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.

Senior Democrats broke ranks last week and voted in favour of repealing SAB 121, a controversial crypto accounting rule.

Thank Wall Street banks.

That’s according to Bitwise chief investment officer Matt Hougan, who wrote that the vote “signals a much bigger trend: the emerging alliance between Wall Street, crypto, and Washington.”

“It is a massive positive catalyst that I think will lift crypto to new all-time highs,” Hougan added.

Political shift

The vote to repeal SAB 121 was an overture to two political bombshells in the industry.

First, the Securities and Exchange Commission asked spot Ethereum exchange-traded fund applicants to resubmit their applications, sparking speculation that approval is all but a done deal.

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.

Both votes and the potential ETF change came as crypto is increasingly being seen as a potential issue for voters in the November presidential election.

President Joe Biden has sided with anti-crypto party members, while his rival and Republican frontrunner Donald Trump has planted himself in the pro-crypto camp.

Biden appointee Gary Gensler, whose SEC has lead a crackdown on the digital asset industry, is often a target of industry ire.

So what happened?

“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.

The vote

Biden threatened to veto the vote to repeal the SAB 21 provision if approved.

A number of prominent Democrats — including Senate majority leader Chuck Schumer — sided with Republicans and defied Biden to vote for the repeal.

Top Democrat Nancy Pelosi also voted with the majority and sided against Biden, saying in a statement:

“Digital currency is already integrated into our economy and will only grow in significance in the years to come.”

Until then, the Democrats’ voice on the crypto issue was lead by Massachusetts Senator and crypto critic Elizabeth Warren.

Wall Street steps in

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.

For every $1 million worth of, say, Bitcoin that banks have on their balance sheet, they need to hold $1 million in cash.

Banks and financial firms saw the SAB 121 rule, unique to crypto, as expensive and hindered the advent of new crypto products for consumers.

Goldman vs Tether

Banking giant Goldman Sachs posted a net profit in the first quarter of $4.13 billion. Stablecoin company Tether says it made $4.52 billion in profit over the same period.

Hougan pointed out that a coalition of bank lobbying groups that pressured the SEC in February to loosen its grip on crypto regulation.

Wall Street firms are among the largest industry donor to Schumer’s campaign fund, Hougan noted, adding that Wall Street’s pressure on Washington will benefit crypto in the long-run.

“If Wall Street cares about crypto custody, the things that increase demand for crypto custody — like more ETFs — become more likely. If Wall Street cares about stablecoins, the things that increase demand for stablecoins become more attractive,” Hougan said.

“Compared to the overt hostility we’ve faced from DC over the past decade, this is huge progress.”

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

The US House of Representatives voted to pass a landmark crypto bill as digital assets become a political football mere months ahead of the presidential election.

The Republican-led Financial Innovation and Technology for the 21st Century Act, known as the FIT21 Act, passed with a bipartisan vote of 279 in favour and 136 in opposition. More than 70 Democrats voted for the bill, while 133 voted in opposition.

The bill promises to set clear rules for digital assets long sought by the crypto industry.

Hours before the vote, the Biden administration said it was against the bill, but didn’t threaten a veto — a relief for the industry.

The bill would end the “food fight for control” of crypto being fought between the Securities and Exchange Commission and the Commodity Futures Trading Commission, said Republican Rep. Patrick McHenry of North Carolina, co-sponsor of the bill and chairman of the House Financial Services Committee.

“This is the biggest moment in crypto policy and legislating in United States history thus far,” Rashan Colbert, head of policy at open-source software developer and decentralised trading platform dYdX Trading, told DL News.

Senate challenge ahead

The FIT21 bill will next need to make its way through the Senate. Looming elections mean that priorities may shift.

“There’s a decent chance that progress stops after this vote, but that doesn’t mean that this is a useless exercise,” said Colbert, a former US Senate staffer.

The progress is important symbolically, Colbert said, and it shows the political will to regulate the digital assets market. It also creates a reference point for a bipartisan agreement on how to regulate crypto.

And even if the bill doesn’t pass in its current form, its provisions could make their way into other laws.

What’s in the bill

The bill is tailored for digital assets and offers an unprecedented framework for the industry. It passed out of the House Financial Services and Agriculture Committees with bipartisan support in July.

FIT21 sets up definitions for crypto assets, and divides responsibility between the Commodity Futures Trading Commission and Securities and Exchange Commission.

The rules would grant the CFTC, which is considered friendlier to the industry, more jurisdiction of the sector. Definitions determine whether an asset would be subject to SEC or CFTC oversight.

Decentralised finance is outside of the bill’s purview.

The rules would provide an “enhanced level of comfort knowing that we have explicit authority to keep doing what we’re doing, which is really all they want at the moment,” Colbert said.

The vote comes on the heels of another political win for crypto. Last week, the US House and Senate voted to repeal controversial accounting guidance from the SEC, called SAB121.

At the same time, the industry is anticipating regulators’ approval of spot Ethereum exchange-traded funds.

More backlash

The White House wrote in a brief on Wednesday that the bill “in its current form lacks sufficient protections for consumers and investors who engage in certain digital asset transactions.”

But, notably, the White House said it will work on developing a regulatory framework for digital assets with Congress.

Democrat Rep. Maxine Waters of California has called FIT21 a “wish list of big crypto and is undeserving of any of our support.”

The bill’s impact isn’t limited to crypto, Waters said on Wednesday.

FIT21 would move crypto as well as some traditional securities from SEC oversight into a “regulatory no-man’s land, with no primary regulator,” she said. She called it the “worst, most harmful proposal I have seen in a long time” and predicted a recession if it passed.

So did Massachusetts Democrat Stephen Lynch, who called it a “radical rewrite of the securities laws of this country.”

As crypto and traditional financial markets start to merge, he predicted that volatility in the crypto market would lead to catastrophe in the traditional financial market.

“This will cause havoc in our financial markets, eventually,” Lynch said.

While Wednesday’s comments also fell along party lines — with Republicans supporting the bill and Democrats urging their colleagues to vote “Nay” — several Democrats voiced their support.

Rep. Wiley Nickel, a Democrat from North Carolina, said the US was “relying on a 90-year-old securities law, written before the internet was even invented.”

“We can’t wait for the next FTX to take action,” he added.

SEC Chair Gary Gensler, considered a foe of the industry, said that the bill poses a risk to markets and investors.

FIT 21 would “undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk,” Gensler said in a statement on Wednesday.

The SEC has charged key players in the industry, including ConsenSys, Coinbase, Kraken, and Robinhood Market’s crypto businesses, with securities violations.

Industry experts say that SEC requirements aren’t applicable to or designed for digital asset issuers.

“For far too long, the US digital asset ecosystem has been plagued by regulatory uncertainty that has stifled innovation and left consumers unprotected,” McHenry said in a statement earlier this month.

Industry support

“The absence of clear rules leads to confusion in the marketplace for companies – and leaves users and consumers unprotected,” the Blockchain Association wrote in a letter to lawmakers in the Senate on Monday.

“This lack of clarity impedes innovation and hamstrings companies, harming America’s standing in the global technology race.”

Last week, dozens of crypto firms — including Coinbase, Andreessen Horowitz, and Kraken — signed an industry letter organised by the Crypto Council for Innovation in support of FIT21.

“The US lags behind other major jurisdictions in developing a regulatory framework for digital assets,” the letter said, adding that American innovators may migrate elsewhere.

“It is crucial for the US to maintain its leadership in financial innovation.”

McHenry echoed the sentiment Wednesday.

“We’re falling behind Europe,” he said. “This bill catches [us] up so that we do not lose out on innovation policy to the Europeans, to the folks in the UK, to Singapore, to Japan, to Hong Kong.”

Inbar Preiss is DL News’ regulation correspondent. Contact the author at inbar@dlnews.com. Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

New stablecoins are being minted at a rapid pace in 2024.

Nearly $30 billion have been minted so far this year, with a surge on Tuesday, presumably because of the increased odds that the Securities and Exchange Commission will approve spot Ethereum exchange-traded funds on Thursday.

The two largest stablecoin issuers, Tether and Circle, minted $1.25 billion in stablecoins on Tuesday. Tether minted $1 billion USDT on Ethereum, and Circle minted $250 million USDC on Solana.

Generally, increases in the stablecoin supply are a bullish indicator, because traders use stablecoins to purchase other cryptocurrencies.

Now, large amounts of stablecoins may be used to buy Ethereum in an attempt to front-run traditional investors, especially given the spot Bitcoin ETFs attracted nearly $16 billion in investments since their launch in March.

The process

This bullishness is explained by the process through which Tether and Circle issue new stablecoins.

For both entities, minting begins with a know-your-customer, or KYC, process, which includes standard identification checks and sanctions screenings. Additional documents may also be requested as needed.

Tether allows anyone who passes the KYC check to mint USDT, including individual traders, while Circle permits only registered businesses to mint USDC at scale.

After passing a KYC check, users can deposit fiat currency into Tether or Circle bank accounts. The funds are held in reserve to ensure each stablecoin is backed by at least $1 of fiat currency or cash equivalents.

Tether’s reserves can be monitored here, and Circle’s reserves can be monitored here.

Once funds are deposited, the stablecoin issuer confirms the validity of the deposit and issues the stablecoins to the provided wallet address.

To withdraw funds, users send USDT or USDC to the respective issuer.

The issuer then removes the stablecoins from circulation and transfers the equivalent USD amount from its reserves to the user’s bank account.

Demand for crypto

An increase in minted stablecoins indicates higher demand for crypto exposure, and a decrease suggests reduced demand.

With USDT, newly issued tokens can be “authorised but not issued,” meaning they aren’t included in the total market capitalization.

This method batches mints together, reducing security risks by minimising the number of interactions Tether needs with the minting smart contracts.

For example, although Tether issued $1 billion USDT on Tuesday, according to Tether’s transparency page, $997 million USDT is considered authorised but not issued on Ethereum.

Tether’s USDT is the largest stablecoin, with a market capitalization of $111.3 billion while Circle’s USDC is the second-largest stablecoin, with a market capitalisation of $32.7 billion.

Both stablecoins can be used on more than 70 different blockchains.

Overall, stablecoin minting has ramped up in 2024, as the total market capitalisation has risen to $160.6 billion from $130.8 billion at the start of the year.

That has coincided with an overall increase in crypto prices, as the total market capitalisation for all cryptocurrencies has risen to $2.7 trillion from $1.8 trillion at the start of the year.

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

Don’t expect spot Ethereum exchange-traded funds to launch immediately after the Securities and Exchange Commission greenlights them.

Up until Monday, the SEC seemed poised to deny all applications for Ethereum ETFs, and the agency’s sudden change of heart has surprised both its staff and prospective issuers.

Now, with a crucial deadline looming, it’s likely that the SEC will approve in all-but-official terms the investment products on Thursday— but it will probably still need more time to sort through paperwork before the ETFs can launch.

“There will be days (at a minimum), likely at least weeks, and potentially months between approval and launches here,” Bloomberg Intelligence ETF analyst James Seyffart posted.

“It will be weeks, not months, but all of us are just making educated guesses,” Eric Balchunas, another Bloomberg Intelligence ETF analyst, told DL News. “The intel will come soon though, we’ll know for sure.”

SEC filings

At issue are two sets of filings that prospective ETF issuers must get sorted: 19b-4 filings and S-1 filings.

19b-4 filings are signed off by the SEC’s Trading and Markets division, while S-1 forms are handled by the regulator’s division of Corporate Finance.

It’s only after they’re both finalised that the SEC can officially greenlight the products.

All prospective ETF issuers need their 19b-4s in order by Thursday if they want their product ready for launch day. That’s because a crucial deadline for VanEck’s 19b-4 filing is coming up: If the SEC doesn’t approve that filing by then, it will be as if the agency rejected the application.

But it’s not just 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 needs to rush to get that document ready by VanEck’s deadline.

However, once the 19b-4s are approved, the SEC and prospective issuers have a lot more time to finalise 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 yesterday, then they’re likely just getting started,” he added.

In other words, the SEC will likely signal on Thursday that it will be approving the Ethereum ETFs by finalising the 19b-4 filings — but it will only officially greenlight them later on, possibly this summer, once the S-1 filings are dealt with as well.

“A month would be a pretty quick turnaround,” Johnsson said. “That’s basically a single turn of SEC comments.”

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

Crypto deposited in Aave, the largest decentralised lending protocol, is approaching a level not seen since the crash of Terra’s UST stablecoin two years ago.

The value of crypto deposited in Aave topped $19.5 billion Wednesday, its highest figure since May 9, 2022, according to DefiLlama data.

It’s the latest sign that DeFi has recovered from the myriad cataclysms of 2022 that wiped two-thirds of the industry’s market capitalization.

It’s also a sign that crypto traders are rushing to double down on Ether after ETF watchers said the Securities and Exchange Commission was likely to approve spot Ether exchange-traded funds in the coming days.

Earlier this year, the launch of spot Bitcoin ETFs sent Bitcoin soaring to new heights. Ether peaked in November 2021 at $4,800. Ether was recently trading at $3,763, down less than 1% in the past 24 hours.

Lending protocols like Aave help traders obtain leverage, a way to supercharge their gains — and their losses. It is built on top of a dozen blockchains, but roughly 90% of the dollar value of deposits are on Ethereum and its layer 2 blockchains, such as Arbitrum.

On Monday, Bloomberg Intelligence analysts James Seyffart and Eric Balchunas amended their odds of the SEC approval of spot Ether ETFs to 75% from 25%, prompting a 20% jump in the cryptocurrency’s value.

Traders have rushed to Aave in the days since.

In the seven days preceding the Bloomberg analysts’ announcement, more than $450 million in crypto flowed into Aave V3, the latest iteration of the protocol. Since Monday, crypto worth more than $517 million has been deposited in V3.

The amount of crypto borrowed on Aave topped $6.7 billion Wednesday, its highest level since May 9, 2022.

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

Investor activity on zkSync is buzzing once again amid speculation that the blockchain’s much-anticipated airdrop is imminent.

DeFi users have deposited about $47 million into zkSync since Tuesday, DefiLlama data shows.

By comparison, Polygon drew $8 million in flows during the same period, the second highest among all blockchains.

ZkSync, an Ethereum layer 2 blockchain, hasn’t seen this level of inflows since March when memecoin speculation reached a fever pitch.

Speculation of a zkSync airdrop kicked into gear last week when Matter Labs, developers of the blockchain, announced the final network upgrade before it will hand the project’s governance to the community by the end of June.

DeFi-inclined users deduced that announcement to mean the release of zkSync’s native token that will be used to govern the blockchain.

Part of this token release event could also include an airdrop for early adopters ― DeFi users who have conducted a transaction on zkSync.

ZkSync competitors Optimism and Arbitrum also used a token launch and airdrop to begin their decentralised governance process.

Matter Labs hasn’t published any official literature on the airdrop, but reports emerged this week that it could happen on June 13.

That would make June a big month for airdrops with investors also expecting airdrops from DeFi protocol LayerZero and blockchain network Blast.

The Block reported that zkSync’s token generation will happen this month with a supply count of 21 billion tokens.

Splitting a project’s token generation event and the actual airdrop is uncommon in crypto. But Ether restaking protocol EigenLayer chose that method with the tokens locked to prevent a price dump that often happens immediately after airdrops.

ZkSync, along with LayerZero, has been among the most anticipated crypto airdrops, and both have attracted significant farming activity and fears of possible sybil activity.

Farming means completing transactions on DeFi protocols or blockchains to become eligible for possible airdrops.

Sybil farming takes that up several notches by deploying a cluster of wallet addresses to game the process and ensure a greater-than-average share of the token distribution.

LayerZero has already advised mercenary airdrop hunters to self-report or lose their token allocation.

Matter Labs hasn’t publicly stated its anti-sybil protocols, if any.

The developers didn’t immediately respond to a request for comment.

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.

At first glance, Steven Laver doesn’t seem like the guy who would be leading the most audacious project in crypto.

The 43-year-old software engineer worked on the BlackBerry back in the 2000s, and then helped develop the Windows Phone app store at Microsoft.

He didn’t even work in crypto until early 2022.

Nevertheless, Laver is now the lead software engineer on Solana Labs’ push to change the crypto experience by putting blockchain capabilities in the palm of your hand.

“This has that big, sky’s the limit energy,” Laver told DL News in a rare interview. “This feels like madness, but at the same time, this feels like the end result.”

That result is Solana’s second mobile phone.

It’s called Chapter 2 and is slated to come out in early 2025. Preorders for the new device cost $500, and Solana says it has more than 130,000 preorders. That’s $65 million in preorders.

Bold bet

It’s a bold bet for the four-year-old blockchain network. Mobile telephony, one of the most regulated industries on the planet, is dominated by Apple and Samsung.

Why would Solana, a DeFi stalwart with a token worth $82 billion and one of the hottest brand names in crypto, make such a huge gamble on manufacturing hardware?

“It’s a tough, tough ask,” Chris Lewis, an independent telecoms analyst with over 40 years in the industry, told DL News.

The answer: control.

The Chapter 2 is Solana’s bid to liberate crypto from the desktop and the domination of the app platforms at Apple and Google.

The Silicon Valley powerhouses have long plagued crypto-friendly mobile developers by charging huge fees or banning apps from their platforms.

In a world where investing, shopping, banking and everything else happens on a smartphone, crypto is still fighting for a foothold.

“We’re used to everyone bringing a laptop to dinner, so you don’t miss a drop or a claim,” Emmett Hollyer, head of business development and product at Solana Labs, told DL News.

Memecoin madness

Solana, of course, isn’t the first crypto venture to try and pry open the incumbents’ grip.

Over the last decade, more than a dozen bespoke crypto phones have hit the market. But none have gained meaningful traction.

Last year, Solana gave it a shot with the Android-powered Solana Saga. Customers scooped up about 20,000 of the $600 handsets, which was well short of the 50,000 unit goal.

In comparison, Apple shipped more than 80 million iPhones in the fourth quarter alone.

But Saga hit on what has emerged as a not-so-secret weapon in crypto phone development — memecoins.

The device was delivered with a dog-themed memecoin called BONK. Somehow, collectors fell in love with BONK and its price soared 560% last December.

When investors scrambled for the phone on secondary markets, Hollyer and his team realised they’d stumbled on a new type of marketing play.

Now they’re producing a sequel.

‘Consumer hardware is hard, but phones are an order of magnitude beyond that.’

Steven Laver, Solana

While the company declined to disclose how much money it is investing in Chapter 2, it’s not a small number.

“Consumer hardware, in general, is hard, but phones are an order of magnitude beyond that,” Laver said. “Building a phone is an exercise as much in operations, logistics, and compliance as it is the underlying technology.”

The project comes as Solana rides a wave of momentum. Its native token, SOL, has soared 78% this year compared to a 64% jump in the price of Ethereum, according to CoinGecko.

With a market value of $81 billion, Solana is the fifth biggest digital asset.

Solana has also largely captured the red-hot memecoin market. Activity was so high in March that the network generated more fees than heavyweight Ethereum — no small task.

Lingering questions

Still, questions linger about the wisdom of launching a mobile phone.

“What is it you’re bringing in,” Lewis said. “Is it just the security? Is it a new interface? Is it the latest chip power? I think those are the questions you’ve got, and then to be able to build the brand and get it out into the market.”

And, perhaps most importantly, is there really demand for a crypto phone?

Deep roots

Solana’s project has deep roots in Silicon Valley’s mobile scene.

It sprang from a little-known but well-regarded project called Essential, which was founded by Andy Rubin, the brains behind Android at Google.

After Essential shut down in 2020, some staffers launched another mobile company called OSOM. A couple of years later, it developed the OV1 phone, which, sporting a ceramic, titanium body, became a cult fave.

If you look closely, it also looks a lot like the Solana Saga. That’s because they are almost the same. Solana Labs and OSOM announced a partnership in June 2022.

In February 2022, Laver landed at Solana right in the thick of the Saga development.

A Canadian native, Laver studied computer science at the University of Waterloo in Ontario (the same alma mater as Ethereum co-founder Vitalik Buterin).

Iconic products

Laver was present at the creation of several iconic products. He worked on a whole range of BlackBerries, made by the Canadian firm Research in Motion, which introduced handheld emailing and texting to corporate life.

At Microsoft, Laver worked on what would become the Windows Phone app store. He’s also dabbled in other consumer electronics products such as the smart watch manufacturer, Fitbit, plus stints at Apple and Google.

‘There’s a lot of low- and mid-budget Android phones that feel like a cheap car dashboard from the late ‘90s.’

Steven Laver, Solana Labs

From the get-go, Laver said the Saga was designed to have a satisfying heft in the hand and an elegant matte finish.

“There’s a lot of low- and mid-budget Android phones that feel like a cheap car dashboard from the late ‘90s,” said Laver.

Solana’s device was engineered with three features not found on normal handsets.

The first was called the Seed Vault.

This stores the seed phrases users employ to send and receive crypto. Saga’s security is somewhere in between an internet-connected crypto wallet such as Phantom or MetaMask and the vault-like Ledger, said Laver.

It’s not meant to hold millions of dollars of crypto, but you could buy a few cocktails with it.

Challenging Apple and Google

The Solana Mobile Stack lets mobile app developers build crypto apps for the phone. And the Solana dApp Store provides projects with a marketplace for their handiwork.

It’s designed to be an end run around the Apple App Store, which has taken down some of the larger crypto apps in the industry, perhaps most notably MetaMask in October. It was later reinstated.

In-app purchases on the Apple app store are also subject to a whopping 30% fee.

As for Google’s Play Store, it eased its crypto policy last summer. But it, too, typically charges developers fees between 15% and 30%.

Laver says the Solana Labs team is going to let crypto be crypto.

“We take a much lighter hand with our policy,” he said. “We’re trying our best to get out of the way.”

Profit centre

Solana Labs doesn’t charge any fees, except for the costs for posting the app’s metadata to the Solana blockchain.

“This isn’t a profit centre for us,” said Laver.

The platform already includes the NFT marketplace Magic Eden and the decentralised exchange Jupiter.

‘We need to find a way to give builders a reasonable path to distribution.’

Emmett Hollyer, Solana Labs

Hollyer hopes it puts pressure on Silicon Valley to take a more enlightened approach to crypto.

“Hopefully, Google and Apple will come to their senses and see what could be possible if they relax some of their fee structures and some of their restrictive policies,” he said. “Until then, we need to find a way to give builders a reasonable path to distribution.”

Solana recently recorded its 100th dapp.

“We’re just starting to get to this point where developers are starting to see the value of building for a phone like Saga,” Laver said.

BONK goes boom

But the big change in the Solana phone development was BONK, the $2.1 billion meme coin. Solana threw in $750 in BONK tokens with every phone.

When the token skyrocketed in December, 30 million BONK tokens were integrated directly into the Solana Saga phone. An arbitrage trade emerged.

“With the BONK, I bought other memecoins,” Lui Kohl, product manager at token vesting platform Streamflow, told DL News. “Overall, I think I turned $800 BONK into $4,000, so it was monetarily well worth it.”

Thanks to BONK buzz, Hollyer said Solana was able to sell the rest of its phones in three days.

The episode also spurred anticipation in Chapter 2, which will come loaded with five memecoins. Kohl, for one, has already pre-ordered the phone.

Absorbing the lessons of crypto mobile marketing, Laver conceded he was “personally a little confused.”

“Blockchain is just a little different,” he said. “At the end of the day, putting a real physical product, that is well integrated, in people’s hands, that’s why I do this.”

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

Hong Kong authorities on Wednesday ordered the eyeball-scanning crypto startup Worldcoin to cease all operations in the region after a months-long investigation.

The Hong Kong Privacy Commissioner’s Office said the images Worldcoin collects of people’s faces and irises are “unnecessary and excessive,” and violated the city’s data protection principles.

“If members of the public notice that Worldcoin is still operating at any premises with the iris scanning devices in Hong Kong, please report the matter immediately to the PCPD,” Privacy Commissioner Ada Chung Lai-ling said in a statement released on May 22. The PCPD stands for the privacy agency.

Latest setback

It’s the latest setback for the crypto project founded by Sam Altman, the Silicon Valley entrepreneur and CEO of OpenAI.

In classic startup fashion, Worldcoin set up eyeball-scanning orbs around the world without getting licenced or approvals from regulators.

The business is predicated on using biometric data to establish the “humanness” of people in a digital world that is increasingly populated by AI bots and other programmes.

So far, it’s scanned more than 5.3 million people, according to its website. In exchange, it provides volunteers with digital tokens called WLD.

More than a half dozen nations — including the UK, France, Portugal and Brazil — have either directed the company to stop violating the privacy of volunteers, including minors in Spain, or opened probes into the platform.

It’s also the latest in a string of public relations fiascoes for Altman.

This week, OpenAI was forced to pause the rollout of the voice for a ChatGPT personal assistant because it sounded too closely like the voice of actor Scarlet Johansson.

Her lawyers demanded the company cease using the voice.

Worldcoin has previously told DL News it is working to comply with privacy regulations in multiple jurisdictions.

The company did not respond to a request for comment for this article.

Proof of personhood

Worldcoin has big backers in its corner.

Tools for Humanity, a venture that acts as the lead developer of the Worldcoin project, has raised $240 million from top shelf venture capitalist firms such as a16z, Tiger Global, and Coinbase Ventures.

In March, Portugal temporarily prohibited the Worldcoin Foundation from collecting biometric data after saying it had received complaints that underage volunteers had been scanned.

Spain has also temporarily banned Worldcoin from operating in the country, citing privacy concerns, while authorities in Germany, the UK, and France are also investigating the project.

Yet Hong Kong’s watchdogs appear to have executed the most comprehensive probe and prohibition of the venture, including the use of covert visits by investigators.

Six violations

Between December and January, they used warrants to raid six premises involved in the operation of the Worldcoin project and found the same number of violations.

Officials argued that because those operating Worldcoin’s iris scanners were already in a position to verify the humanness of volunteers, the collection of biometric data was unnecessary.

“Taking into account biometric data is sensitive personal data, any wrongful disclosure or leakage of such data could lead to grave consequences,” the PCPD said.

‘Worldcoin failed to provide adequate information to participants.’

Hong Kong privacy officials

The PCPD also considered that Worldcoin had unfairly collected participants’ data.

Officials said device operators did not confirm volunteers’ understanding of a privacy notice and biometric data consent form.

It also did not inform them of potential risks to disclosing biometric data, and did not confirm volunteers were over the age of 18 before scanning their irises.

“Worldcoin failed to provide adequate information to participants to enable them to make an informed choice or give real consent,” the PCPD said.

The PCPD also said Worldcoin was not justified in retaining biometric data for a maximum of 10 years, “merely for the purpose of training AI models for the user verification process.”

A complaint also called into question the legitimacy of Worldcoin’s Proof of Personhood system.

While Worldcoin uses biometric data to prove a volunteer’s uniqueness, the software isn’t perfect.

In 2022, Worldcoin discovered an exploit that operators used to fool the iris scanners into creating multiple signups for the same person, Forbes reported.

Suspected errors

Additionally, Worldcoin’s biometric data consent form said that Worldcoin’s software might mistakenly conclude that someone had already signed up before.

The PCPD said Worldcoin did not have means for volunteers to report suspected errors.

“The PCPD therefore considered that participants did not have the means to exercise their data access and correction rights.”

The PCPD said Worldcoin confirmed that there were 8,302 individuals with their faces and irises scanned for verification during its operation in Hong Kong.

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

Ethereum shot up this week amid a swing to optimism about US approval for exchange-traded funds that track the cryptocurrency.

The reasoning behind the sudden U-turn is up for debate, but market watchers are generally aligned on what a regulator nod would do for Ethereum and other cryptocurrencies.

Asset manager VanEck is the first Ethereum ETF application on the Securities and Exchange Commission’s pile, due May 23.

Here’s what experts are saying.

Galaxy’s Mike Novogratz

A “widespread” pivot in Washington in the last 24 hours just upended the Ethereum ETF game, said Galaxy Digital CEO Mike Novogratz.

If the SEC’s change of heart was politically motivated, “that’s a seismic shift,” Novogratz said.

“If that’s what actually happened, prices are going to be much higher than here.”

Consensys’ Joe Lubin

Expect a “floodgate” of demand for Ether, which will likely lead to a supply crunch and drive prices higher, says Joe Lubin, co-founder of Ethereum and founder of crypto infrastructure firm Consensys.

Institutions that have already gained exposure to Bitcoin ETFs “will most likely want to diversify into that second approved ETF,” Lubin told DL News.

“There’s going to be a pretty large amount of natural, pent-up pressure to purchase Ether” via ETFs, he said. He added the caveat that there will be less supply to accommodate that demand than when the spot Bitcoin ETFs were approved in January.

Bitwise’s Matt Hougan

”Crypto is in the process of going mainstream, and that this progress will push crypto to all-time highs,” Bitwise Chief Investment Officer Matt Hougan wrote in a blog post this week.

But Hougan suggested that the catalyst was not the sudden optimism on ETFs.

”Something remarkable happened in Washington: A bipartisan group of senators and representatives passed the first pro-crypto piece of legislation in Washington’s history.”

He referred to the bill to repeal the SEC’s SAB 121 policy that imposed strict rules on crypto custody.

“This newfound support for crypto in DC — whether we get the spot Ethereum approval or not — is the latest proof point,” Hougan said.

Swarm’s Timo Lehes

Timo Lehes, co-founder of blockchain platform Swarm, sees “significant inflows of capital” into Ethereum once an ETF is approved.

“Once you have allocated to Bitcoin, you also look to something else as part of portfolio diversification,” he told DL News. “Naturally, investors choose eth, as the next largest crypto asset.”

While inflows will probably pale in comparison to those for Bitcoin’s ETF when it launched in January, “it will still be enough to move the dial on its price action.”

Kaiko

Options traders who have “crowded around” bullish options are now looking at gains, said Adam McCarthy, an analyst at Kaiko.

But investors should be cautious, Kaiko said: “Hong Kong ETFs didn’t see much demand and have had mixed days with several net outflow days already. No staking is a big factor too, and likely impacts demand further.”

He suggested watching Grayscale’s $9 billion ETHE product, “if it suffers large outflows, that would be significant for prices.”

Bernstein

The approval of a spot Ethereum ETF will drive a 75% surge to $6,600, according to estimates made by Gautam Chhugani and Mahika Sapra, analysts at research firm Bernstein.

They noted that the SEC’s approval of similar Bitcoin products in January spurred a 75% rally in the following weeks.

“We would expect similar price action for ETH,” Chhugani and Sapra said in a report this week.

The crypto market is in a bull run.

Bitcoin and Ether are going mainstream. And the industry has overcome a punishing bear market.

Is the stage finally set for Consensys, one of crypto’s most influential tech firms, to go public?

Maybe so, said Joe Lubin, the founder and CEO of the company that runs the popular MetaMask wallet, among other ventures.

“We’ve talked about that for a long time,” Lubin, an Ethereum co-founder, told DL News at the crypto conference DappCon in Berlin.

“And there are different ways to go public in our ecosystem,” he continued. “You can launch a protocol, you can tokenise a protocol, you can externalise a project.”

Airdrops

In the crypto world, many view a project’s tokenisation or airdrop event — in which a token is created and distributed to its most loyal users — as akin to an initial public offering.

For years, there have been hints about a MetaMask airdrop. With more than 30 million users, the distribution of a MetaMask token would make quite a splash.

‘If we do go public in some form, we’ve always been biassed to using our own technology.’

Joe Lubin, Consensys

So which method might Consensys, a company focused on developing blockchain and web3 software, use?

Lubin kept his cards close to his chest but he did say that Consensys may spin out MetaMask or other units, such as toolkit developer Infura, or Linea, a layer 2 blockchain network.

“We spun out over 40 of them,” he said, rocking an Ethereum T-shirt. “Some of them like Gnosis are very successful.”

Lubin was referring to the sprawling suite of crypto projects that Consensys has spawned over the years. Gnosis is a group of crypto projects that include the Gnosis Chain network and payments network Gnosis Pay.

Lubin offered fresh hints something was in the works. He said Consensys is working with the auditing firm KPMG but declined to provide details.

Still, he was clear that Consensys would opt for blockchain route to going public rather than listing shares on the Nasdaq or another stock exchange.

“If we do go public in some form, we’ve always been biassed to using our own technology to do something,” Lubin said.

“That doesn’t mean we would want to walk away from American capital markets, which are deep and liquid,” he continued. “But there might be ways to go public using our own technology and still make it accessible.”

Dealhunting

Lubin, who got a taste of Wall Street as a technology executive in Goldman Sachs private wealth unit in the early 2000s, is also eyeing acquisitions.

“The board just approved something,” he said. “We’re very active.”

Other than hinting it was a venture in the cybersecurity area, he was coy on the details.

Lubin said Consensys has a record of acquisitions, intellectual property purchases, and acqui-hires — deals designed to absorb staff.

“All I can say is that the highest priority for us is the security that we provide to our end users,” he said.

Little wonder — MetaMask must be a tempting target for bad actors.

“Essentially, you can think of our ecosystem as being filled with certain kinds of predators,” said Lubin.

Liam Kelly is a DeFi Correspondent at DL News. Got a tip? Email at liam@dlnews.com.

Japan’s weak yen could ignite a crypto rally that sends Bitcoin to new heights.

In a 3,800-word essay, BitMEX co-founder Arthur Hayes said the US government is poised to print dollars to prop up the yen.

“Crypto booms, as there is more dollar and yuan liquidity floating in the system,” Hayes wrote.

“Bitcoin is the best-performing asset in the face of global fiat debasement.”

‘Lose-lose situation’

Hayes drew inspiration from a source outside the often insular world of crypto: veteran investor Russell Napier, the author of several books and the “Solid Ground” newsletter.

Napier recently detailed what Hayes calls “the lose-lose situation” facing the US and Japan: the likelihood Japan will have to sell its US Treasuries to boost a weakening yen.

In that scenario, the US would print money to buy bonds “to fix the price and yield at a politically expedient level,” Hayes writes.

Chinese competition

Japan and China are both export-driven countries competing for customers in emerging markets, Hayes wrote.

The weaker their currencies, the more affordable their products.

If the yen weakens further, “China will respond by devaluing the yuan,” Hayes writes.

If the yuan falls, manufacturing in China becomes cheaper, and businesses lose the incentive to build factories in the US.

It would be a blow to President Joe Biden’s attempt to revive manufacturing in former Democratic strongholds like Michigan, Hayes said.

Hayes’ thesis also rests on an assumption that China can persuade the US to instruct Japan to strengthen the yen.

The ‘easy button’

If Japan raised interest rates, however, banks, insurance funds, and others would be forced to sell Treasuries, according to Hayes.

Instead, the US and Japan can take advantage of a tool he called a dollar-yen swap line.

“Imagine the Japanese needed $1 trillion worth of firepower to strengthen the yen from 156 to 100,” Hayes writes.

The Federal Reserve would swap $1 trillion for an equivalent amount of yen — the Fed prints dollars and the Bank of Japan prints yen.

While the Fed might hold onto its yen, the BOJ will use dollars, ploughing them into the world economy.

Functionally, it is the same money-printing, inflation-fuelling process that would have transpired if Japan raised interest rates, said Hayes.

“The swap line is better politically because it happens in the shadows,” he writes.

On a recent podcast hosted by crypto venture firm Arrington Capital, Hayes said the dollar-yen swap would open an “unlimited spigot of dollar liquidity, which will push up asset prices.”

That includes crypto.

“This is the lite version of why all crypto traders must constantly monitor” the dollar and yen currency pair, he said.

“If my theory becomes reality, it is trivial for any institutional investor to buy one of the US-listed Bitcoin ETFs.”

Crypto market movers

Bitcoin is down 1.4% over the past 24 hours to about $69,964.

Ethereum is up 2.3% over the same period to about $3,747.

What we’re reading

Ethereum co-founder on why the ETFs will create a supply crunch — DL News.

SEC Requests Updates To Nasdaq And CBOE Ethereum ETF Filings — Milk Road.

$327 Million ETH Sent To Crypto Exchanges After Speculation About Spot ETF Approval — Unchained.

El Salvador’s Strategy For Stacking Sats — Milk Road.

Analysts see Ethereum surging another 75% as ETF approval seen as done deal — DL News.

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

After months of radio silence, the Securities and Exchange Commission looks poised to approve spot Ethereum exchange-traded funds after all.

The resulting “floodgate” of demand for Ether will likely lead to a supply crunch, Joe Lubin, co-founder of Ethereum and founder and CEO of crypto infrastructure firm Consensys, told DL News.

Institutions that have already gained exposure to Bitcoin through the asset’s freshly launched ETFs “will most likely want to diversify into that second approved ETF,” Lubin said.

“There’s going to be a pretty large amount of natural, pent-up pressure to purchase Ether” through the ETFs, he said, but there will be less supply to accommodate that demand than when the spot Bitcoin ETFs were approved in January.

In Bitcoin’s case, authorised participants — the firms contracted to buy Bitcoin on behalf of the ETFs every day new shares are created — could simply purchase idle coins on exchanges or through over-the-counter counterparties.

But onchain data shows that more than 27% of the total supply of Ether is already being staked across the Ethereum network. It’s locked in contracts and earning a yield for its owners.

“Much of the Ether is put to work in the core protocol, DeFi systems, or in DAOs,” Lubin said, referring to decentralised autonomous organisations.

In other words, not only is Ether’s market value lower than Bitcoin’s — making Ether’s price more reactive to inflows — but a significant portion of its supply is unavailable for ETF consumption.

On top of that, renewed activity on Ethereum will cause the network to burn a substantial amount of the existing Ether supply over time, constraining supply further.

Even in Bitcoin’s case, banks were so desperate to purchase coins for the ETFs that they reached out to at least one major Bitcoin mining outfit to acquire some of its Bitcoin holdings, DL News learned. The supply crunch for Ethereum ETFs might be even bigger.

“This could be a pretty profound watershed moment” for Ethereum and the crypto industry as a whole, Lubin said.

Tom Carreras and Liam Kelly write about markets and DeFi for DL News. Got a tip about Ethereum ETFs? Reach out at tcarreras@dlnews.com or liam@dlnews.com

Traders appear to be anticipating approval of a spot Ethereum exchange-traded fund, after Bloomberg Intelligence analyst Eirc Balchunas raised his odds of the Securities and Exchange Commission greenlighting the products to 75% from 25% on Monday.

The optimism has fueled a surge in activity on the Ethereum network as Ethereum trading volume skyrocketed to over $3.3 billion on Monday, the highest level since April 13 and a 157% increase from the day before.

Uniswap, the leading decentralised exchange on Ethereum by trading volume and total value of crypto assets deposited, saw its volume double on Monday from Sunday to $2.3 billion.

Similarly, on Curve Finance, the second-largest decentralised exchange, volume doubled to $576 million on Monday from the day before.

On Lido, a liquid staking platform, and EigenLayer, a restaking platform, the total value of crypto assets deposited rose by 21.6% and 22.7% respectively.

Increases or decreases in total value locked, or TVL, generally track the price of Ether, because a big portion of the TVL in Ethereum-based staking and restaking protocols is composed of Ether. Thus, as Ether’s price rises, the dollar value of the assets locked in these protocols increases.

However, looking at new inflows and outflows, Lido saw about $116 million worth of Ether exit the protocol, while EigenLayer benefited from $37 million in new deposits.

Overall, the total value of crypto assets deposited in Ethereum protocols reached $64.7 billion on Monday, its highest level since May 7, 2022.

Looking at volumes generated by bots on the messaging app Telegram, a rough proxy for memecoin trading, Ethereum marked its highest volume day since April 24 on Monday, generating $26.5 million in volume.

The average transaction fee on Ethereum, which hit its lowest level of the year at $1.70 on Saturday, spiked to $6.69 on Monday, marking a threefold increase.

Further underscoring the excitement around the Ethereum ecosystem, seven out of the top 10 protocols by revenue generated are predominately based on Ethereum in the last 24 hours.

Ethereum saw its largest daily USD increase on Monday, jumping $585. The momentum extended into Tuesday, with Ethereum recently up 3.2% to $3,777.

Adding to this optimistic outlook, the SEC indicated on Tuesday that it is leaning toward approving spot Ether ETFs, according to a report from Barrons. A decision from the regulator is expected to come on Thursday.

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

A “widespread shift amongst Democrats” in Washington in the last 24 hours just upended the Ethereum ETF game completely, according to Galaxy Digital CEO Mike Novogratz.

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

After months of silence, the Securities and Exchange Commission is frantically communicating with prospective ETF issuers — which include Galaxy — in order to get the products ready before a crucial deadline on May 23, CoinDesk reported.

Ethereum has soared 20% since rumours of the about-face first surfaced through Bloomberg Intelligence’s ETF analysts Eric Balchunas and James Seyffart.

If the SEC’s change of heart was politically motivated, “that’s a seismic shift,” Novogratz said. “If that’s what actually happened, prices are going to be much higher than here.”

Firestorm

Prominent members of the Democratic party — particularly Massachusetts Senator Elizabeth Warren — have long been critical of crypto, while Republicans have generally been more amenable to the industry.

The difference in approach became particularly salient in the last couple of weeks. Former President Donald Trump, historically crypto agnostic, recently said he will support the industry if re-elected.

President Joe Biden, meanwhile, threatened to veto a motion to repeal SAB 121, a controversial crypto accounting rule, despite bi-partisan support for the repeal.

The contrast between the two politicians — less than six months before they face off in the US presidential election — “set off a firestorm,” Novogratz said.

“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.

With Trump leading Biden in the polls, and crypto super PACs raising over $150 million to push forward pro-industry candidates, sometimes in vulnerable swing states, Democrats’ aversion against crypto made less and less sense, Novogratz said.

“It has been really Elizabeth Warren and a small group of people who’ve held the Democrats hostage on this,” he said, adding that Democratic Senate leader Chuck Schumer, who voted to repeal SAB 121, likely told Warren “enough, this is becoming dumb.”

“There is no reason to make crypto, which is a technology, a political issue,” Novogratz added. “Hopefully that message is starting to resonate.”

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

Ether-correlated assets are surging after a surprise turnaround on the likelihood of an Ethereum spot ETF approval from Bloomberg Intelligence analyst Eric Balchunas.

While Ether itself rallied 22% to $3,800, several other assets have outpaced it.

Grayscale’s Ethereum Trust has in recent months become a gauge among traders for the likelihood of an Ethereum spot ETF approval.

That’s because the investment product, which launched in 2017, cannot be redeemed for the Ether tokens that back it. The lack of redemptions has meant that the trust has traded below its net asset value — or NAV — for most of the past two years. It traded at a steep 20% discount on Friday.

If the SEC approves spot Ethereum ETFs, however, Grayscale can convert its trust into an ETF. That’s what happened with GBTC, Grayscale’s Bitcoin Trust Fund.

Because ETFs can be redeemed for their underlying assets, that would allow traders to quickly arbitrage the discount to NAV, as they did when Grayscale converted its Bitcoin trust to an ETF in January.

After the recent rally, the Grayscale Ethereum Trust now trades over the counter at %2.7 premium to its backing, indicating that traders believe a conversion into an ETF is likely a done deal.

‘Ethereum betas’ rally

Liquid staking protocol Lido’s LDO governance token is among the biggest gainers, rising 31%.

Other popular Ethereum DeFi tokens, such as Uniswap’s UNI and Aave’s AAVE, have also jumped, but not as much as Ether or Lido.

As the biggest DeFi protocol on Ethereum with $35 billion of deposits, traders often look to Lido as Ethereum beta — a trading term for assets that react more sharply to price moves in a correlated asset, in this case, Ether.

Another popular Ethereum beta is memecoin PEPE, named after comic artist Matt Furie’s popular Pepe the Frog character. It’s the second-biggest memecoin on Ethereum after Shiba Inu.

PEPE gained more than 34% on the revised ETF odds, hitting a new all-time high. It now has a market value of over $5.3 billion.

Other Ethereum-related assets, such as crypto asset manager Grayscale’s Ethereum Trust, have also benefited. After a 31% gain, it’s now trading above its net asset value per share of $32.56 for the first time since March.

The moves upward comes after Balchunas revised his odds that the Securities and Exchange Commission will greenlight an Ethereum spot exchange-traded fund this week to 75% from 25%.

In an X post, the analyst said he was “hearing chatter this afternoon that the SEC could be doing a 180 on this (increasingly political issue), so now everyone is scrambling (like us everyone else assumed they’d be denied).”

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

The long simmering debate around the’ “fully-diluted value” of tokens is back on a boil. On Friday, Binance published research showing how tokens are increasingly launching with a limited supply and sky-high valuations.

It prompted a flurry of responses from crypto developers, investors, and more.

Cobie, the influential pseudonymous crypto investor, urged retail investors to shun newly-launched tokens in a widely-circulated essay.

Fully-diluted value, or FDV, is among the most controversial topics in crypto. But what exactly is it, and why did Binance’s commentary set the crypto community aflutter?

What is FDV?

In crypto, many tokens follow the example set by Bitcoin: they have a finite supply, most of which will be released incrementally, over a multi-year period. Sometime around the year 2140, all 21 million Bitcoin will have entered circulation.

Bitcoin was trading just above $70,000 Tuesday. With roughly 19.7 million Bitcoin in circulation, the cryptocurrency’s market capitalisation was about $1.3 trillion.

Bitcoin’s fully-diluted valuation refers to the market capitalisation of Bitcoin if all 21 million were in circulation. Crucially, it assumes that Bitcoin would still be trading at the same price it is today.

FDV became a key metric after crypto developers responded to a regulatory crackdown on initial coin offerings in 2018 and began tapping venture capital to raise money.

Venture-driven model

The metric was useful because under the venture-driven model a relatively small portion of any given token is typically tradable at launch. The remainder is set aside for a project’s developers, investors, and an affiliated nonprofit tasked with doling out grants to lure users.

Those set-aside tokens are typically locked for a period of one to three years.

In other words, new tokens would launch with limited supply, making their price more sensitive to large or frequent trades.

‘The FDVs of tokens launched in these initial months are already nearing the total for 2023.’

Binance Research

Critics warned retail investors to avoid tokens with an especially “low float,” or low circulating supply, arguing that eventual flood of new tokens — from developers and venture capitalists who’d been holding onto their shares due to lock ups — would decimate the tokens’ price.

In the heady days of 2021, some investors ignored that warning. The market was on a tear, and every launch seemed to mint a new set of millionaires.

By the time FTX collapsed in November 2022, however, the supposedly exploitative nature of “low float, high FDV” tokens was conventional wisdom.

Cobie’s take

But those tokens are becoming more common, according to Binance Research.

“Although we are only a couple of months into 2024, the FDVs of tokens launched in these initial months are already nearing the total for 2023, underscoring the prevalence of tokens with high valuations,” researchers wrote.

Some took issue with Binance’s methodology, arguing the relatively high FDV of tokens launched in 2024 is a byproduct of crypto’s rally earlier this year — in other words, a rising tide lifts all boats.

“Valuations within an asset class tend to move together,” Doug Colkitt, the founder of DeFi protocol Ambient Finance, wrote. “New token launches tend to trade at a relatively fixed ratio to ETH.”

Others pointed out that most new tokens listed on Binance have lost value since their listing date.

In his essay published Sunday, Cobie argued that retail investors should avoid newly-launched tokens.

That’s because an ever-greater share of tokens’ price discovery is happening in private markets, according to Binance Research. That means venture capitalists are buying tokens at a set price pre-launch, or trading the rights to tokens post-launch but prior to their unlock.

Private capture

“Effectively, massive private market raises lead to multi-billion dollar valuations at launch, making it more challenging for public market investors to profit from future growth,” the researchers wrote.

This trend can be seen in investment data. Over the past several years, the returns on newly-launched tokens have dwindled, according to Cobie.

“It is currently not possible to ‘be early’ to new token launches — as we have seen, the private capture of upside happened in an inaccessible way,” he wrote.

“In fact, opting out and protesting with lack of participation seems like the correct response to a lot of recent token launches.”

Memecoins soar

Ironically, the most “useless” tokens have avoided these pitfalls.

Memecoins, which live and die entirely off hype, rather than market fundamentals, typically launch with their entire supply available to buy and trade from the get-go, according to Binance Research.

“Memecoins are typically launched in a way that is accessible to anyone, with little opportunity for institutional participants to acquire tokens at a low cost ahead of time,” the researchers wrote.

No other token has performed as well this calendar year.

Aleks Gilbert is a New York-based reporter covering DeFi. Got a tip? Email him at aleks@dlnews.com.

Ether will surge as high as $6,600 if US regulators green light spot Ethereum exchange-traded funds this week.

That is according to estimates made by Gautam Chhugani and Mahika Sapra, analysts at research firm Bernstein.

They noted that the US Securities and Exchange Commission’s approval of similar Bitcoin products in January spurred a 75% rally in the following weeks.

“We would expect similar price action for ETH,” Chhugani and Sapra said in a report published on Tuesday.

With today’s prices, that would put the price of Ethereum north of $6,600. It hit its previous record of $4,878 in November 2021.

Ethereum is on a tear this week as speculation flies the SEC is warmed to approving ETFs. Ether has jumped 22% in the last 24 hours compared to a 4.5% uptick for Bitcoin, according to CoinGecko data.

Bernstein’s note to clients contributed to the surge of optimism lifting crypto after a choppy couple of months.

On Monday, a pair of influential Bloomberg Intelligence analysts caused a stir by improving the odds of an ETH ETF approval to 75% from 25%.

The deadline for the SEC to give VanEck’s Ethereum ETF application a thumbs up or down is Thursday.

Approval will likely be extended to several other applicants to avoid the SEC being seen as kingmaker.

But the drama has also created confusion in the market around the technical processes of filing for regulatory approval from the SEC.

The odds

Bloomberg Intelligence analysts James Seyffart and Eric Balchunas said they changed their prediction on the ETF amid whispers the SEC was becoming more active in its chats with exchanges.

Hours later, the news hit that exchanges had been prompted to update and refile their applications, according to CoinDesk.

Seyffart and Balchunas said the SEC may approve the Ethereum ETFs in a two-step process rather than reject the entire application, which many investors had feared.

In other words, the SEC might approve an Ethereum ETF in principle but not the actual sale of the products in the marketplace — a distinction that market watchers have interpreted as optimistic.

“I don’t think I’ve ever been so happy to be wrong,” Noelle Acheson said in her Tuesday edition of her Crypto is Macro Now newsletter. “It looks like we just might get ETH spot ETFs listed in the US after all.”

Polymarket confusion

The tumult is whipsawing punters on Polymarket where they’ve placed $8 million worth of bets on the ETFs’ inbound rejection or approval.

But if it’s a two-step process, that could monkey wrench the wagering.

Indeed, bettors are already debating the fine print of when an application is actually approved by the SEC.

This isn’t the first time bettors have clashed on the way wagers are defined on Polymarket.

Crypto market movers

Bitcoin is up 4.5% to $70,360 over the past 24 hours.

Ethereum is up 22% to $3,790.

What we’re reading

Solana memecoin generator pump.fun is under attack from former team member — DL News.

SEC Requests Updates To Nasdaq And CBOE Ethereum ETF Filings — Milk Road.

Analysts Up Odds of Spot Ether ETF to 75% as Prometheum Launches Product That Treats ETH as a Security — Unchained.

El Salvador’s Strategy For Stacking Sats — Milk Road.

Grayscale CEO Sonnenshein resigns, replaced by Goldman exec: Crypto reacts — DL News.

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

Europe is hoping its own blockchain will help it break free from dependence on US technology.

On Tuesday, the European Union set up a new organisation designed to introduce blockchain infrastructure and revamp record keeping and the transfer of data transfer between the bloc’s 27 member states.

The launch took place during a meeting of telecommunications ministers at the European Council in Brussels. Lawmakers also rubber stamped the EU’s landmark law on artificial intelligence.

‘Europeum will have a tangible presence in the daily lives of European citizens.’

Mathieu Michel, Belgian state secretary for digitalisation.

The blockchain infrastructure will impact both individuals and companies, said Mathieu Michel, Belgium’s state secretary for digitalisation.

Michel, who pushed for the blockchain project administered by EU states, has dubbed it Europeum.

“Europeum will have a tangible presence in the daily lives of European citizens,” he said at a press conference.

It would allow citizens to trace the origins of their products, and enable businesses to protect their intellectual property by maintaining data on immutable blockchain networks, he said.

Ten European member states, including Italy, Poland, and Greece, have agreed to help operate and roll out the EU blockchain. Other European countries will still be able to use the blockchain infrastructure.

More nations are expected to join, Michel said.

Germany and France have not committed to the arrangement. Still, the latter has been supportive of the project, Michel told DL News earlier.

Europeum for sovereignty

“We need to create a new sovereign infrastructure, rather than depending on Amazon Web Services for telecom,” Michel told DL News at an event earlier in May, alluding to the online retailer’s global cloud computing business.

The idea is that digital identities, wallets, credentials and licences will be recorded on Europeum.

Michel hopes the blockchain infrastructure will translate legal and bureaucratic processes into efficiently automated smart contracts. And that it will support metaverse applications, as well as the European Central Bank’s digital euro.

Digital twins

“We speak about the future of digital twins or the metaverse, so we need to have a sovereign infrastructure that can meet important criteria such as singularity, security, privacy, interoperability.”

The blockchain infrastructure has been under construction since 2017. Under the auspices of an agency called the European Blockchain and Services Infrastructure.

Developers and companies created a prototype which already functions today, European Commission officials have told DL News.

Since the European Commission does not have legal basis to operate a blockchain for European citizens to use, it has remained in pilot mode.

That’s why the project is now transformed into a so-called European Digital Infrastructure Consortium, a multinational project supported by the European Commission.

These consortia come under Europe’s Digital Decade Policy Programme 2030, a project sitting on €165 billion to support its objectives.

“People don’t need to be happy that Europeum exists,” Michel said during the interview.

“They just need to know that if the data is exchanged between nations, administration or companies, it is safe to use.”

Inbar Preiss is DL News’ Brussels correspondent. Contact the author at inbar@dlnews.com.

A version of this article appeared in our The Decentralised newsletter on May 21. Sign up here.

GM, Tim here.

Here’s what caught my DeFi-eye recently:

The pump.fun exploiter is out for blood.

US prosecutors bring first-of-its-kind MEV case.

TVL on Telegram’s TON blockchain jumps.

Is Solana’s pump.fun in trouble?

Pump.fun, a Solana-based platform for memecoin launches, is back after a temporary shutdown following a $2 million exploit.

But the exploit could just be the beginning of the protocol’s troubles.

Accused exploiter Jarret Reginald S Dunn posted a confirmation that he had been arrested and released on bail by UK police over the weekend.

Now he’s hitting back with accusations of his own against the pump.fun team.

Dunn, who other pump.fun developers say previously worked on the project, accused it of running the UK equivalent of an unregistered securities exchange, or a gambling site with no license.

Pump.fun is currently one of Solana’s most successful projects. Days before the exploit, it generated over $1.2 million in fees in 24 hours — more than the Solana blockchain did in the same period.

If pump.fun faces legal issues and shuts off again, it could kneecap activity on Solana.

But Dunn’s case against pump may be weak.

He’s already appeared to take credit for the exploit, and later said he’s been accused of stealing the $2 million with conspiracy to steal another $80 million.

In the UK, the legality of pump.fun is unclear. But still, its developers likely won’t want to have to defend themselves in court.

Pump.fun did not respond to a request for comment.

US prosecutors bring $25m MEV case

US prosecutors allege a pair of MIT-educated brothers made off with $25 million by targeting crypto trading bots on the Ethereum.

Such trading bots, which rearrange transactions on blockchains for profit, have long existed in a legal grey area. While some trading bots do exploit users, others help maintain efficient markets.

Some say the first-of-its-kind case could signal that more actions against those operating crypto trading bots are coming.

But as always, the devil is in the details.

It appears that the point of contention for prosecutors is that the alleged perpetrators targeted private transactions to extract the funds.

Normally, trading bots can only target publicly-broadcast transactions. However, in this case, the brothers are accused of gaining access to private transactions to trick other trading bots into buying $25 million worth of illiquid tokens.

Those targeting publicly-broadcast transactions for MEV strategies appear to be safe — for now.

TON hits TVL all-time high

Assets deposited to DeFi protocols on Telegram’s TON blockchain briefly hit an all-time high of $270 million.

The boost could be the start of the messaging app converting its 800 million monthly active users into crypto degens.

Helping fuel the rise is Tether’s deployment of its USDT stablecoin on the TON blockchain in April. USDT is the biggest crypto stablecoin with over $111 billion in circulation.

TON has a crypto wallet integrated into the Telegram app, allowing users to send USDT to their contacts worldwide directly from the app.

Users can also earn an annual yield of up to 50% on USDT stored in their TON wallet, paid in TON, the blockchain’s native token.

The TON token rallied some 31% after venture firm Pantera Capital announced an investment in the blockchain on May 8.

While TVL is up, it’s unclear if this recent increase is translating into increased activity.

Data of the week — what’s happening on TON?

The TON blockchain’s TVL spiked again at the start of May, pushing the metric briefly to over $270 million.

But at the same time, other metrics, like trading volume, didn’t show a similar increase.

Historically, increases in blockchain TVL usually result in increases in trading activity.

This week in DeFi governance

VOTE: Arbitrum DAO supports 8-week mergers and acquisitions pilot

VOTE: Aave DAO looks to onboard Ethena’s USDe on Ethereum

VOTE: Lido DAO polls new Lido Alliance framework

Post of the week

Crypto personality Jordan Fish — AKA cobie — has penned another blog post after a nearly-two-year hiatus.

In it he discusses the growing trend of how more and more of a crypto project’s value is captured privately before it launches a token.

Cobie’s previous posts proved highly-influential across the crypto industry — and this one looks to be no different.

What we’re watching...

zkSync firmly stands by its commitment to decentralize.

Since rolling out support for EIP4844 in March, this has been the sole focus. The upcoming release of v24 is the final planned protocol upgrade needed before handing over network governance to the community. The remaining…

— zkSync (∎, ∆) (@zksync) May 17, 2024

Ethereum layer 2 zkSync teases that its token launch could be close.

The project has previously said it plans to decentralise governance of the blockchain through a token.

It now says this transfer will take place after the upcoming v24 upgrade, scheduled for the end of June.

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