financial markets for life, became a government informer, and stayed out of the spotlight until his death last month.

Michael Douglas’ Gordon Gekko character in the 1987 film “Wall Street” — the “greed is good” part — was based on Boesky.

What the Boesky experience taught me is that financial innovation doesn’t actually exist.

‘When someone claims they’e created an innovation, it is usually more likely they’ve found a way to hide risks.’

That might sound like a bold claim. But think about it.

Finance is the intermediation between borrowers and lenders, and savers and investors.

You can structure credit in different ways. Or hedge risk.

But when someone claims they’e created an innovation, it is usually more likely they’ve found a way to hide risks. Case in point: US subprime mortgages in the 2000s, which concealed bad credit in vast pools of investment grade products.

Fundamental observation

So how does this apply to crypto, or more precisely, to decentralised finance?

Let’s start with the tendency by many to conflate the properties of DeFi instruments — tokens, blockchain networks, smart contracts — with the industry itself.

Defi’s promised social value lies in the termination of the financial middleman. This is a big deal, and one that would justify some of the large investment flows into the crypto industry.

What Amazon did initially for books and later later for everything else, is what crypto can do for finance.

Crypto’s potential

In finance, you can estimate the current costs of the rent-seeking middleman in terms of the margin between market interest rates and loan rates, or credit card interest rates.

In other words, the spread you see between central bank capital and the rate your bank is giving you on deposits, or charging you on debt, is massively wide.

That’s the potential in savings crypto can offer.

It can take out some of the hassle of a mortgage application, and it can match borrowers and lenders in ways that is not possible with the mostly static institutions of modern finance.

But beware of claims that go beyond this. In statistics, there is a famous method called “the bootstrap” — a sampling technique that superficially appears to create data out of nothing.

You can bootstrap data, but you can’t bootstrap money, just like a central bank cannot expand the money supply beyond certain thresholds over long periods without creating inflation.

Bubbles can persist for surprisingly long times — decades even. Some people will make a killing while it lasts. If it is not sustainable, it will end.

The natural barrier for DeFi is that ownership of real assets is governed by national laws. It takes a court order to claim a delinquent debtor’s assets.

Uncollateralised lending, which is the business of banks, is difficult in a pure crypto universe.

Wholesale financial markets already operate at high levels of efficiency and low margins.

The main promise for DeFi from an economic perspective would be the parts of the financial markets that suffer the most friction in the form of high transaction costs and barriers to entry.

This would be a social value, but it would still require crypto-friendly regulation.

Social value

This scenario is different from the one I talked about in earlier columns about crypto as a potential replacement for fiat money. That does not require the collusion of authorities.

The social value here is the freedom to transact without state control. What the two have in common is the elimination of the rent-seeking middlemen.

For DeFi, the middleman argument is the one that matters most. But I struggle to see a world of decentralised finance that operates outside of legal systems at scale.

In a fiat money system, one distinguishes between inside and outside money. Inside money is the money created by banks — through loans for example.

Outside money exists outside the financial system, like gold. Crypto money can be classified as outside money from the perspective of the non-crypto world.

In that definition crypto is a bubble that either pops, or that gets fed by fiat money that allows crypto investors to liquidate their positions.

But don’t fall for the financial innovation hype. There are a lot of Boeskys out there in the crypto universe.

I think Amazon is the better way to think about Defi. Amazon brutally cut out the middleman.

But just as Amazon did not reinvent the book, crypto will not reinvent finance.

Vitalik Buterin says he’s far from pleased with the latest round of celebrity joke coins, but that doesn’t mean the $69 billion market is for nought.

It just needs a new direction.

“The north star should be: to have a project where even if eventually all tokens involved go to zero, the average person who participated is happy to have done so,” the Ethereum co-founder wrote on X, previously Twitter.

Memecoins command a combined market value of $68.6 billion, and generated over $6.5 billion in trades over the past 24 hours alone.

Buterin said celebrity memecoins must have “some kind of public-good goal that it’s serving, other than enriching the celebrity and early adopters. Realistically, either an art project or the celebrity’s favourite charity, or both.”

He said Ashton Kutcher and Mila Kunis’ NFT-powered Stoner Cats animated series from 2021 was “vastly more honorable” than other memecoins launched by celebs this year.

The non-fungible tokens of the show’s feline stars were sold to raise money to produce the series. In 2023, the Securities and Exchange Commission charged the project’s creators with offering unregistered securities.

The second factor determining whether the Ethereum co-founder can respect memecoins is whether they enable users to do something other than trading the token.

“As much as I dislike token-voting DAOs, at least they give something for people to do and organise around,” Buterin said. “The DAO should not fully decide the agenda, but it can have some influence.”

Decentralised autonomous organisations are communities that lead many crypto projects.

A quick summary of features that a celebrity crypto project needs to have for me to be more willing to respect it:

1. Have some kind of public-good goal that it's serving, other than enriching the celebrity and early adopters. Realistically, either an art project or the…

— vitalik.eth (@VitalikButerin) June 5, 2024

The third factor?

Whether or not it will last.

“Make something that lasts 10-plus years, rather than bubbling around for a few months and then being forgotten,” Vitalik said.

Memes all the way down

Buterin’s comments come as tokens that are either officially or unofficially linked to famous people like Donald Trump and Caitliyn Jenner have been riding high on the current crypto bull run.

Australian rapper Iggy Azalea launched a token on Solana in May. Since its launch, the token rose more than 520% to $0.1073, according to CoinGecko.

Market watchers expect the current memecoin frenzy to drive Solana — the blockchain many of these joke coins are trading — to record highs this year.

Hitting new highs and making celebs wealthier isn’t enough to meet Buterin’s high bar for memecoiner-y however.

Crypto market movers

Bitcoin is up 3% over the past 24 hours to $70,940.

Ethereum is up 1.1% to $3,800.

What we are reading

Novogratz says Bitcoin will hit $100,000 by year’s end — DL News.

Thailand Approves First Spot Bitcoin ETF, Joining Global Trend — Milk Road.

In the Ongoing SAB 121 Fight, Here’s How Crypto Can Move Forward With Bipartisan Support — Unchained.

BNB Soars To New All-Time High Despite Binance’s Struggle In Nigeria— Milk Road.

Controversial firm Prometheum says it’s jumping on the BlackRock tokenisation trend — DL News.

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

Aaron Kaplan seemed surprisingly relaxed for someone who’s picked a fight with the crypto lobby.

Not only has the co-CEO of digital asset trading platform Prometheum told the industry to stop asking for special treatment, he is coming for its lunch money with a new Ethereum custody service.

“We’re feeling very positive,” Kaplan told DL News, referring to the company’s recent soft launch of its service with unnamed clients.

The firm is also gearing up to tap into a projected $16 trillion boom in the trading of digital securities like equities and structured products — so-called tokenisation.

Siding with Gensler

The crypto lobby has amassed an $85 million war chest ahead of the US election to fight for its own favourable, tailored regulations.

But Kaplan continues to take the view of Gary Gensler, the SEC’s chair, who says that the federal securities laws are adequate to govern digital assets.

The company’s Ethereum product has already attracted negative attention from pro-crypto lobbyists and lawmakers, as it treats Ethereum as a security.

The SEC has never explicitly said that Ether is a security or a commodity — a contentious point for the crypto industry.

Kaplan said, however, that Prometheum has always taken the view it will follow securities laws, whatever they are.

‘We’ve never spent tens of millions of dollars trying to lobby for different laws in Congress.’

Aaron Kaplan

“We’ve never spent tens of millions of dollars trying to lobby for different laws in Congress,” he said.

“We’re just asking for the law to be applied, and whichever way the law goes, we will analyse and proceed accordingly.”

The attitude has already served Prometheum well — it’s the only industry player with a special broker licence from the SEC — but has also made it enemies in the cryptoverse.

Tokenisation

Prometheum’s aim since its founding in 2017 has been to provide a liquid, compliant public market for transacting digital assets, Kaplan said.

To that end, the company went through the rigorous process of obtaining a special purpose broker dealer licence — a new category of approval that the SEC introduced in 2021.

It’s still the only company with this licence, which, as of December, allows it to trade, clear, settle, and custody digital assets — the components of a soup-to-nuts service for investors.

The licence enables Prometheum to do all this with any kind of security.

That includes Ethereum and the company could also handle tokenised securities — on chain versions of assets like stocks and bonds.

It’s a sign BlackRock’s push into tokenisation is drawing more corporate followers.

Investment banks are beginning to issue instruments like bonds on the blockchain, and promoting the cost savings tokenisation.

However, widespread adoption of blockchain for assets like stocks and bonds is slow.

The digital assets subcommittee in the House of Representatives meets on Wednesday to discuss whether there are legal impediments to tokenisation.

Kaplan said, however, that the impediments are more structural than legal — and that’s where Prometheum sees an opportunity.

“I don’t think anything’s necessarily missing in the law,” Kaplan said.

“What’s missing is the market infrastructure licensed under securities laws that allows for the public trading, clearing, settlement, and custody of digital securities.”

Controversy magnet

But Prometheum’s fundamental operating premise — that federal securities laws are adequate to regulate digital assets — has positioned it at the nexus of the most heated debate in crypto in the US.

Industry leaders like Coinbase CEO Brian Armstrong are adamant that crypto is a unique technology that needs its own laws.

A year ago, a then-low profile Kaplan testified in Congress.

He told lawmakers that contrary to complaints from the crypto industry, it is possible to register with the SEC, and that platforms like Coinbase were “scofflaws” for failing to do so.

An ensuing industry backlash levelled accusations at Prometheum that ranged from the arguably reasonable — that it appeared to have no business model — to the absurd. No, Kaplan is not Gensler’s nephew.

Kaplan, however, appears unfazed.

“If the crypto industry wants crypto, they got it. That’s not our primary focus,” he said.

“Our primary focus is securities on the blockchain, and investment contracts are just a small fraction of that.”

Reach out to the author at joanna@dlnews.com.

Michael Novogratz, founder and CEO of crypto investment firm Galaxy Digital, is — surprise, surprise — bullish on Bitcoin.

The crypto billionaire told Bloomberg TV Tuesday that he believes Bitcoin’s price could hit $100,000 by year’s end.

“If we take up to $73,000 in the next week or so, we’re gonna end the year at $100,000, somewhere around there, or even higher,” he said.

Novogratz cited regulatory changes in the U.S government. Specifically, he referenced the Securities and Exchange Commission’s approval of Ethereum exchange-traded funds; bipartisan support in Congress for FIT121, the legislation that would provide a clearer regulatory framework for digital assets; and congressional support for the revocation of SAB 121, accounting guidance from the SEC that many in crypto oppose.

The repeal of SAB 121 passed both the House of Representatives and the Senate, but President Joe Biden vetoed the measure on Friday.

“We’re getting the regulatory clarity, and even though it’s not perfect, we’ve got enough that people now realise [that] this is coming,” Novogratz said in reference to a broader governmental acceptance of crypto.

Bitcoin’s resurgence

Novogratz’s optimism for Bitcoin comes amid a recent resurgence in the cryptocurrency’s price, which has buoyed the broader crypto market.

In mid-March, Bitcoin reached an all-time high of more than $73,000, and the total market capitalization of all cryptocurrencies approached $2.8 trillion, according to CoinGecko.

By early May, however, crypto fervour waned, and the largest cryptocurrency by market capitalization hovered near $56,000, bringing down the total market value of all cryptocurrencies with it.

Now, Bitcoin is approaching $71,000, and the total market capitalization for all cryptocurrencies has jumped to $2.67 trillion from an early May low of $2.33 trillion.

“If you bought Bitcoin and held it like most Bitcoiners do, you’re in the money,” Novogratz said.

Ryan Salame, who was one of FTX’s head honchos before it imploded, is posting through it.

The former co-CEO of the bankrupt crypto exchange’s Bahamas subsidiary has posted on X every day since a federal judge sentenced him in late May to seven and a half years in prison.

“Are we at the point in the crypto cycle where lenders let you borrow billions against a ham sandwich or not yet?” he wrote Sunday.

Four lawyers told DL News that the former FTX executive’s decision to take to social media since his sentencing is “unusual.” However, the legal risks for Salame’s public commentary are less than those he would have faced if he took to X prior to his sentencing, they added.

Salame pleaded guilty in September 2023 to a campaign-finance violation and the unlicensed operation of a money-transmitting business. He is one of four key lieutenants of Sam Bankman-Fried, the co-founder and former CEO of FTX, to plead guilty after the collapse of FTX in November 2022.

Bankman-Fried was sentenced to 25 years in prison in late March. Caroline Ellison, Nishad Singh, and Gary Wang all await sentencing.

Neither Salame nor his lawyers immediately responded to a request for comment from DL News.

‘Not in the defendants’ interest’

Salame’s recent emergence on X will likely have fewer legal consequences than if he had sounded off before his sentencing, according to Daniel Silva, an attorney at the law firm of Buchalter and a former Department of Justice prosecutor.

If the government found anything Salame said on X especially objectionable, prosecutors would have to move to dismiss his conviction, strike his sentence, submit another pending indictment, and proceed with discovery and potentially trial.

“I’m not sure why they would want to do that,” Silva told DL News.

However, Will Thomas, a law professor at the University of Michigan, said speaking publicly after a sentence isn’t without potential consequences.

“An annoyed judge might pull a defendant back into court to explain how their post-plea statements fit with their in-court representations, which is ... uncomfortable,” Thomas wrote in an email to DL News. “It is even possible for a judge to rescind a guilty plea, which ultimately is not in the defendants’ interest.”

Salame has avoided talking about his sentence on X, but he has posted twice about his case. In both instances, he implicitly invoked an advice-of-counsel defence and laid blame at the feet of former lawyers.

“Sucks that if I had just sold off my pile of crypto like I was going to instead of listening to multiple lawyers and borrowing from Alameda against it instead, I likely wouldn’t be going to prison for seven and half years,” he wrote, referring to Alameda Research, a crypto trading firm founded by Bankman-Fried

‘What good can come of this?’

Regardless of the risks, all the lawyers DL News spoke with said that Salame’s public commentary isn’t the norm for most criminal defendants.

“I would always advise clients not to do that,” said Elisha Kobre, an attorney at Bradley Arant Boult Cummings and a former DOJ prosecutor.

Silva agreed. “What good can come of this?” he said, adding later: “Maybe he’s trying to entice someone to pay him for his story.”

In a Monday post on X, Salame did say that he was reaching out to publishers for a memoir he had written since FTX collapsed, but he said he didn’t want money: “I’ll be keeping 0$ of the proceeds once it hits print.”

The European Union’s elections start on Thursday. For crypto, that means key lawmakers may lose their seats in the new 720-member parliament, and the policy agenda for the sector will go into a period of flux.

While crypto has emerged as an issue in the US presidential election, it’s remained a sleeper topic in the European campaign.

Still for the last five years, the EU has methodically addressed the challenges of crypto assets by adopting a comprehensive regime known as MiCA. At the same time, European leaders have also set up a small but symbolic body to oversee the rollout of blockchain infrastructure.

A delicate balance

But how a new Parliament picks up where the last one left off remains an unknowable question until the dust clears after this weekend. Crypto experts are watching closely to see how lawmakers approach the delicate balance between regulation and innovation.

“There seems to be a recognition that whilst regulation is important and can be enabling, it can also go too far and be seen as a blocker,” Mark Foster, EU policy lead at the Crypto Council for Innovation, told DL News.

The crypto industry will be looking out for who fills several key roles in the new Parliament.

For example, the Parliament’s Committee on Economic and Monetary Affairs has played a crucial role in amending and shaping crypto legislation over the last five years.

It’s shaped MiCA, which stands for the Markets in Crypto-Assets regulation, as well as rules to prevent money laundering.

Each parliamentary committee has a chair who coordinates the work within the groups of several dozen lawmakers focused on specific sectors.

The chairs also have a subtle influential role during the so-called trilogue negotiations, the final and most meticulous segment of law drafting shared between the EU institutions.

The Committees on Civil Liberties, Justice and Home Affairs, and on Internal Market and Consumer Protection have had impact on crypto legislation.

Parliament’s groupings

Other key jobs are the coordinators of the Parliament’s parties spanning across the political spectrum.

Coordinators allocate legislative reports within the group, deciding who gets to lead negotiations on a bill.

While experts expect to see a swing to the far right in the upcoming elections, the centrist-right European People’s Party remains taking up the biggest chunk in the polls.

The left-wing Socialist and Democrats group, whose MEPs have historically posed challenges to crypto industry advocates, come second in size.

Pending bills

There are a few pending draft laws that were not completed ahead of the elections. These bills will need a rapporteur, or an appointed lead negotiator in the Parliament.

The digital euro, a controversial bid to set up a European Central Bank-run digital currency, will also need a new parliamentary leader should German MEP Stefan Berger not return to complete the process.

Other legislation for payment services and financial data will also need a new MEP to take lead.

The Payment Services Regulation will be important in determining whether issuers of fiat-backed stablecoins, or e-money tokens, will need to comply with more onerous measures than the ones proposed within MiCA.

And, the new composition of lawmakers in the committees could redraft the work done by the last mandate to their own liking.

DeFi versus tokenisation

The European Commission is due to report on progress in decentralised finance and NFTs, and assess any risks the ecosystems may pose to consumers and markets.

The MiCA framework largely excludes these two features of the crypto industry, and focuses on service providers. Instead, the Commission will decide based on its findings whether extra legislation is needed.

The DeFi and NFT reports, which will include insights from European financial markets and banking regulators, are due in December.

But potential policy action on DeFi may be thwarted by another trend eating up the industry: tokenisation.

“If we’ve got huge banks and market infrastructures going into tokenising securities, debt instruments and deposits, that will need to have the right framework around it,” Foster said.

Europe’s crypto legislation

MiCA, which covers stablecoin issuers plus licensing requirements for crypto firms to safeguard markets and consumers, will go live in stages starting from the end of June.

Financial institutions, including crypto service providers, will also need to comply with beefed up IT security requirements from 2025 under the Digital Operational Resilience Act.

A DLT Pilot project was another pod in the European Commission’s Digital Finance Package. It was designed for market participants to experiment with tokenised financial instruments, but has not had much success.

In addition, Europe produced crypto-focused anti-money laundering rules to collect data on senders and receivers of transactions under the Transfer of Funds Regulation.

Plus, a separate Anti-Money Laundering Regulation also swept in crypto services as entities required to comply with the EU’s updated regime for the private sector.

Now, top officials are calling for a slow down in regulation and a chance for the tech and financial sector to implement the firehose of new laws spewed at them.

Blockchain, not crypto

“What we’ll see over the course of the next five years, the term of this legislative cycle, will be a focus more on DLT and the underlying technology,” Foster said.

That could cover decentralised, digital identity and wallets, or revamping financial market infrastructure with features like instant settlement to wipe out intermediaries.

And, these lawmakers will need to approve the next heads of the European Commission, Europe’s executive arm.

EU budget

The next European Commission leaders will be nominated by EU member states, and then elected by the European Parliament. This process will take place after the summer.

The new European Commission president, a job that could well remain with incumbent Ursula von der Leyen, and Commissioners leading the financial and technology sectors will be responsible for any new legislation that may impact crypto or blockchain.

The Commission also has an important role in allocating the EU’s budget towards its long-term goals on digitalisation or sustainability.

That includes projects like the blockchain infrastructure designed to underlie European administrations, dubbed Europeum.

It also includes other initiatives to update internet infrastructures and digitising services or businesses.

“This is an important ingredient to enable citizens to be able to use web 3 and crypto products and services,” Foster said.

Inbar Preiss is a Brussels-based regulation correspondent. Contact her at inbar@dlnews.com.

Crypto is the newest battleground in the US presidential election.

Presumptive Republican presidential nominee Donald Trump jumped into the fray last month by accepting crypto donations while vowing to protect self-custody rights for crypto owners.

But there are reasons beyond attempting to win the votes of crypto investors.

“Many Republicans recognize the strategic advantages of a private-sector US dollar stablecoin,” Pranav Kanade, a portfolio manager at Van Eck’s Digital Assets Alpha Fund, told DL News.

Central to the Republicans’ support of stablecoins, Kanade said, is the demand they provide for US Treasury bonds.

With the US government running a $1.7 trillion deficit, it must find buyers for its debt. In recent years, stablecoin issuers have become some of the largest buyers of US government debt.

Passing clear regulation around stablecoins would increase their use, and thus increase demand for US Treasuries.

“This becomes increasingly vital as traditional government buyers of US debt, like China, become more hesitant,” Kanade said.

Since 2021, China’s US debt holdings have shrunk 30% as it chooses not to replace maturing Treasury bonds with new ones.

Treasury bonds are debt issued by the US government. Investors buy bonds with dollars then receive their money back, plus interest, when the bond matures. Bonds are broadly viewed as the safest investment assets.

Stablecoin issuers love bonds

Stablecoins are crypto assets designed to track the value of another asset, usually currencies like the US dollar or the euro.

The most popular stablecoins, Tether’s USDT and Circle’s USDC, are backed by dollars and dollar-equivalent assets. This means investors can redeem these stablecoins for dollars at a one-to-one ratio.

Stablecoin issuers love to buy US Treasury bonds to back their stablecoins because they are considered dollar-equivalent assets, and they earn a yield, currently around 5.1% on short-dated bonds.

Tether’s USDT, the biggest US dollar stablecoin with $112 billion in circulation, is 66% backed by US Treasuries.

Stablecoin issuers, fueled by the demand for stablecoins overseas, can help boost demand for US government debt, Kanade said. He predicted that with proper regulation, the stablecoin sector could grow from roughly $160 billion to “several trillion dollars.”

In an August research report, wealth management firm Bernstein said it expected the stablecoin market to grow to $2.8 trillion in the next five years.

Crypto becomes bipartisan?

It’s not just Republicans who see the potential of crypto. According to Kanade, Trump’s recent comments are catalysing a bipartisan dialogue.

Kanade said he sees Democrats in the House who voted for the pro-crypto bill known as FIT 21, as well as senators including New York’s Kirsten Gillibrand “acknowledging this potential.”

But there are still signs of hesitation.

On May 31, President Joe Biden vetoed a House Joint Resolution that would have abolished a bill that critics say makes it difficult for crypto companies to work with banks.

Still, “it’s important to look at the bigger picture,” Kanade said.

“The tide is clearly shifting towards bipartisan support for crypto.”

Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.

Nine months after the Hong Kong crypto exchange JPEX disappeared with an estimated $200 million in customer deposits, investors are firing back.

On Tuesday, two individuals in Hong Kong filed a civil suit against the mysterious company and six affiliated enterprises. They also sued Felix Chiu, the owner of an over-the-counter crypto trading shop called Coingaroo that peddled crypto on JPEX.

The lawsuit, which seeks restitution of more than US$700,000, pulls back the curtain on the alleged inner workings of one of Hong Kong’s most closely watched crypto cases.

Tron wallets

While the owners of JPEX have yet to be identified, the anonymous holders of three Tron wallets linked to the exchange were also sued, and will be served court papers using tokenized documents.

“This case will really test the judiciary’s capability in handling cases in the web3 space,” said Joshua Chu, the lawyer and technology specialist representing the plaintiffs.

JPEX could not be reached for comment. Chiu did not immediately respond to a request for comments left with Coingaroo.

The case offers an in-depth look at how JPEX operated and allegedly swindled Hongkongers.

Influencers peddling crypto

Since 2021, JPEX has promoted itself in Hong Kong through billboards and social media influencers.

Many of those influencers, including Joseph Lam, Henry Choi and Clement Chan, are among the over 70 people arrested during the police investigation into JPEX.

One of the plaintiffs, Wing-yan Chan, attended some of Lam’s seminars and was a member of his private Telegram and WhatsApp messaging groups.

The documents claim Lam “repeatedly advocated for the credibility, stability and profitability of JPEX” and that Lam and other promoters gave away referral codes to attract users to the platform.

Chan alleged that Lam’s seminars, posts, and messages led her to believe JPEX was a licensed, genuine, and secure cryptocurrency exchange.

JPEX claimed that investments would be safe and profitable, guaranteeing an annual return of at least 19% on its native token, JPC, according to the lawsuit.

Chan alleged that Lam’s seminars, posts, and messages led her to believe JPEX was a licensed, genuine, and secure cryptocurrency exchange.

Lam did not immediately respond to requests for comment.

By the time the Securities and Futures Commission issued a warning against JPEX on September 13, 2023, Chan had deposited almost US$248,000 into JPEX.

The following day, JPEX increased charges for withdrawing money. Withdrawals were fixed at an amount of 1,000 USDT, or around $1,000, per transaction, with a 999 USDT charge. (USDT is the dollar-backed stablecoin issued by Tether.)

Transferred without consent

Using a blockchain explorer app, the plaintiffs found that even though the transactions and balances showed up on their JPEX accounts, nearly all of their money had been transferred without their consent.

The funds passed through two of the wallets named in the suit and then moved on to several others. Both of those wallets now contain only a few dollars in tokens, while the third named wallet has no recorded transactions, court papers said.

JPEX kept up the charade for two more months, the lawsuit said. It launched a “stakeholder dividends program” before announcing on November 11 that its trading system was undergoing optimisation and reconfiguration.

It never reopened, and users could not withdraw any assets.

Setting a precedent

Chu, the plaintiffs’ lawyer, said the case could produce “precedent-setting developments” in how Hong Kong gets to grips with litigating in cases involving cryptocurrency and blockchain technology.

He is encouraging more victims to come forward and is concerned that some have been told they should wait until criminal proceedings have concluded.

“A lot of people are getting incorrect advice,” he said.

Got a story about crypto scams in Hong Kong? Contact callan@dlnews.com.

Polygon Labs announced another acquisition today, adding the tech firm Toposware’s 11-person team, intellectual property, and tech stack to its ranks.

In all, Polygon Labs has splashed $1 billion in zero-knowledge technology investments.

Zero-knowledge technology is a type of cryptographic proof system that can confirm the validity of blockchain transactions without revealing all of their details. It’s one of the ways to achieve scalability for layer 2 blockchains ― an area of interest for Polygon Labs and its family of networks.

The Toposware deal marks the third zero-knowledge technology-based team assimilated into Polygon Labs ― the company previously acquired Hermez and Mir in 2021.

Zero-knowledge technology competes against another piece of technology called optimistic rollups, but prominent blockchain figures such as Ethereum Vitalik Buterin favour ZK as the better solution because it is faster and cheaper.

“ZK is easier, not only from a development perspective but for users and user experience too,” a Polygon spokesperson told DL News.

Zero-knowledge scaling

The Toposware acquisition isn’t just a bet on zero-knowledge cryptography. It’s also a bet on scaling and allowing all blockchains to interact with one another.

That’s because an internet-sized blockchain ecosystem would likely require multiple chains, introducing another problem, fragmentation ― where information is siloed in different networks, and it isn’t trivial to migrate data across these chains.

Polygon Labs says it’s working towards interoperability ― what the industry calls networks that can interact with one another ― for ZK-based chains.

Part of this effort is to make it possible for any blockchain using the Ethereum Virtual Machine to become a layer 2 blockchain that uses zero-knowledge technology.

ZK-based technology isn’t easily compatible with EVM networks, which are popular among blockchain developers.

EVM blockchains are similar to Ethereum in that they run on the Ethereum Virtual Machine and use the same smart contract logic.

For an EVM chain to become a ZK-based network and connect to Ethereum, it requires a Type 1 Prover ― which convinces a blockchain that a transaction is valid.

Toposware and Polygon Labs have been developing such a Prover.

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.

The Securities and Exchange Commission sent cryptocurrencies soaring last month when it approved spot Ethereum exchange traded funds.

While it’s not yet clear when everyday investors can buy them, options traders, bettors and analysts offer clues.

Traders poured nearly $240 million into bets that Ethereum will reach an all-time high of $5,000 before the June 28 expiry.

“This positioning is being driven by traders front-running the launch of spot ETH ETFs,” Jake Ostrovskis, OTC Trader at Wintermute, told DL News.

In total, option traders have placed some $3.6 billion trades that expire on June 28, signalling a surge in traders buying calls — or bullish bets — that Ethereum will exceed $4,000.

A bet on blockchain-betting site Polymarket puts the odds at 60% that spot Ethereum ETFs will start to trade before July 4.

Bloomberg Intelligence analyst Eric Balchunas says an end of June launch is a “legit possibility,” but that investors should expect a launch around July 4.

Elsewhere, JPMorgan analysts suggest that spot Ethereum ETFs will start to trade around July and August ahead of the US election as crypto becomes a political issue.

“The general market consensus is that these ETFs will be launched sooner rather than later,” Jamie Sly, communications manager at crypto data firm CCData, told DL News.

Ethereum has surged some 30% since its May low to $3,763 on the back of the regulatory nod for spot Ethereum ETFs.

While the SEC has not yet approved the sale of the ETFs, market watchers expect the ETF launch to catapult the cryptocurrency past its November 2021 record of $4,878.

Jacob Joseph, research analyst at cryptocurrency data firm CCData, told DL News that spot Ethereum ETFs will likely see inflows of $3.9 billion within the first 100 days.

Kaiko analyst Adam McCarthy cautioned that a comparison with the launch of ETFs in Hong Kong paint a less optimistic outcome. Those “didn’t see much demand, and have had mixed days with several net outflow days already.”

Crypto market movers

Bitcoin is down 0.4% over the past 24 hours to trade at $68,940.

Ethereum is down 1.4% to $3,763.

What we are reading

Ethereum to $5,000? Nine experts on how the ETF approval will impact prices — DL News.

Thailand Approves First Spot Bitcoin ETF, Joining Global Trend — Milk Road

455,000 Tokens Launched on Solana in May: Report — Unchained.

Judge Orders SEC To Pay $1.8 Million In Legal Fees, Dismisses Case Against Debt Box — Milk Road.

Why Congress is about to take an interest in tokenisation’s $16tn promise — DL News.

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

In the realm of digital assets, the path from project initiation to market maturity can be challenging for any builder. Founded in 2018, Acheron Trading is trusted by more than 400 issuers to bring their assets to market. Acheron Trading has emerged as a reliable guide in an ever-changing landscape, offering the expertise and stability needed to navigate the complexities of liquidity management with precision.

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As a Principal and Designated MM, Acheron Trading ensures the smooth operation of digital asset markets by maintaining liquidity and promoting fair price discovery. The firm’s symbiotic strategies are grounded in a deep understanding of market structure, gained through academic ties with Princeton and Cornell, and institutional experience at Goldman Sachs, PwC, and Macquarie Group.

This journey begins with pre-market construction, a phase where careful planning and preparation set the stage for success. As a trusted advisor, Acheron Trading offers insights and strategies to guide projects through exchange targeting and launch planning, helping clients make informed decisions.

During the primary listing phase, the team plays a crucial role in seamlessly bringing the asset to market. Targeted liquidity provision by the firm to centralised exchanges (CEXs) and their decentralised counterparts (DEXs) maintains uptime and market efficiency, mitigating price volatility and supporting orderly price discovery.

As projects progress into the price discovery and expansion phase, Acheron Trading adapts to dynamic market conditions, adjusting strategies to meet evolving demands. By embracing innovation, Acheron Trading helps clients expand their reach and tap into new liquidity pools, driving growth in the digital asset market.

Cyclical growth amid an end to inflation marks the culmination of Acheron Trading’s partnership with its clients. As projects achieve stability and maturity, the team provides unwavering support, guiding clients through market dynamics post-launch.

While clients experience a white glove service firsthand, the journey to establishing trust in the MM sector is not without its challenges. Some MMs prioritize profits over minimising price volatility, shorting tokens and engaging in manipulation. This leads to negative perceptions of MMs within the digital assets industry and beyond.

Acheron’s technology facilitates real-time analysis of market data, dynamically adjusting trading strategies to optimise liquidity provision and mitigate risks across diverse market conditions.

Acheron combats this issue by exemplifyng transparent and ethical behavior, offering real-time access to liquidity performance indicators, clear, flexible contracts, and educational resources with real-world utility. The firm continues to take a stand for transparency in the industry – a significant and much-needed challenge to prevailing norms. This approach directly benefits all clients, as they gain access to a portal showing live KPIs including real-time liquidity metrics across all DEXs and CEXs, enhancing visibility and fostering trust.

Cutting-edge technology helps Acheron to minimise human intervention and enable scalable profits unhindered by staffing constraints. Acheron’s technology facilitates real-time analysis of market data, dynamically adjusting trading strategies to optimise liquidity provision and mitigate risks across diverse market conditions.

Acheron Trading acts as a beacon of stability and expertise in the digital asset landscape. With its commitment to transparency and excellence, the firm empowers clients to navigate the market with confidence. Despite the challenges and negative perceptions of MMs in the space, Acheron Trading remains steadfast in its mission to promote transparency and integrity in this sector, for a healthy and sustainable economy beneficial to all.

Click here to read more about how the firm is doing things better.

A version of this article appeared in our The Decentralised newsletter on June 4. Sign up here.

GM, Tim here.

Here’s what caught my DeFi-eye recently:

Layer 2 Linea pauses after $7 million Velocore exploit.

Vitalik Buterin reflects on Ethereum’s early days.

Uniswap gets called out after delaying fee-switch vote.

Linea pauses blockchain

Layer 2 network Linea paused transactions for an hour on Sunday after a protocol on the chain — Velocore — suffered a $7 million exploit.

In an X thread, Linea said it halted the blockchain to protect users.

Linea's team made a decision to halt block production by pausing the sequencer and censor attacker addresses to protect the users and builders in our ecosystem. Like other L2s, we are still in the "training wheels" phase of existence, giving us safeguards to use.

— Linea (@LineaBuild) June 2, 2024

Linea’s actions likely prevented further losses from the exploit.

But the decision throws into question the industry’s founding principles: Immutability and user control.

Linea users, who have bridged almost $1.2 billion to the chain, couldn’t do anything with their assets while the blockchain was paused.

The network paused and censored the attacker’s wallet because it’s still centrally controlled by its creator, Consensys.

Bitcoin and Ethereum, are decentralised, and need a consensus of over 50% of their respective networks to do what Linea did.

The incident comes amid Linea’s Surge campaign, which rewards users with points for bridging assets to the layer 2.

Vitalik reflects on Ethereum

Ethereum co-founder Vitalik Buterin shared a list of things he would have done differently if he could go back to the blockchain’s 2014 inception.

Many things on Buterin’s list were technical changes to make developers’ lives easier.

But one had a much broader impact: Speeding up Ethereum’s switch away from the energy-intensive Proof of Work validation mechanism.

“We could have saved a huge amount of trees if we had a much simpler Proof of Stake in 2018,” Buterin said.

Buterin lamented that it took until 2022 to move to Proof of Stake, suggesting a “crappier” switch earlier in the blockchain’s life would’ve been better.

The Cambridge Centre for Alternative Finance estimates that Ethereum’s switch from Proof of Work to Proof of Stake reduced the network’s energy consumption by 99.9%.

If the change had come in 2018 as Buterin suggested, it could’ve saved over 80 terawatt-hours of electricity — about the yearly energy usage of Croatia.

Uniswap called out

A last-minute decision to delay Uniswap’s fee-switch vote ruffled feathers in the DeFi community.

“Over the last week, a stakeholder raised a new issue relating to this work that requires additional diligence on our end to fully vet,” Erin Koen, the Uniswap Foundation’s governance lead, wrote Friday in the Uniswap DAO governance forum.

Koen didn’t elaborate on the issue or the required diligence.

That didn’t stop Dan Robinson, a general partner at crypto venture firm Paradigm, accusing the Uniswap Foundation of caving to pressure from another, unnamed VC.

“It’s disappointing to see a large VC try to bully the token governance process and delay community proposals at the last minute in order to advance their own pet projects,” he wrote on X.

Robinson didn’t elaborate in his post and didn’t immediately return DL News’ request for comment.

Uniswap’s fee-switch vote is a long time coming.

The vote, which if successful would allow for a portion of the Uniswap protocol’s revenue to be awarded to UNI token holders, passed a non-binding “temperature check” vote earlier this year.

A binding, blockchain-based vote was set to begin Friday before it was postponed.

Uniswap Foundation CEO Devin Walsh declined to comment when contacted by DL News.

Data of the week

Uniswap’s fee-switch vote could provide a steady stream of income for UNI token holders, if it passes.

DefiLlama data shows the top decentralised exchange took in almost $1.8 million in fees in 24 hours. That’s some $649.7 million annually.

This week in DeFi governanceVOTE: Arbitrum DAO supports improvement proposal for Account Abstraction walletsPROPOSAL: Stargate Foundation amends LayerZero token allocation processVOTE: Aave to adjust interest rate curve for weETH on Arbitrum and BasePost of the week

Pseudonymous crypto game studio founder Loopify sums up the current state of blockchain gaming with the timeless gold rush and shovels analogy.

blockchain gaming chains and games pic.twitter.com/N5PruOKLFO

— Loopify 🧙‍♂️ (@Loopifyyy) June 2, 2024

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As a result of these conversations, we decided to drop all trademark applications for the term “ZK”.

These discussions came down to one important fact: it would be impossible to…

— Matter Labs (∎, ∆) (@the_matter_labs) June 2, 2024

Matter Labs, the company behind Ethereum layer 2 zkSync, dropped its trademark applications for the term “ZK” after backlash from the crypto community.

Got a tip about DeFi? Reach out at tim@dlnews.com.

The Commodities Futures Trading Commission has named Mo Shaikh, co-founder and CEO of Aptos Labs, to its subcommittee on digital assets.

The Digital Assets Markets Subcommittee lies underneath the Global Markets Advisory Committee. Established in 1998, the GMAC consists of who’s who of financial executives, including higher-ups from Citadel, Goldman Sachs, and HSBC.

Industry representatives on the larger committee and the subcommittee advise the CFTC on rulemaking that affects international trade and business, according to the agency.

Others on the 34-person digital assets subcommittee include executives from BlackRock, Polygon Labs, Uniswap Labs, and BNY Mellon. Shaikh had to submit a written application to be considered for the advisory group, he told DL News.

Shaikh’s appointment is a further sign of legitimacy for Aptos, a layer 1 blockchain that launched in October 2022.

The network was developed by former employees of Facebook parent Meta Platforms. Shaikh and co-founder Avery Ching worked on Facebook’s blockchain project, Diem, which was scuttled in February 2022.

“Not only do we represent L1s, but we also represent a lot of the projects in the Web3 space — and [are] happy to be a voice for them along the way.” Shaikh said.

Shaikh’s company supports the development of the Aptos blockchain.

Meta, Aptos, and $350 million

Aptos uses Move, the programming language originally designed for Diem, to support a blockchain network that aims to process transactions more quickly than Ethereum.

Aptos Labs has raised $350 million in funding from blue-chip venture capitalists, including Andreessen Horowitz and Jump Crypto, according to Crunchbase. One of its most recent funding rounds in September 2022 pegged its valuation at more than $4 billion, per Bloomberg.

In his interview with DL News, Shaikh repeatedly touted Aptos’ speed. Creators of Sui, another blockchain whose technology comes from Diem, also touted their network’s ability to process many more transactions per second than blockchains like Ethereum.