CoW Protocol

Casey Wagner

Ben Strack

Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:



<ul>
<li>Making sense of the jobs report that didn’t necessarily clear up what size rate cut the Fed could opt for.</li>



<li>The formalized call for a crypto question at next week’s presidential debate, and why it’s needed.</li>



<li>Friday means a recap of economic data and developments!</li>
</ul>



<h2 class="wp-block-heading">More Goldilocks data sends markets lower&nbsp;</h2>



The pivotal report that some analysts say will determine the size of the Federal Reserve’s interest rate cut later this month is here, and, shocker, it was disappointing.&nbsp;



US employers added 142,000 jobs in August, Friday’s <a href="https://www.bls.gov/news.release/empsit.nr0.htm">US Jobs report</a> showed. Economists had expected a net gain of 160,000. Still, it’s better than July’s figure, which was revised down on Friday from 114,000 to 89,000. Another (small) bright spot: unemployment fell from 4.3% in July to 4.2% in August, which was expected.&nbsp;



Markets, expectedly, fell. The S&amp;P 500 and Nasdaq Composite indexes lost as much as 2% and 2.8%, respectively, after the open on Friday. Bitcoin and ether slid as much as 5.8% each in the hours after the report was published.&nbsp;



By 2 pm ET, the S&amp;P 500 and Nasdaq Composite were trading 1.6% and 2.4% lower, respectively. Bitcoin was down 5% over 24 hours, hovering around $53,800 at that time while ether was 6% in the red.&nbsp;



Even so, crypto experts say it’s not the time to worry.&nbsp;



“The August jobs report hit the sweet spot for bitcoin: the labor market has slowed, which will allow the Fed to cut rates, but there are no signs of recession,” said Grayscale research head Zach Pandl.



Pandl and his team remain “optimistic about the outlook for the balance of the year, in light of the favorable macro backdrop, the election year focus on large US budget deficits, and growing institutional adoption through the new spot crypto ETPs,” he added.&nbsp;



Investors had speculated that a larger interest rate cut (50 basis points versus 25bps) would be in store should job growth slow or unemployment rise. Today’s report showed neither.&nbsp;



As so-called Chair Timiraos (Nick from the WSJ) <a href="https://x.com/NickTimiraos/status/1832038957594427441">said</a>, the headline figures aren’t bad enough to guarantee a 50bps cut, but they also aren’t good enough to ensure central bankers will opt for 25bps.&nbsp;



Based on the <a href="https://blockworks.co/newsletter/research/issue/post_ef1be887-fd7e-4298-bb39-c65167eb89bc">reaction</a> we saw to the July jobs report in early August (remember the VIX hit 38 and the Dow lost more than 2,000 points?), today’s market carnage isn’t a shocker.&nbsp;



We’ve decidedly left the era where “bad data is good,” but now we are in what I’m calling the “iffy data is good” era. Today’s report was definitely not too hot, but it also wasn’t bad enough to really intensify fears that a soft landing is impossible.&nbsp;



Tom Essaye, founder of Sevens Report Research, says we are in the “just right” zone, where a September rate cut is all but guaranteed, without full-fledged recession fears being sparked.&nbsp;



Here’s to more iffy data next week. Have a good weekend.&nbsp;



— Casey Wagner&nbsp;



<h2 class="wp-block-heading">$51,000</h2>



The bitcoin “support level” that if lost could lead to a steeper drop, according to technical and on-chain analyst Ali Martinez.



Martinez noted in a Wednesday X <a href="https://x.com/ali_charts/status/1831231909898449130">post</a> that BTC falling below $51,000 could lead to a further plummet to $40,600 — citing the <a href="https://tradingcenter.org/index.php/learn/technical-analysis/328-how-to-trade-td-sequential">TD Sequential</a> indicator used to identify trend exhaustion and price reversal. Bitcoin dipped closer to that level Friday, falling below $53,800 by 2 pm ET.&nbsp;



<h2 class="wp-block-heading">Crypto industry looking for stance details at presidential debate&nbsp;</h2>



Yesterday’s <a href="https://blockworks.co/news/on-the-margin-newsletter-crucial-jobs-report">newsletter</a> touched on Donald Trump’s latest crypto mention. It also, separately,&nbsp; discussed a recent <a href="https://blockworks.co/news/blockchain-association-investigation-fed-order">enforcement action</a> against a crypto-friendly bank.&nbsp;



These form a reminder: The ongoing lack of regulatory clarity for industry businesses coincides with a presidential election cycle in which crypto has become a point of discussion.



This brings hope to those wanting to see crypto regulatory change. And while there have been promises from one candidate and mostly silence from the other, people want more details.&nbsp;



A Chamber of Progress executive formalized this wish via a <a href="https://progresschamber.org/wp-content/uploads/2024/09/Letter-to-ABC-Debate-Mods_-Crypto-Question-1.pdf">letter</a> to ABC News’ Linsey Davis and David Muir ahead of the Sept. 10 debate between Trump and Kamala Harris. These moderators “have an opportunity to illuminate the candidates’ stances on crypto,” wrote Kyle Bligen, the tech industry coalition’s director of financial policy.



After all, “passing bipartisan digital asset regulations is front and center this election cycle” for the 18 million Americans (by their count) currently holding or trading crypto.



Another quick reminder: Trump has expressed <a href="https://blockworks.co/news/on-the-margin-newsletter-trump-bitcoin-mining-meeting">support</a> for US bitcoin mining, <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">vowed</a> to fire SEC Chair Gary Gensler and promised to make the US the “world capital for crypto and bitcoin.” Though Harris hasn’t yet addressed the topic of crypto much, a campaign adviser <a href="https://www.bloomberg.com/news/articles/2024-08-21/harris-supports-policies-to-expand-crypto-industry-aide-says?srnd=phx-crypto&amp;utm_source=on-the-margin.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=first-month-s-a-doozy&amp;_bhlid=791e8f2e2b8483dd7e2d676dc6e16698a3b3fcc1">said</a> she would “support policies that ensure that emerging technologies and that sort of industry can continue to grow.”



Former SEC senior counsel Ashley Ebersole previously told me “talk is cheap.” Big statements on the campaign trail do not always lead to practical actions, <a href="https://blockworks.co/news/kamala-harris-crypto-policy-reset-outlook">added</a> Exodus legal chief Veronica McGregor, alluding to Trump’s Gensler remarks.



Still, any crypto-related pledges uttered by either candidate (or lack thereof) may hold a bit more weight on a debate stage.&nbsp;



“Both candidates should shed more light on their positions and explain how we can nurture digital assets while also providing greater consumer protection,” Bligen added in the letter.&nbsp;



Such a debate question could go to Harris given she has so far not been as clear on her crypto stance, Ebersole said. Any pro-crypto statements from Harris in particular “might cause a bit of a market bounce,” BDE Ventures CEO Brian Evans told Blockworks.



We know Elon Musk and the Winklevoss twins support Trump. We’ve seen SkyBridge Capital founder Anthony Scaramucci (who had a brief stint as White House communications director under Trump) repeatedly share his support for Harris.&nbsp;



More recently, Ripple co-founder Chris Larsen came out — along with 87 other corporate leaders, CNBC <a href="https://www.cnbc.com/2024/09/06/harris-endorsed-trump-murdoch-yelp-snap-ripple.html">reported</a> — to endorse the vice president.&nbsp;



Though some may be willing to <a href="https://blockworks.co/news/single-issue-crypto-voter">vote on the crypto issue alone</a>, some <a href="https://blockworks.co/news/only-a-fool-would-vote-on-crypto-alone">may not</a>. Others may be on the fence. However people are thinking about it, it seems hard to argue that more substantive dialogue around the topic can only be positive for all.&nbsp;



— Ben Strack



<h2 class="wp-block-heading">Did You Notice</h2>



Happy Friday! It was a short week for our US readers, but there was still plenty of data to unpack. It’s less than two weeks until the next policy-setting Federal Reserve meeting, and markets have a bit more clarity now. Here’s this week’s recap:&nbsp;



<ul>
<li>The latest Fed <a href="https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20240904.pdf">Beige Book</a>, released Wednesday, shows that economic activity in the US is mostly flat or declining. Employment remained fairly stagnant, the survey indicates, and companies reported few layoffs. The report paints a picture that shows the labor market is tightening, a situation Fed Chair Jerome Powell has said he does not want to aggravate. That bodes well for a rate cut later this month, which we of course already knew was coming. But having supporting economic reports never hurts. </li>



<li>As Felix <a href="https://blockworks.co/news/on-the-margin-newsletter-ism-pmi-goods-disinflation">unpacked</a> on Tuesday, the latest ISM manufacturing report left investors with much to be desired. The Purchasing Managers Index for August came in at 47.2% after analysts expected 47.9%, fueling fears that economic growth is on the decline and leading to the biggest sell-off in stocks since early August. </li>



<li>New York Fed President John Williams and Fed Gov. Christopher Waller made separate appearances on Friday morning. Both reiterated that rate cuts will be starting this month, but, unsurprisingly, gave no indication as to the size of such a cut. We’re 12 days out from the next FOMC decision day, and markets are still mostly betting on a 25-basis point decrease. I’m not one to make wagers, but I’d be shocked if the Fed opts for 50bps on Sep. 18. Powell hates surprising the market, and central bankers have given no indication that anything greater than 25bps is on the table. </li>
</ul>



— Casey Wagner



<h2 class="wp-block-heading">Bulletin Board</h2>



<ul>
<li>New York judge Juan Merchan on Friday <a href="https://www.cbsnews.com/news/trump-sentencing-delay-hush-money-case-new-york/">delayed</a> the date of Donald Trump’s “hush money” case sentencing (from Sept. 18 to Nov. 26), meaning it will come after the presidential election.   </li>



<li>Barclays analysts upgraded their stock rating for Coinbase and Robinhood to “equal weight,” according to a Friday research note. For COIN specifically, the analysts cite an apparently improving regulatory environment “with both presidential candidates becoming increasingly friendly towards crypto.” Coinbase has <a href="https://blockworks.co/news/coinbase-q3-earnings-analysis">diversified</a> its business model in recent quarters, most recently tallying <a href="https://blockworks.co/news/coinbase-reports-1-4b-in-revenue-beating-estimates">$1.4 billion in total revenue</a> during Q2. </li>



<li>Investment firm VanEck said it plans to <a href="https://blockworks.co/news/vaneck-closing-ether-futures-etf">close its ether futures ETF</a> nearly a year after launching it. The plan — made after evaluating its performance, liquidity, assets under management and investor interest, the company said in a statement — comes following VanEck’s launch of a spot ETH fund in July.</li>



<li>Speaking of ETFs, Blockworks’ Empire <a href="https://blockworks.co/news/how-safe-is-the-money-sitting-in-bitcoin-etfs">newsletter</a> team breaks down how safe the $50 billion or so sitting in US spot bitcoin ETFs is given the FBI’s latest warning about North Korean hackers.</li>
</ul>



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

More Goldilocks data sends markets lower

Jack Kubinec

Jeff Albus

Howdy!&nbsp;



Death, taxes, and the Kansas City Chiefs getting extremely lucky at the end of football games. When will it end?



It’s day two of the NFL season and I’m already resigned to my Buffalo Bills bowing out to Patrick Mahomes in the playoffs yet again. At least I have all our newsletter subscribers to keep me company:



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">Kamino is Solana’s home for liquidity incentives</h2>



PayPal’s PYUSD stablecoin has recently seen rapid growth on Solana. Much of the growth has been driven by Kamino, a newer DeFi platform where the majority of this activity is happening.



Kamino, a borrow-lend protocol on Solana that began gaining real traction in late 2023, onboarded PYUSD with generous liquidity incentives in early July. Today, some $344 million PYUSD is held on Kamino, according to onchain <a href="https://solscan.io/token/2b1kV6DkPAnxd5ixfnxCpjxmKwqjjaYmCZfHsFu24GXo#analysis">data</a>. This equates to 62% of the total supply on Solana.



It’s easy to see why PYUSD grew so quickly on Kamino — it was <a href="https://x.com/y2kappa/status/1825979796930834635">offering</a> 18% APY on the stablecoin for a time. This boosted yield wasn’t cheap. $500,000 is being spent weekly on PYUSD incentives, and this figure was hundreds of thousands of dollars higher a couple weeks ago.&nbsp;



A source with knowledge of the matter told me that these incentives are doled out by Trident Digital, a little-known firm that the stablecoin’s issuer Paxos <a href="https://blockworks.co/news/paypal-stablecoin-aave-deployment">taps for liquidity boosting services</a>. I could not determine for certain whether the funds incentivizing PYUSD adoption were ultimately being paid for by PayPal or by the Solana Foundation.&nbsp;



But taking a broader look, PYUSD is not alone in spending for adoption on Kamino. In fact, eight of Kamino’s 10 highest-volume liquidity vaults have “incentives farms,” which appear to let projects front their tokens and let Kamino disburse them to depositors. Tons of Solana projects have done this: Jito, Marinade, Blaze, and Sanctum all appear to have active liquidity farms. <a href="https://x.com/KaminoFinance/status/1821194296181297334">Ethena</a> and <a href="https://x.com/KaminoFinance/status/1775497542295343587">Wormhole</a> appear to have spent on liquidity incentives, too.



While all this was going on, Kamino has grown significantly. On Dec. 6, 2023, Kamino had $42 million in total value locked (TVL), according to DeFiLlama. Nine months later, that number is at $1.4 billion, and Kamino looks like it could make a serious run at Jito to become Solana’s largest protocol by TVL.&nbsp;



Some have drawn comparisons between Kamino and the Ethereum borrow-lend protocol Aave, a blue-chip DeFi protocol that’s ranked third in TVL among all protocols with over $11 billion locked. Kamino isn’t the only borrow-lend protocol on Solana — MarginFi and Save (formerly Solend) also come to mind — but its liquidity management vaults tab appears to be setting it apart. There’s also the fact that <a href="https://www.coindesk.com/tech/2024/04/11/marginfi-leader-resigns-on-fiery-day-for-major-solana-lender/">both</a> other <a href="https://decrypt.co/103489/solend-whale-108m-loan-nearly-crashed-solana">incumbents</a> have had their warts in the past.&nbsp;



Still, it’s an open question as to how sticky Kamino’s TVL can be. Of the $1.4 billion currently held on Kamino, $380 million is in PYUSD, and the weekly yield boost appears to be slowly scaling down. Kamino’s $148 million in liquidity vaults, many of which receive incentives, are significant, too.&nbsp;



“Kamino lenders are happy lenders,” Kamino’s co-founder <a href="https://x.com/y2kappa/status/1831652258246705299">wrote</a> on X this week. I’ll be interested to see if liquidity incentives are table stakes for keeping them happy.



— Jack Kubinec



<h2 class="wp-block-heading">Zero In</h2>



India really showed out for Colosseum’s Radar hackathon:



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="786" height="397" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png" alt="" class="wp-image-91463" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png?w=786 786w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-1.png?w=80 80w" sizes="(max-width: 786px) 100vw, 786px" /></figure>



The hackathon, which is going on from now until Oct. 8, has drawn a fair amount of interest from Solana’s community, and as you can see, more than a third of the registrants come from India. Hackathon winners have a chance to join Colosseum’s startup accelerator, which also comes with a <a href="https://blockworks.co/news/lightspeed-newsletter-solana-startup-accelerator">seed investment check</a>.



Colosseum’s first hackathon in the spring produced the viral Solana experiment Ore, which we’ve written <a href="https://blockworks.co/news/lightspeed-newsletter-solana-ore-v2-review">a fair bit about</a>, so I’ll be rooting for some similarly-interesting new projects to emerge from this hackathon.&nbsp;



— Jack Kubinec



<h2 class="wp-block-heading">The Pulse</h2>



ICYMI — Stories you may have missed this week:



<ul>
<li>0xDeep <a href="https://x.com/0xDeep/status/1829952043123163447">created</a> the Solana Programs Verified Directory, a public dashboard for trusted and verified Solana programs. It is intended to help users ensure the integrity of their interactions.</li>



<li>PRISM Explorer <a href="https://x.com/prism_tec/status/1830743118867501420">launched</a> the first AI-driven data intelligence platform for Solana, allowing users to query the entire Solana ledger back to Epoch 0 with SQL and AI agents.</li>



<li>Volmex Finance <a href="https://blog.volmex.finance/sviv-index/">introduced</a> the SVIV Index, Solana&#8217;s first implied volatility index, tracking 14-day expected volatility with future updates planned for derivatives trading.</li>



<li>Jupiter Exchange <a href="https://x.com/JupiterExchange/status/1831698316557701612">announced</a> its new ‘Protect your swaps’ feature, intended to safeguard transactions from sandwich attacks by routing swaps directly to Jito Labs validators.</li>



<li>The GRASS airdrop <a href="https://x.com/SolanaFloor/status/1831674074243772926">caused</a> disappointment among some users due to smaller-than-expected token allocations, despite its minimal participation requirements​.</li>



<li>Mercuryo is set to <a href="https://mercuryo.io/explore/article/mercuryo-launches-spend-crypto-debit-card">launch</a> its Spend virtual debit card, which promises to let Solana wallet users spend their crypto at over 90M Mastercard merchants.</li>



<li>Scammers <a href="https://x.com/SlorgoftheSlugs/status/1830769369049375204">discovered</a> a new method to burn tokens directly from Solana wallets via the Token 2022 standard, adding a new layer of risk for unsuspecting users.</li>



<li>AggLayer, <a href="https://x.com/SuperVikkings/status/1832078473873015077">introduced</a> by Polygon Labs&#8217; CEO, is a cross-chain interoperability layer connecting Solana, Ethereum, and other blockchains to bring “infinite scalability” to Web3.</li>



<li>Bybit has begun to <a href="https://announcements.bybit.com/en/article/introducing-bbsol-unleash-the-power-of-liquid-staking-on-solana-bltbe8b566922960d76/?category=new_crypto">issue</a> bbSOL, a liquid staking token on Solana that allows users to earn staking rewards while maintaining liquidity and maximizing returns.</li>
</ul>



— Jeffrey Albus



<h2 class="wp-block-heading">One Good DM</h2>



A message from braunguy, co-founder of Lulo



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="572" height="628" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-2.png" alt="" class="wp-image-91464" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-2.png?w=572 572w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-2.png?w=273 273w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-2.png?w=234 234w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-2.png?w=238 238w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-2.png?w=199 199w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image-2.png?w=73 73w" sizes="(max-width: 572px) 100vw, 572px" /></figure>



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Kamino seeing benefits from liquidity incentives on PYUSD

Investment firm VanEck intends to close its ether futures ETF nearly a year after launching it, the company said Friday.



The VanEck Ethereum Strategy ETF (EFUT) hit the market in October 2023. The fund, like others brought to market at the same time, <a href="https://blockworks.co/news/sec-consider-ether-futures-etfs">held ether futures contracts</a> rather than ETH directly.



The ETH futures offerings <a href="https://blockworks.co/news/ether-futures-etfs-opening-week-underwhelming">failed to gain significant assets</a>, as some speculated investors might be waiting for spot ether ETFs — funds that <a href="https://blockworks.co/news/nine-us-spot-eth-etfs-live-post-approval">gained the SEC’s final green light in July</a>.&nbsp;



VanEck was among those to launch a spot ether ETF. While the VanEck Ethereum ETF (ETHV) has so far notched $63 million of net inflows, according to Farside Investors <a href="https://farside.co.uk/ethereum-etf-flow-all-data/">data</a>, EFUT manages just $21 million in assets.&nbsp;



Read more: <a href="https://blockworks.co/news/education-required-to-spur-eth-etf-outflows">To spur ETH ETF inflows, ‘the first catalyst is education’</a>&nbsp;



Shareholders of VanEck’s ether futures fund can sell their shares on the Cboe exchange until markets close on Sept. 16. After that, the shares will no longer trade on the exchange and will be subsequently de-listed.



“VanEck continuously monitors and evaluates its ETF offerings across a number of factors, including performance, liquidity, assets under management, and investor interest, among others,” the company said in a Friday news release. “The decision was made to liquidate the fund based on an analysis of these factors and other operational considerations.”



Grayscale Investments withdrew its application to launch an ether futures ETF in May. Then-CEO Michael Sonnenshein <a href="https://www.dlnews.com/articles/regulation/grayscale-to-focus-on-spot-ethereum-products-says-ceo/">reportedly</a> said during a Financial Times event



earlier that month that the firm wanted to focus on its spot products.&nbsp;



VanEck <a href="https://www.vaneck.com/us/en/press-releases/vaneck-announces-changes-to-etf-product-line-bitcoin-strategy-etf.pdf">revealed</a> its plan to shutter its bitcoin futures ETF just days after launching a spot BTC fund in January.



Industry professionals have previously pointed to the downsides of futures ETFs, including roll costs and contango — a situation when the futures price is above the expected future spot price.&nbsp;



“We believe investor appetite would switch from products offering ether futures exposure to direct ether exposure, such as ETHV,” a VanEck spokesperson told Blockworks in an email. “Spot products should more closely track the price of ether, as they don’t incur the costs associated with rolling futures contracts.”



Updated September 6, 2024 at 1:35 pm ET: Added comment from VanEck spokesperson.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

VanEck to close ether futures ETF after July spot ETH fund launch

Katherine Ross

David Canellis

Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/empire" target="_blank" rel="noreferrer noopener">Subscribe to the Empire newsletter</a>.



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Happy Fri-yay!



No, but really, we made it through the (short) week. Congrats.



Today we’re diving right into custodian safety, and David’s cooked up a few Easter Eggs for you all. Have a great weekend!



— Katherine Ross



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<h2 class="wp-block-heading">Staying afloat</h2>



The FBI has a warning for crypto: North Korean hackers are on the prowl.



“North Korean malicious cyber actors conducted research on a variety of targets connected to cryptocurrency exchange-traded funds (ETFs) over the last several months. This research included pre-operational preparations suggesting North Korean actors may attempt malicious cyber activities against companies associated with cryptocurrency ETFs or other cryptocurrency-related financial products,” the FBI <a href="https://www.ic3.gov/Media/Y2024/PSA240903">said</a> earlier this week in a bulletin.



On social media, it led to a discussion started by Eleanor Terrett of Fox News on whether or not Coinbase — the custodian of 8 of the 11 bitcoin ETFs (including BlackRock’s) — could be a “single point of failure.”&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">It doesn’t bode well that nearly all crypto ETF issuers have the same custodian for all their <a href="https://twitter.com/search?q=%24BTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$BTC</a> and <a href="https://twitter.com/search?q=%24ETH&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$ETH</a>. This makes <a href="https://twitter.com/coinbase?ref_src=twsrc%5Etfw">@coinbase</a> a potential single point of failure and that’s scary. <a href="https://t.co/47RNMQ5dQN">https://t.co/47RNMQ5dQN</a>&mdash; Eleanor Terrett (@EleanorTerrett) <a href="https://twitter.com/EleanorTerrett/status/1831352537670131890?ref_src=twsrc%5Etfw">September 4, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



As it stands, all 11 ETFs have over $51 billion worth of bitcoin according to <a href="https://bitcointreasuries.net/">Bitcoin Treasuries</a>, so it’s a fair concern to wonder what could happen if something — or someone — attacks custodians or the issuers themselves.



&#8220;The world’s largest financial institutions rely on Coinbase for a reason — we have a proven track record, state-of-the-art technology, and deep expertise in crypto custody. Crypto is a unique technology with unique needs,” a Coinbase spokesperson told me.



“Coinbase has built its reputation as the most trusted and secure platform for safeguarding digital assets, and operates under the same regulatory frameworks as other major institutions like the DTCC, ensuring that we meet the highest standards of security and oversight. Our commitment to security remains unwavering, and we’re proud to serve as the trusted custodian for the majority of crypto ETFs, ensuring the safety and integrity of these assets.&#8221;&nbsp;



The company’s Chief Legal Officer Paul Grewal reiterated that point on social media, saying that it’s the “opposite of scary.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I think it&#39;s whatever the opposite of scary is. A wide range of the world’s largest and pickiest institutions trust us as the most effective way to keep their clients’ digital assets safe. <a href="https://t.co/lL1tEjPv1G">https://t.co/lL1tEjPv1G</a> <a href="https://t.co/jw0Tqgi7td">https://t.co/jw0Tqgi7td</a>&mdash; paulgrewal.eth (@iampaulgrewal) <a href="https://twitter.com/iampaulgrewal/status/1831363302410293724?ref_src=twsrc%5Etfw">September 4, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



If you remember, there were <a href="https://www.reddit.com/r/Bitcoin/comments/1aboqwr/does_the_fact_that_coinbase_holds_custody_of_8/">snippets</a> of discussions at the end of last year through the beginning of this year when all of the ETF filings revealed that most of the issuers had picked Coinbase.&nbsp;



In March, the company itself <a href="https://www.coinbase.com/blog/how-we-keep-digital-assets-safe">addressed</a> the safety of custodying the assets.&nbsp;



And yesterday, MetaMask’s lead security researcher Taylor Monahan entered the chat.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Coinbase is NOT different bc they’ve *eliminated* the risk though. Bc they haven’t. Bc they can’t. NO ONE CAN. This shit is wild. The incentives are too much. The hackers have too many resources. They will literally burn 0 days to get at Coinbase. They *have* burned 0 days.&mdash; Tay 💖 (@tayvano_) <a href="https://twitter.com/tayvano_/status/1831545355370164470?ref_src=twsrc%5Etfw">September 5, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Monahan pointed out, in a thread on X, that Coinbase owns the “reality” of the situation: There are bad actors out there, and they will try to attack prominent crypto firms (or crypto people, as Nick Drakon formerly of Revelo <a href="https://x.com/NickDrakon/status/1831719184041906286">revealed</a> in his own thread Thursday.)



According to Monahan, Coinbase adheres to a “get hacked but don’t get rekt” mindset.&nbsp;



“No matter what Coinbase does internally for their systems, they cannot wholesale prevent one of their customers from willfully initiating a transfer given they provide the required authentication,” she warned, saying that the risk could come from the issuers themselves.



She compared the security to a ship, which is to say you don’t want water getting in. But sometimes it does.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">More good stuff: My friend Luke (who actually built systems at Coinbase and AWS and others) gave this analogy: secure systems are built like ships. Even if the hull is breached, the water should only flood a few compartments. The ship shouldn&#39;t sink.<a href="https://t.co/CqmP6Vd6S3">https://t.co/CqmP6Vd6S3</a>&mdash; Tay 💖 (@tayvano_) <a href="https://twitter.com/tayvano_/status/1831730099936489766?ref_src=twsrc%5Etfw">September 5, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“Water is CONSTANTLY seeping into the hull of the ship. Like&#8230;always,” Monahan said.”The ship expects this though. You just have float switch sump pumps in the basins that are auto triggered when the water reaches a certain level.”



Monahan’s analogy is a good one, reminding folks that it’s all about awareness and staying on top of the situation. So perhaps instead of “keep calm and carry on,” crypto folks should adopt “keep calm and stay aware.”



— Katherine Ross



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">IYKYK</h2>



On this week’s Weekly Round Up <a href="https://blockworks.co/podcast/empire">episode of Empire</a>, Jason Yanowitz and Santiago Santos broke down a myriad of topics — most of which you, dear reader, will be familiar with if you open this newsletter each morning.&nbsp;



But I want to focus on just one: The <a href="https://blockworks.co/news/empire-newsletter-crypto-trends">quiet quitting theory from Ikiagi’s Travis Kling.</a> Yanowitz speculated that this is something that happens in every industry, while Santos said he thinks this happens every cycle.&nbsp;



“It’s the hallmark of a trough,” Santos said. “The question is, is this time any different? And is this a sign of something that’s more enduring?”



Those questions are a bit broad to answer right here, right now, but I think Santos might have been answering them himself when he noted that BlackRock’s Larry Fink isn’t quiet quitting by any means. But it’s natural for some investors to burn out.&nbsp;



There’s an opportunity if you look closely, investors perhaps just need to be “disciplined” and “patient,” Santos said.&nbsp;



“I’ve seen this movie many, many times,” he added. Grab some popcorn then, I guess.



And now you know.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="1275" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png" alt="" class="wp-image-91441" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=323 323w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=328 328w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=275 275w, https://blockworks-co.imgix.net/wp-content/uploads/2024/09/image.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">Images credit: Financial Times &amp; World Economic Forum (<a href="https://creativecommons.org/licenses/by/2.0/#ref-appropriate-credit">C.C. BY 2.0</a>), modified by Blockworks</figcaption></figure>



BlackRock chief Larry Fink’s evolution into crypto evangelist didn’t happen overnight.



It also happened much longer ago than it seems. Fink has since October 2017 made public comments about crypto 14 times, and only three of those could be considered negative.&nbsp;



The latest of those comments was in late 2021, when he <a href="https://x.com/squawkcnbc/status/1448252591385755648">said</a> he was probably more in the “Jamie Dimon camp” when it comes to bitcoin. The JPMorgan boss has called bitcoin a fraud, a Ponzi scheme on top of other classic critiques over the years.



Moments where Fink and BlackRock have either commented on or interacted with the crypto space are plotted on the chart above.&nbsp;



Fink’s happy faces — which have indeed been consistent over the past year — represent positive headlines, and the stern faces were either negative or neutral. I don’t expect we’ll see many of the latter moving forward.



— Katherine Ross &amp; David Canellis



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Just how safe is the $51 billion sitting in bitcoin ETFs?

Telegram CEO Pavel Durov spoke out publicly for the first time since his arrest.



The CEO, who was arrested in Paris last week, claimed in a Telegram message to his channel that he was interviewed for four days after arriving in France.&nbsp;



“I was told I may be personally responsible for other people’s illegal use of Telegram, because the French authorities didn’t receive responses from Telegram,” Durov said.&nbsp;



He said that prior to the interrogation, he hadn’t received prior warning from the authorities about the inquiries, and neither had Telegram’s official point of contact in the European Union for such requests.&nbsp;



Read more: <a href="https://blockworks.co/news/telegram-founder-pavel-durov-indicted">Telegram CEO indicted in France</a>



“As a French citizen, I was a frequent guest at the French consulate in Dubai. A while ago, when asked, I personally helped them establish a hotline with Telegram to deal with the threat of terrorism in France,” Durov claimed.



Durov was later indicted in France. He’s since been ordered to stay in France, though he was released from police custody. In the Thursday message, Durov didn’t specify whether he was still in France.



The charges against Durov include complicity in selling and offering narcotic substances and distributing child pornography. The French authorities previously claimed that Durov didn’t aid investigations.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-crypto-telegram-centralization">Unpacking crypto’s Telegram situationship</a>



Per last week’s press release from French authorities,&nbsp; an official investigation was opened in early July. An earlier Politico report also claimed that the authorities have sought an arrest warrant for Durov’s brother, Nikolai Durov, as well.&nbsp;



“Sometimes we can’t agree with a country’s regulator on the right balance between privacy and security. In those cases, we are ready to leave that country. We&#8217;ve done it many times. When Russia demanded we hand over “encryption keys” to enable surveillance, we refused — and Telegram got banned in Russia,” he further explained.&nbsp;



“When Iran demanded we block channels of peaceful protesters, we refused — and Telegram got banned in Iran. We are prepared to leave markets that aren’t compatible with our principles, because we are not doing this for money. We are driven by the intention to bring good and defend the basic rights of people, particularly in places where these rights are violated,” Durov said.



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The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Pavel Durov says French investigation was ‘surprising’

The Blockchain Association is seeking more information about the Federal Reserve’s latest cease-and-desist order against United Texas Bank as part of a broader investigation into the US government’s so-called Operation Choke Point 2.0.&nbsp;&nbsp;



An examination by the central bank identified “significant deficiencies” around risk management and compliance with anti-money laundering laws, including the Bank Secrecy Act, according to a Wednesday <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/enf20240904a2.pdf">filing</a>.&nbsp;



These alleged shortcomings were related to “foreign correspondent banking and virtual currency customers,” the Federal Reserve noted.&nbsp;



United Texas Bank did not immediately return a request for comment.&nbsp;



Read more: <a href="https://blockworks.co/news/operation-choke-point-2-0">Operation Choke Point 2.0: Is the US coming for crypto?</a>



“It’s no secret there is a coordinated attempt to choke off the digital asset industry’s access to the traditional banking system,” Blockchain Association policy counsel Laura Sanders told Blockworks. “We are investigating yesterday’s troubling news, which unfortunately may be more of the same: deliberate targeting of banks that serve digital asset customers.”



The <a href="https://blockworks.co/tag/federal-reserve">Federal Reserve</a>’s order against United Texas Bank gained the attention of Custodia Bank founder Caitlin Long, who wrote in an X <a href="https://x.com/CaitlinLong_/status/1831369498643108202">post</a>: “Another crypto bank, another enforcement action.”



The Federal Reserve Board last year <a href="https://www.federalreserve.gov/newsevents/pressreleases/orders20230127a.htm">denied</a> Custodia’s application to become a member of the Federal Reserve System — noting the bank’s crypto focus “presented significant safety and soundness risks.”



“Regulators have such broad mandates on monitoring and compliance that they can basically selectively enforce against anyone they want,” former VanEck crypto strategy lead Gabor Gurbacs said in response to Long’s post. “It seems wrong.”



The Federal Reserve Bank of Philadelphia claimed the same type of <a href="https://blockworks.co/news/federal-reserve-charges-customers-bank-aml">AML-related “significant deficiencies” at Customers Bank</a> and its parent company last month. It noted Customers’ services to “digital asset” clients in the action, including enabling them to make tokenized payments over a distributed ledger technology system to other clients at the bank.



In response, Customers Bank named Allen Love as its new chief compliance and AML officer to work on “strengthening Bank Secrecy Act and Anti-Money Laundering protocols for the company’s digital asset business.”



The order against United Texas Bank came the same day the Commodity Futures Trading Commission alleged that Uniswap “illegally offered leveraged or margined retail commodity transactions in digital assets via a decentralized digital asset trading protocol.”



Uniswap is set to <a href="https://blockworks.co/news/cftc-settlement-uniswap-labs">pay $175,000 to settle the allegations</a>. <a href="https://blockworks.co/tag/cftc">CFTC</a> Commissioner Summer Mersinger said in a dissenting <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090424?utm_source=govdelivery">opinion</a> that the Uniswap case “has all the hallmarks of what we have come to know as regulation through enforcement.”&nbsp;



Read more: <a href="https://blockworks.co/news/cftc-uniswap-settlement-dissenting-opinion">CFTC Commissioners dissent on Uniswap settlement</a>



“Wielding the hammer of enforcement against these DeFi protocols may result in some short-term ‘wins,’” Mersinger added. “But in the long-term…it will only create problems.”&nbsp;



Looking elsewhere: <a href="https://blockworks.co/news/sec-charges-galois-capital-custody-failures">The SEC charged the defunct crypto hedge fund Galois Capital</a> with failing to properly safeguard client assets. Galois agreed to pay a settlement amount of $225,000 — to be distributed to the fund’s “harmed investors.”&nbsp;



Blockchain Association executive director Kristin Smith took to X to call the Galois charges more of the same from the agency: “Taxpayer-funded ‘gotcha’ lawfare aimed at driving the US crypto industry away for good.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ Another day, another attempt by the SEC to drive the crypto ecosystem offshore. The SEC claims Galois Capital failed to comply with the Custody Rule. Galois settled, but it’s worth digging into the Custody Rule and how the SEC uses it to discourage investments in crypto.…&mdash; Kristin Smith (@KMSmithDC) <a href="https://twitter.com/KMSmithDC/status/1831339085689983273?ref_src=twsrc%5Etfw">September 4, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Industry watchers are waiting to see whether <a href="https://blockworks.co/news/more-crypto-remarks-likely-coming-from-trump-harris">a new presidential administration</a> might offer regulatory clarity to crypto businesses.&nbsp;



While Donald Trump has made <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">several promises as part of a bid to be a pro-crypto president</a>, Democratic nominee Kamala Harris has so far been less vocal about the topic.&nbsp;



Read more: <a href="https://blockworks.co/news/more-crypto-remarks-likely-coming-from-trump-harris">Ex-SEC counsel: More crypto remarks likely coming from Trump, Harris</a>



“The digital asset industry has created tens of thousands of American jobs, and these lawful businesses need bank accounts to pay their employees, vendors and taxes,” Sanders said. “Blockchain Association will continue its investigation into Operation Choke Point 2.0 and bring all findings to light.”&nbsp;



A modified version of this article first appeared in the daily On the Margin newsletter. Subscribe <a href="https://blockworks.co/newsletter/onthemargin">here</a> so you don’t miss tomorrow’s edition.



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Blockchain Association ‘investigating’ Fed order against United Texas Bank

Felix Jauvin

Today, enjoy the On the Margin newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Casey Wagner and Felix Jauvin. Here’s what you’ll find in today’s edition:



<ul>
<li>What to watch for when perhaps the most important jobs report of the year drops tomorrow. </li>



<li>Trump’s mention of crypto (and a task force proposal) during a speech at the Economic Club of New York. </li>



<li>A look at the Fed’s cease-and-desist order that a crypto advocacy group is “investigating.” </li>
</ul>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">What to expect before the most important jobs report of the year</h2>



Tomorrow will bring the most important jobs report we’ve had in years, and the reason is twofold:



<ol>
<li>Last month, the unemployment rate came in at 4.3%, significantly above the consensus estimate of 4.1%. Although part of it was due to a surge in temporary layoffs that should revert quickly, it shocked the market into being concerned about a recession looming closer than most anticipated. </li>
</ol>



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcBzyMgDqpVijsal2CdwYXC5a8P1BcgKYR1MeRoG0PhbcU6FU49qayXuRRDR-mfz0WTGBGrGHN2BN24vWyVARjQuKNoBGC6uiyzS2-OaskVWbazsY6Xim8lzVLLvfQP7B9AcGE8h1EdbgsuIubelLasTh1N?key=YnnSNCu8pVmUl21H7m7vCw" alt=""/></figure>



<ol start="2">
<li>After Fed Chair Jerome Powell’s <a href="https://blockworks.co/news/cryptos-equities-slide-as-traders-unpack-powells-jackson-hole-remarks">Jackson Hole speech</a> (during which he explicitly said the Fed does not welcome any further cooling in the labor market) he has tied the Fed reaction function directly to movements in the labor market. The Fed reaction function is no longer tied to CPI prints. What this boils down to is that any further increase in the U3 unemployment rate (the key input into Fed models such as the Taylor Rule) will be matched by similar easing in Fed policy. </li>
</ol>



Heading into tomorrow, here is where expectations lie:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcGbsXaxaCdUD9u5_Tw6jcZOfT4pTL014rj9y-xjJfbUa3CY-te2Ak6_EkmpAq9t_XlYefd0M0VN6Y08Jz6HDnAqidyqImMOPGbC9vx4t0tiLI88lJI30eKVDfE01Z9FyWmCW30ttD4VWMR0WSW40IjsoN6?key=YnnSNCu8pVmUl21H7m7vCw" alt=""/></figure>



Of these data points, the unemployment rate will likely be the key driver of how much the Fed is going to cut rates in the upcoming September meeting. My simple framework for outcomes is below:



<ul>
<li>Below 4.2% print: Likely a cut of 25 basis points and potentially more hawkish signaling in terms of the pace of rate cuts moving forward.</li>



<li>4.2% print: Likely a 25 bps cut, but with more dovish signaling to a continuation of cuts.</li>



<li>4.3% and above print: Likely a 50 bps cut and heightened dovishness. </li>
</ul>



Of course, basing policy on a single datapoint goes against the dozens of times Powell has repeated his mantra of being data-driven and looking at the data in aggregate. That said, it is clear we are walking a fine line at the moment where it feels like the unemployment rate could accelerate higher, or slow down at this current level. The Fed reaction functions would be very different between those two scenarios.



As for the outcome in the job gains/losses number itself, the possibilities are more mixed and noisy. As seen in the chart below, the initial prints (dotted-green) have been coming in higher than the future revised number (solid green). This has led to a much noisier signal in terms of what is truly occurring in the labor market, given there’s been such large revisions after the fact. That said, the median estimate of 150,000 is a significant upside reverse compared to the previous month, which is a positive sign for the state of the labor market.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcpUnzRwszZWqLs4ECkkC33olLt3X3zB0kqoAF7CrLN0p1p12guldpyYAEKN7yWRv1UALuNINQUotPtsp3wRgdp8Rbl94Z6V-9DloOn-7JCAFJXt1mazTYf3g0hFSk0rrSppoFjLdIn0CgVq25emtkNQ615?key=YnnSNCu8pVmUl21H7m7vCw" alt=""/></figure>



Finally, one data point we can look at today as a hint for tomorrow’s number is the ADP employment report.



 <img loading="lazy" decoding="async" width="624" height="293" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc12pRRG3OKzBDZFwftYJSO6bIUZup4eRGNt5A1pDabPQgwsSE2zeSh5kVI7M_65cSX8KmeuQrj-fkosIgbyWlyGva4U-jBlJBaQgiYlHbqQ3ZlczQpxjMobyMULqdKssDDDArJqRqDCNZtM7c_ECNWcys?key=YnnSNCu8pVmUl21H7m7vCw">



Although the signal is mixed, such a downside surprise in the outcome does spell some concern for a miss on the NFP print as we head into it tomorrow. The one thing we do know? Tomorrow’s print will likely set the trend for markets for the rest of the fall.



— Felix Jauvin



<h3 class="wp-block-heading">$472 million&nbsp;</h3>



The trading volume amount that prediction market platform Polymarket recorded in August. It’s an $85.8 million increase <a href="https://blockworks.co/news/polymarket-july-all-time-high-trading-volumes">from July</a>, Polymarket said, and marks the platform’s highest-volume month ever.&nbsp;



Despite not being accessible by those in the US, the biggest bets on Polymarket remain linked to the US <a href="https://blockworks.co/news/polymarket-web3-predictions-us-presidential-elections">presidential election</a>. Users have wagered $800.7 million on who will win in November. Donald Trump currently leads in Polymarket polls, 53% to 46%.&nbsp;



<h2 class="wp-block-heading">The Twitter/task force overlap&nbsp;</h2>



Donald Trump addressed members at the Economic Club of New York Thursday, where he once again promised to make the US the “world capital for crypto and bitcoin.”&nbsp;



That one line was the extent of Trump’s crypto-related comments this afternoon. He spoke for an hour, discussing plans to decrease dependence on foreign energy and lower the national debt, among other things.&nbsp;



Most notably though, the Republican presidential nominee said that — at the direction of Tesla CEO Elon Musk — he will create a new federal task force.&nbsp;



“I will create a government efficiency commission tasked with conducting a complete financial and performance audit of the entire federal government and making recommendations for drastic reforms,” Trump said. “Elon [Musk], because he&#8217;s not very busy, has agreed to head that task force.”



I’m not sure how this would impact Tesla (or Musk’s responsibilities running his various other businesses), but TSLA shares rose about 1% while Trump was speaking.



With regards to World Liberty Financial, we don’t know for sure if there will be a token, although there are <a href="https://www.coindesk.com/business/2024/09/04/in-trump-backed-crypto-project-insiders-are-poised-for-unusually-big-paydays/?_gl=1*1mdpbht*_up*MQ..*_ga*MTU2MTc4ODE3OC4xNzI1NTU2MzAx*_ga_VM3STRYVN8*MTcyNTU1NjMwMC4xLjEuMTcyNTU1NjMwMy4wLjAuNDAwOTM1MTI1">reports</a> that a token is in the works. To be clear, we don’t really know what the project is at all.&nbsp;



According to its latest <a href="https://x.com/worldlibertyfi">posts</a> on X, World Liberty will be built on Aave, and the platform’s goal is to maintain US dollar dominance. There seems to be some connection with stablecoins, although exactly what this is remains up in the air.&nbsp;



Should there be a World Liberty Financial token, or even a stablecoin, the SEC is going to be interested. They probably already are. Trump has said he would remove SEC Chair Gary Gensler “on day one” should he be re-elected. But even if Gensler is replaced with another commissioner, that isn’t protection against an enforcement action.&nbsp;



— Casey Wagner



<h2 class="wp-block-heading">‘Another crypto bank, another enforcement action’&nbsp;</h2>



As the so-called “regulation by enforcement” trend against the crypto industry appears to continue, an advocacy group is investigating one of the latest actions.



The Fed on Wednesday disclosed a cease-and-desist order against crypto-friendly bank United Texas Bank.&nbsp;&nbsp;



An examination by the central bank identified “significant deficiencies” around risk management and compliance with anti-money laundering (AML) laws, including the Bank Secrecy Act, according to a Wednesday <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/enf20240904a2.pdf">filing</a>.&nbsp;



These alleged shortcomings were related to “foreign correspondent banking and virtual currency customers,” the Fed noted.&nbsp;



United Texas Bank did not immediately return a request for comment.&nbsp;



“It’s no secret there is a coordinated attempt to choke off the digital asset industry’s access to the traditional banking system,” Blockchain Association policy counsel Laura Sanders told Blockworks. “We are investigating yesterday’s troubling news, which unfortunately may be more of the same: deliberate targeting of banks that serve digital asset customers.”&nbsp;



Custodia Bank founder Caitlin Long put it a bit more succinctly in an all-caps X <a href="https://x.com/CaitlinLong_/status/1831369498643108202">post</a>: “ANOTHER CRYPTO BANK, ANOTHER ENFORCEMENT ACTION.”



(An aside: The Federal Reserve Board last year <a href="https://www.federalreserve.gov/newsevents/pressreleases/orders20230127a.htm">denied</a> Custodia’s application to become a member of the Federal Reserve System — noting the bank’s crypto focus “presented significant safety and soundness risks.”)



“Regulators have such broad mandates on monitoring and compliance that they can basically selectively enforce against anyone they want,” former VanEck crypto strategy lead Gabor Gurbacs said on X in response to Long’s post. “It seems wrong.”



Having déjà vu? Us too. The Federal Reserve Bank of Philadelphia identified the same type of AML-related “<a href="https://blockworks.co/news/federal-reserve-charges-customers-bank-aml">significant deficiencies</a>” at Customers Bank and its parent company last month.



It mentioned Customers Bank’s services to “digital asset” clients in the action, including their capacity to make tokenized payments over a distributed ledger technology system.



A few days after the Aug. 5 “agreement,” Customers named a chief compliance and AML officer to work on “strengthening Bank Secrecy Act and Anti-Money Laundering protocols for the company’s digital asset business.”



Wednesday’s cease-and-desist order came the same day Uniswap agreed to pay $175,000 to <a href="https://blockworks.co/news/cftc-settlement-uniswap-labs">settle claims</a> made by the CFTC.&nbsp;



In a <a href="https://blockworks.co/news/cftc-uniswap-settlement-dissenting-opinion">dissenting opinion</a>, CFTC Commissioner Summer Mersinger said the Uniswap case “has all the hallmarks of what we have come to know as regulation through enforcement.”&nbsp;



Industry players are waiting to see if a <a href="https://blockworks.co/news/more-crypto-remarks-likely-coming-from-trump-harris">new presidential administration</a> might offer regulatory clarity to crypto businesses. Until then, their options appear limited.



— Ben Strack&nbsp;



<h2 class="wp-block-heading">Bulletin Board</h2>



<ul>
<li>A new <a href="https://news.northeastern.edu/2024/09/03/crypto-voters-2024-election/">report</a> and poll from Northeastern University shows that political experts have differing opinions on how important the so-called “crypto voter” will be come November. While some say crypto-focused individuals are more likely to donate than vote, others say the bloc is a diverse group that candidates cannot afford to ignore this election. </li>



<li>Mastercard has launched a new euro-dominated, non-custodial crypto debit card through a partnership with infrastructure provider Mercuryo. The announcement comes after Mastercard tested a similar product with MetaMask last month. </li>



<li>The entire On the Margin team will be at Permissionless in Salt Lake City next month! Get your <a href="https://blockworks.co/event/permissionless-iii">tickets</a> now. Prices are only going up, and we want to meet you.</li>
</ul>



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Behind the most important jobs report of the year

Today, enjoy the Lightspeed newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to the Lightspeed newsletter</a>.



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Howdy!



Happy first day of the NFL season. It’s a little embarrassing how much I’ve looked forward to the world’s best sports league returning.&nbsp;



My Super Bowl pick for this season is the Detroit Lions, who are giving Michiganders a reason to hope again after decades of disappointment. Anyways:



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">Small Solana validators grapple with declining revenue</h2>



Solana is churning up less in revenue and fees as the network cools off from a hot summer. One group in particular is feeling the pinch — small network validators.



These smaller validators who help run the Solana network’s consensus mechanism are often propped up by the Solana Foundation’s delegation program, which covers some costs and <a href="https://blockworks.co/news/lightspeed-newsletter-solana-sandwich-attacks">stakes SOL with smaller validators</a> to increase the number of validators who can exist. 72% of Solana validators participate in the delegation program, according to a <a href="https://www.helius.dev/blog/solana-foundation-delegation-program-sfdp">report</a> from Solana infrastructure outfit Helius.&nbsp;



It’s not an easy living for small validators. As Helius noted, many validator costs are fixed, while their revenues scale with the amount of stake they control as well as the price of SOL.&nbsp;



Now, these thin margins have grown even thinner. 95% of Solana validator revenue currently comes from SOL issuance, according to a Dune <a href="https://dune.com/21co/solana-key-metrics">dashboard</a>, and SOL’s price is down 9% over the past month. Fees and MEV make up the rest of validators’ revenue, and the total amount of fees and MEV running through Solana has fallen from levels seen in recent months, according to Blockworks Research’s “total economic value” <a href="https://app.blockworksresearch.com/analytics/sol?dashboard=sol-financial&amp;interval=weekly">metric</a>.



Making matters worse, the Solana Foundation delegation program recently lowered the maximum commission participants can charge from 7% to 5% — and also set a 10% commission cap on Jito MEV. Before, validators could collect 100% of Jito MEV if they so desired.



In simple terms, this means that in order to use the foundation’s delegation program — a must for smaller validators looking to break even — validators cannot charge stakers as much for their services.&nbsp;



One smaller Solana validator <a href="https://discord.com/channels/428295358100013066/849749936916267029/1275831166582395017">estimated</a> that after these changes, validators who aren’t having their voting costs covered by the Foundation would need to control roughly 65,000 SOL to break even (up from around 40,000 before). That’s a climb from $5.2 million to $8.45 million at current prices. For validators having their voting fees covered, which are the costs validators pay to vote on transactions and agree to add them to the blockchain, the break even price climbed from 4,000 SOL to 6,000 SOL, by the validator’s estimate.&nbsp;



With Solana’s economic value slackening and the delegation program being less lucrative than it once was, small validators need to attract staked SOL from other sources — like marketing themselves while passing along better yield or participating in large stake pools.&nbsp;



Marinade is one of these big stake pools, but it now makes validators bid for allocations from its supply via its “stake auction marketplace.” This has raised Marinade’s yield <a href="https://blockworks.co/news/lightspeed-newsletter-stake-auction-marketplace">as part of its “v2” rebrand</a>, but it also doesn’t do small validators any favors. Some have <a href="https://hanabi.so/marinade-stake-selling">accused</a> Marinade’s new marketplace of rewarding malicious validators who are <a href="https://blockworks.co/news/lightspeed-newsletter-sandwich-attacks">disqualified from the foundation’s delegation program</a>. Marinade core contributor Michael Repetny did not immediately return my request for comment



All good things must come to an end, and it appears that a relatively profitable few months for small Solana validators may not be sustained. The Solana Foundation delegation program clearly does help decentralize Solana’s set of validators, but a system that relies so heavily on grants can’t last forever.&nbsp;



By lowering the commissions small validators can charge, the Solana Foundation is arguably doing the equivalent of kicking an unlaunched adult child out of the family basement. The real world is scary — it’s hard attracting your own stake, and Marinade’s stake pool is difficult to join — but you can’t live off mom and dad’s cooking forever.



— Jack Kubinec



<h2 class="wp-block-heading">Zero In&nbsp;</h2>



This Blockworks Research chart contextualizes the decline of transaction fees and Jito tips:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd3yVbR4kvHlIdMDJnj0NYb4KTW4HCz9eo95ilvNuVIj82d07uYonN7Ex0qshqOj2WKiqOswitYZGQYbbGsfNcY7JE_HMe_RiVsU3cPQ68PRsGaSfQQ-Or75Nk7k0l24jabkH3_dfc2tFiTwLuhT10XV0gE?key=CJ_umHRpSv-QqgGq4BKnzQ" alt=""/></figure>



The price of SOL is falling, and as you can see, so are the tips and fees validators can collect. The past two weeks have seen SOL’s total economic value fall to a level we haven’t seen since February.



If you see a Solana validator, buy them a beer. It’s tough out there.&nbsp;



— Jack Kubinec



<h2 class="wp-block-heading">The Pulse</h2>



Binance has <a href="https://x.com/whosknave/status/1830982033579077922">announced</a> its latest Solana offering: the BNSOL token. The move is part of a broader liquid staking token (LST) trend, with Bybit, Bitget and others also rolling out their own versions of the concept. BNSOL is reportedly <a href="https://x.com/DefiSolar/status/1829135164326174932">powered</a> by Sanctum, which is known for supporting Solana’s LST infrastructure​.



Staking on Solana (and other proof-of-stake blockchains) usually requires users to lock up their tokens for an agreed-period, limiting their ability to use them elsewhere. Not so with <a href="https://blockworks.co/podcast/lightspeed/e69e9286-0cb9-11ef-a943-d3c8b7693082">LSTs</a>. These assets are more flexible, allowing users to trade, lend and utilize their staked tokens in DeFi applications while still earning staking rewards​.



On X, some appeared bullish on the potential for growth, while others remain skeptical of Binance’s role in the decentralized space. @DefiSolar was <a href="https://x.com/DefiSolar/status/1829135164326174932">optimistic</a>, pointing out the scale of Binance’s SOL holdings: “Sanctum TVL is about to skyrocket knowing Binance holds around $3b worth of SOL. $CLOUD seems to be the play…”



@dudify_xyz <a href="https://x.com/dudify_xyz/status/1829167863409803438">noted</a>, “bnSOL restaking and delegation on @solayer_labs will increase TVL. It’s nice to see a win-win situation for two SOL ecosystem projects.”



@DLFinCrypto1 took a swipe at Binance’s centralized control, <a href="https://x.com/DLFinCrypto1/status/1829167700016542028">warning</a>: “Ah, Binance: where ‘partnership’ often means ‘we control it all.’ $CLOUD might be the play, but don&#8217;t forget the house always wins. Decentralization, anyone?”



— Jeffrey Albus



<h2 class="wp-block-heading">One Good DM</h2>



A message from Nate, who anonymously operates the Aurora validator:


<div class="wp-block-image">
<figure class="aligncenter"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeCFZ6JhInY_dVsASm5sx9UroT09o8vhSoJyoRUdDbuQwhmaxsAaww0wpXgFAvWE36CCEDbrC3aq7ElBzl6DW-NWHNzx7v-gIrL8L7hKJQRP6adWumcJoaqBkSpljbQewpjIPei67wjVd-RUYa41tXE3eyW?key=CJ_umHRpSv-QqgGq4BKnzQ" alt=""/></figure></div>


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The financial woes of small Solana validators

Former President Donald Trump on Thursday doubled down on his promise to make “America the world capital for crypto and bitcoin.”&nbsp;



“I&#8217;m pledging today that in my second term, we will eliminate a minimum of 10 old regulations for every one new regulation,” Trump said during an address at the Economic Club of New York Thursday afternoon.&nbsp;



“We&#8217;ll be able to do that quite easily, actually, and instead of attacking industries of the future, we will embrace them.”&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-donald-trump-nft-royalties-memecoin-taxes">Memecoin taxes and NFT royalties are paying off for Trump</a>



The Republican presidential nominee added that he intends to create a new task force dedicated to making federal agencies more “efficient” should he win in November. Tesla CEO Elon Musk, who publicly endorsed Trump in July, will be the leader of this effort, <a href="https://blockworks.co/tag/donald-trump">Trump</a> added. 



“I will create a government efficiency commission tasked with conducting a complete financial and performance audit of the entire federal government and making recommendations for drastic reforms,” Trump said. “Elon [Musk], because he&#8217;s not very busy, has agreed to head that task force.”



The remarks come as more details emerge about the World Liberty Financial project, which Trump and his sons have <a href="https://blockworks.co/news/donald-trump-touts-new-family-defi-project">promoted in recent weeks</a>. The DeFi project will be built on Aave, officials implied in a <a href="https://x.com/worldlibertyfi/status/1831348466733191638">post</a> on X, and will involve stablecoins.&nbsp;



“Our mission is crystal clear: Make crypto and America great by driving the mass adoption of stablecoins and decentralized finance,” World Liberty posted on X Wednesday.&nbsp;



18-year-old Barron Trump, who recently enrolled at New York University, is <a href="https://www.coindesk.com/business/2024/09/03/inside-the-trump-crypto-project-linked-to-a-2m-defi-hack-and-former-pick-up-artist/">reportedly</a> the “DeFi visionary” behind the project.&nbsp;



Trump last month <a href="https://x.com/worldlibertyfi/status/1829143649315361086">posted</a> a promotional video on X and tagged Liberty Financial, promising to make the US the “crypto capital of the planet.” The former president recently returned to X after being banned from Twitter in January 2021.&nbsp;



The supposed endorsement is the latest sign that Trump is hoping to win over the crypto crowd this election.&nbsp;



Trump appeared at the Bitcoin 2024 conference in July. He told the Nashville, TN crowd that should he win in November, he will fire Securities and Exchange Commission Chair Gary Gensler <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">“on day one.</a>”&nbsp;



His campaign began <a href="https://blockworks.co/news/donald-trump-accepts-crypto-donations-2024-election">accepting crypto donations in May</a>. As of the end of July, two Trump PACs have brought in a combined $4 million in crypto donations, which were converted upon receipt into the stablecoin USDC, Federal Election Commission filings show.



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Trump promises to have Elon Musk lead government efficiency task force 

The US government’s regulation of DeFi is reaching a critical point, with Uniswap as its next major battleground.



Our industry as a whole must defend Uniswap’s role in the future of finance, or risk losing a foundational technology that allows decentralized ecosystems to thrive.



The New York outfit behind the popular DEX <a href="https://blockworks.co/news/cftc-settlement-uniswap-labs">just agreed to pay $175,000</a> to the CFTC for facilitating retail trade of a suite of leveraged index tokens, which, going by the tickers in the complaint, were built by Index Coop.



Part of the <a href="https://blockworks.co/tag/cftc">CFTC</a> settlement dictates that Uniswap Labs must cease offering those kinds of tokens to the general public.&nbsp;



Pairs for those <a href="https://app.uniswap.org/explore/pools/ethereum/0x151ccb92bc1ed5c6d0f9adb5cec4763ceb66ac7f">tokens</a> are no longer available through Uniswap Labs&#8217; own front-end for the DEX. The website says “Not available. You can’t trade this token using the Uniswap App.”



Uniswap Labs can technically block as many tokens as it likes on its web app for US residents, but the tokens will still be tradable on the technology itself underneath, either through a different web app or by interacting with the smart contracts directly with code.



Watch for that particular nuance to be debated ad nauseam should the Securities and Exchange Commission <a href="https://blockworks.co/news/uniswap-responds-to-sec-wells-notice">follow through with its Wells notice</a> and actually sue Uniswap Labs.&nbsp;



The firm itself is a bedrock of DeFi, on par with Maker (which has <a href="https://blockworks.co/news/maker-rebrands-as-sky-dai-will-be-changed-to-usds">recently rebranded to Sky</a>). Uniswap volumes have stayed relatively consistent over the years despite waves of new trading platforms looking to eat its lunch. 



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfTLrurS1x4l0is8o0KXi8419rKO8UsJ9PEZb2ZMs8Qw3uMpXm3_2ZZm8s0zOnrRB-zqUoQLOVl-y_7vGvT_w1kLQbkvsd1-q_G1SOTlHsKQIYF0pYSXFuHSCOKztSVnp5kOsE01xZkICuXlJspFtkyG3E?key=rMfCEu7CEsvITbc7fOYfUQ" alt=""/></figure>



With this in mind, if and when Uniswap Labs goes to court, they’d be doing so on behalf of all of DeFi. That’s a different battle than, say, the fight to prove that bitcoin and ether are “money,” or at the very least, <a href="https://blockworks.co/tag/commodities">commodities</a>.



Read more: <a href="https://blockworks.co/news/cftc-uniswap-settlement-dissenting-opinion">CFTC Commissioners dissent on Uniswap settlement</a>



Money is just one of many apps for blockchains. But so far, it’s clearly the most popular.



Bitcoin is perhaps the purest expression of the money app in the blockchain context. And the bitcoin war has been largely fought and won — the CFTC has <a href="https://blockworks.co/news/bitcoin-ether-to-be-regulated-as-commodities-by-cftc-per-new-senate-bill">long considered it a commodity</a> and the SEC never stood a chance of finding Satoshi Nakamoto in any case.&nbsp;



The ETF issuers and other lobbyists, in my view, planted the victory flag in the war over crypto’s potential moneyness.



ETH gained its own commodity label in light of bitcoin winning that fight. And while a commodity classification doesn’t automatically make either bitcoin or ether “money,” it does put them on par with more ancient currencies with intrinsic value, such as silver and gold. Which is just as good.



Running political defense of bitcoin these days isn’t so much about the right to transact digital money peer-to-peer as it is about the <a href="https://unchainedcrypto.com/right-to-mine-laws-bitcoin">right</a> to mine bitcoin, especially in areas that haven’t been so receptive to the industry.



Just as it is possible to separate money (the app) from the blockchain, it’s also possible to separate Uniswap, the front-end app, and <a href="https://blockworks.co/tag/uniswap">Uniswap</a>, the technology — the bundle of smart contracts that make its trades, listings and liquidity provision possible.



At least, that’s what Uniswap Labs will most likely have to prove again and again.



Vitalik (and other smart city proponents) might <a href="https://www.dlnews.com/articles/defi/ethereum-cofounder-vitalik-buterin-on-defi-flaws/">wish</a> for our minds to immediately go to other use cases when we think of blockchains. Tokenized digital identities, wedding registries and driver’s licenses, not memecoin trading and yield farms.



They might have a point. There could very well be more to life than recreating traditional finance on blockchain rails.



One day, the world may run on smart contracts and <a href="https://x.com/brian_armstrong/status/1829623778726592804">AI-agents</a>. Until then, DeFi is arguably crypto’s most vibrant user base — and right now, protecting it is critical.



A modified version of this article first appeared in the daily Empire newsletter. Subscribe <a href="https://blockworks.co/newsletter/empire">here</a> so you don’t miss tomorrow’s edition.



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Uniswap is the next great frontier in the US war on crypto

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<h2 class="wp-block-heading">A shot across the bow&nbsp;</h2>



The CFTC announced an order and a settlement of $175,000 against Uniswap Labs yesterday.&nbsp;



The regulator claimed that the DeFi company offered margin products illegally. Basically, third parties could offer leveraged or margined returns against bitcoin and ether through tokens. Uniswap, it’s important to note, didn’t offer such tokens themselves.&nbsp;



Since Uniswap wasn’t registered as a market maker, it couldn’t act as a contract market, the CFTC added.&nbsp;



It’s not necessarily the first time that the CFTC has brought this type of order against DeFi firms. Last September — nearly a year to the date — it announced a <a href="https://www.cftc.gov/PressRoom/PressReleases/8774-23">similar settlement</a> with ZeroEx, though that firm paid a slightly heftier sum of $200,000.&nbsp;



“In both cases, an unaffiliated entity issued a token that staff claimed could be used to obtain leveraged exposure to the price of bitcoin and ether. In fact, Commissioner Mersinger referred to the tokens at issue in both matters as <a href="https://blockworks.co/news/cftc-uniswap-settlement-dissenting-opinion">‘the same tokens’ in her dissent</a>,” Reed Smith partner Jonathan Ammons said. He’s part of the firms on chain team, specializing in crypto matters.



“An important difference between the two matters, though, is that in ZeroEx, people transacted on a peer-to-peer basis whereas Uniswap’s participants were trading through liquidity pools and automated market maker algorithms.”



The Uniswap case breaks “new ground,” he added, and perhaps shows a “shot across the bow” on the CFTC’s part.&nbsp;



Uniswap did block trading to the four leveraged tokens — which <a href="https://docs.indexcoop.com/index-coop-community-handbook/products/legacy-products/flexible-leverage-index-polygon-fli-ps/btc-2x-flexible-leverage-index-btc2x-fli-p">seem to be tied to</a> Index Coop, though the CFTC didn’t name the firm — through its app after the ZeroEx order, which shows that it attempted to comply, though the CFTC still, clearly, didn’t think that was enough (perhaps that explains the difference between the settlements, and why Uniswap’s was so low to begin with).



The intent here, Ammons added, could be to “send a message to the rest of the DeFi community that the CFTC considers this type of activity to be unlawful.” And perhaps it’s fair to say that the CFTC planned to reiterate its point, given how big of a player Uniswap is in the space.&nbsp;



If we’re judging by market reaction, folks didn’t seem too stressed about the announcement. UNI initially jumped 6%, but has since flattened a bit. Still up 5% on the week.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeqFYCBkTVksXvoa32TM2yFlwZwjJpyTEljQcuE9gUN8hEDcPoZpMi-xFt35FCZCnbK9005Ns4TAwAWMx71QzZBmZmX67dgq6YXySHqxcCdxUZkpFgCh6FPNGKPAMOlRJsGP4cOCN4r502tpzybwpCwGnZp?key=_IkD7cM0buXRjqrjwx2PVw" alt=""/><figcaption class="wp-element-caption">Source: Coinbase&nbsp;</figcaption></figure>



But I didn’t want to just talk about the CFTC settlement, though it does show that the CFTC is cracking down on certain DeFi offerings. In my discussion with Ammons, I also picked his brain on the potential Uniswap enforcement action that still lingers just beyond the horizon.&nbsp;



Mind you, the SEC could opt to not bring any official action against Uniswap after sending over a Wells notice, but the <a href="https://www.axios.com/2024/08/12/sec-questions-vcs-uniswap">Axios report</a> last month that the regulator is questioning venture capitalists about the DeFi firm could perhaps be seen as the SEC not dropping its hunt. (I should add that Andreessen Horowitz didn’t respond to my inquiries on the report.)



“I think that it&#8217;s clear that [SEC] made the claim that the UNI token and the LP tokens are securities or investment contracts, and in that way, the SEC is is kind of treading the water that they have done before, just with a with a DeFi protocol, as opposed to centralized,” Ammons said.&nbsp;



“Uniswap came out with some very good and intelligent arguments to the contrary not only in terms of the Howey Test analysis but also just the secondary market transaction issues,” he added. “The SEC has not had a great track record of succeeding in litigation on the secondary market transactions. So it will be interesting to see where it goes.”



Clearly, the CFTC and the SEC are after two different things, but the SEC could angle its case towards the fact that Uniswap made the UNI and LP tokens, whereas — as we just said — the contracts in the CFTC order weren’t Uniswap’s own.&nbsp;



It wouldn’t surprise Ammons if the CFTC and SEC were sharing info on their probes into Uniswap, he added. Just like it wouldn’t surprise him if the New York Attorney General subpoenaed Union Square Ventures and Andreessen Horowitz (as <a href="https://www.coindesk.com/policy/2024/09/04/vc-giants-a16z-union-square-ventures-get-subpoenaed-by-new-york-about-uniswap-sources/?_gl=1*bs4c1c*_up*MQ..*_ga*MTI5Njg1MjM1LjE3MjU1MzQ3MTk.*_ga_VM3STRYVN8*MTcyNTUzNDcxOS4xLjEuMTcyNTUzNjQxMi4wLjAuMzM2MTkwODQ3">CoinDesk reported</a> yesterday) because of shared information between the SEC and the AG’s office.&nbsp;



He added that the SEC could very well be looking into whether or not VCs had an expectation of profit when purchasing UNI or LP tokens, though I can’t reiterate enough that we don’t know what the SEC is really interested in at this point. But that evidence could “bolster a Howey analysis of those tokens.”



One thing’s for sure, if the SEC is trying to “bring more transparency to these protocols and essentially make them perform KYC and AML and comply with all of the other regulations that apply to securities exchanges, then it really could have a pretty drastic impact on the US market because that type of anonymity is an important component for DeFi protocols,” and it would essentially go poof if a case went in the SEC’s favor.



Just another day in cryptoland.



— Katherine Ross



<h2 class="wp-block-heading">Data Center</h2>



<ul>
<li>BTC is flat and ETH is down 1% on the daily, with both trending sideways over the past month. (BTC: $56,450; ETH: $2,380).</li>



<li>Tron’s <a href="https://defillama.com/chains">TVL</a> is up 10% over the past month to $7.88 billion, about two-thirds bigger than Solana’s.</li>



<li>There are 1,078 <a href="https://www.validatorqueue.com/">validators</a> waiting in the Ethereum queue with only one in line to exit.</li>



<li>Uniswap processed $60.84 billion in volume in August, up from $59.03 billion in July.</li>



<li>About 13.3% of DEX volumes on EVM chains currently flow through the Uniswap web app, per this Dune <a href="https://dune.com/hagaetc/dex-metrics">dashboard</a>.</li>
</ul>



<h2 class="wp-block-heading">Defend DeFi</h2>



Money is just one of many apps for blockchains. But so far, it’s clearly the most popular.



Bitcoin is perhaps the purest expression of the money app in the blockchain context. And the Bitcoin war has been largely fought and won — the CFTC has long considered it a commodity and the SEC never stood a chance of finding Satoshi Nakamoto in any case.&nbsp;



Running political defense of bitcoin these days isn’t so much about the right to transact digital money peer-to-peer as it is about the right to mine bitcoin, especially in areas that haven’t been so receptive to the industry.



ETH gained its own commodity classification in light of bitcoin winning that fight. And while a commodity classification doesn’t automatically make either bitcoin or ether “money,” it does put them on par with more ancient currencies with intrinsic value, like silver and gold. Which is just as good.



The ETF issuers and other lobbyists, in my view, planted the victory flag in the war over crypto’s potential moneyness. As it puts out one fire with the CFTC, Uniswap Labs is all but headed into court with the SEC to defend crypto through the DeFi lens.&nbsp;



The firm itself is a bedrock of DeFi, on par with Maker, with its volume staying relatively consistent over the years despite waves of new trading platforms looking to eat its lunch.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfmVBli1n0sxH1jZkY7gtI6nA-KCghd1UzTWo4sF0jHYbT-Sb80z6h44EYMpQAv9j-K5MKkEoQpjUaGXs-W5jHGUFYu296EMx-iZUzp07RuXM_B4vzFnV2LnmYP2QPwAxWvKLbDpSCC1GcpV9LSzIpVUxCf?key=_IkD7cM0buXRjqrjwx2PVw" alt=""/></figure>



But just like how it’s possible to separate money, the app, from the blockchain, it’s also possible to separate Uniswap the front-end app and Uniswap the technology — the bundle of smart contracts that make its trades, listings and liquidity provision possible.



At least, that’s what Uniswap Labs will most likely have to prove again and again. It can block as many tokens as it likes on its web app for US residents, but the tokens will still be tradable on the technology itself, underneath, either through a different web app or by interacting with the smart contracts directly with code.



Vitalik (and other smart city proponents) might <a href="https://www.dlnews.com/articles/defi/ethereum-cofounder-vitalik-buterin-on-defi-flaws/">wish</a> for our minds to immediately go to other use cases when we think of blockchains. Tokenized digital identities, wedding registries and driver’s licenses — not memecoin trading and yield farms.



They might have a point. There could very well be more to life than recreating traditional finance on blockchain rails.



But until the whole world runs on smart contracts, and we all have our own personal crypto-spending AI agents assisting us around town, DeFi is arguably crypto’s most vibrant user base — and its most critical to defend right now.



— David Canellis



<h2 class="wp-block-heading">The Works</h2>



<ul>
<li>World Liberty Financial, the Trump family project, is focused on US dollar-backed stablecoins, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-09-04/trump-family-crypto-project-vows-to-ensure-dollar-s-dominance">reported</a>.</li>



<li>A PAC for Kamala Harris is accepting crypto donations, but not the campaign itself, CoinDesk <a href="https://www.coindesk.com/policy/2024/09/04/kamala-harris-is-not-directly-accepting-crypto-donations-coinbase-official-clarifies/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">reported</a>.</li>



<li>Robinhood settled with California’s DOJ for <a href="https://www.theblock.co/post/314828/robinhood-to-settle-3-9-million-penalty-with-california-doj-over-past-crypto-withdrawal-restrictions?utm_source=rss&amp;utm_medium=rss">$3.9 million</a> after allegations that the company didn’t let users withdraw crypto.</li>



<li>A <a href="https://cointelegraph.com/news/ripple-sec-stay-court-judgment-appeal">letter</a> to the court asking to stay its $125 million monetary penalty could signal that Ripple plans to appeal in the SEC’s case.</li>



<li>Siemens issued a $330 million digital bond on a private blockchain with German banks, including Deutsche Bank, CoinDesk <a href="https://www.coindesk.com/business/2024/09/04/siemens-issues-330m-digital-bond-on-private-blockchain-with-major-german-banks-including-deutsche-bank/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">reported</a>.</li>
</ul>



<h2 class="wp-block-heading">The Riff</h2>



Q: What’s the allure of crypto cities?



There are crypto hubs and then there’s the extreme end of the crypto city prophecy, in which our entire reality is on the blockchain in some way.



I’d say the popularity of that future has mostly to do with the <a href="https://www.coindesk.com/opinion/2022/09/20/what-are-solarpunk-and-lunarpunk-anyway/">solarpunk</a> aesthetic.



Cyberpunk does sound a lot like cypherpunk — which makes something like Blade Runner or Cyberpunk 2077 the most obvious place to jump to when thinking about what a completely crypto-enabled future would look like.



And then there’s the ominous Bitcoin Citadels floating in the sky, where maxis thrive in the “eternal enslavement of humanity to a tiny elite,” as former crypto columnist Ben Munster once <a href="https://decrypt.co/84125/the-bizarre-rise-of-the-bitcoin-citadel">put</a> it. Too dark for me.



Solarpunk is egalitarian, prosperous and harmonious with nature. The pursuit of public goods, all the time. What better reason to move to a crypto city, once it’s built, that is.



— David Canellis



All the cool kids have them, so why not crypto?



The TradFi bros have New York (and the brand Patagonia, so maybe crypto should eye a clothing line too). Tech had Silicon Valley (we’re not opening that can of worms, so let’s leave it at that) and crypto has… nothing. Yet.&nbsp;



I’m not a tech bro, so I can only pull on my Wall Street beginnings and say that having a hub in a city makes connections and centralization easy.&nbsp;



Crypto’s a different beast, and wants different things, given that it’s not tied to a very historic location. There’s no doubt that having a spot where you can interact with folks you wouldn’t see outside of conferences makes it much easier to collaborate and build crypto together.&nbsp;



Then there are things like <a href="https://blockworks.co/news/these-5-crypto-friendly-us-states-show-initiative-on-tax-laws">tax breaks and other benefits</a> and, let’s be honest, those are pretty sweet too.



— Katherine Ross



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From money to DeFi: A shift in the war for crypto

Macauley Peterson

AltLayer has introduced Wizard, a platform designed to simplify the deployment and management of Actively Validated Services (AVS) for developers working within the EigenLayer ecosystem.



The platform, which enters a public alpha phase Thursday, reduces the time to deploy AVS from months to minutes, according to development company Alt Research.



Wizard is a developer dashboard that aims to turn a complex, time-consuming process — deploying decentralized services — into something nearly instantaneous, much like what cloud computing did for server management.



Read more: <a href="https://blockworks.co/news/investors-betting-on-eigenlayer">Funding Wrap: Investors place more EigenLayer bets</a>



It’s a level of automation that has been missing in the AVS space, helping developers focus more on innovation than infrastructure, according to Chief Operating Officer Amrit Kumar.&nbsp;



“You could basically have an end-to-end experience where you start with the rollup made through the dashboard as well, and then you come to this AVS part,” Kumar told Blockworks.



For example, a gaming focused rollup may need a Verifiable Random Function (VRF) service — a service that gives you randomness. They could simply select it in Wizard and have it applied to their rollup.



“You would say, ‘I want to have this VRF deployed for my game,’ and they could have them connected all through one single platform,” Kumar said.



An AVS consists of a decentralized network of operators that provide services such as sequencing, asset bridging and faster finality. Ethereum’s finality is considered to be two epochs, or about 13 minutes.



Supported by <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a>&#8216;s restaking mechanism, AVS borrows security from Ethereum, ensuring reliability and safety.



Founded in 2021, AltLayer’s primary product is rollups as a service (RaaS), including restaking, to allow <a href="https://blockworks.co/tag/rollups">rollups</a> to leverage Ethereum&#8217;s economic security. Competitors like Caldera and Conduit also provide <a href="https://blockworks.co/podcast/0xresearch/69add246-bff2-11ee-9d68-c3cb8457ce13">RaaS solutions</a> focused on simplifying the deployment of application-specific rollups.&nbsp;



While AltLayer emphasizes security through restaking, Caldera and Conduit offer customizable rollup frameworks that prioritize performance optimization and seamless integration with Ethereum and other layer-2 solutions.



Read more: <a href="https://blockworks.co/newsletter/research/issue/post_5f59f5cf-c86e-45e6-9f4e-9417042ca549">AltLayer brings MACH to Arbitrum</a>



Wizard simplifies the process by offering templates for common AVS configurations, reducing the complexity of setting up and managing these services. It’s part of the overall aim to help scale decentralized applications by automating rollup deployment and management.



“This AVS wizard basically allows people to deploy a different kind of AVS and experiment with them,” Kumar said. “And some of them could be useful for our rollups and others could be useful for us in the EigenLayer ecosystem more generally.”



He likens the evolution of AVS to the development of rollups — with some large general purpose ones like Arbitrum One and OP Mainnet, and many smaller application-specific rollups.



Like a forest of mushrooms after a heavy rain — popping up everywhere — from the massive optimistic “portobellos” to the quirky Web3 gaming “shiitakes.” They may look different, but they all thrive on the same fertile ground of Ethereum’s security — <a href="https://blockworks.co/news/layer-2-secured-by-ethereum">at least in theory</a>.



“You will always have a general purpose AVS, and then you could have a customized version of that designed and deployed for a certain specific use case application,” Kumar said.



These niche deployments may have limited operator sets run by a project’s stakeholders, he noted — which might be one way to manage slashing risk.



Read more: <a href="https://blockworks.co/news/eigenlayer-at-risk-of-centralization">EigenLayer’s biggest risk may be centralization, report suggests</a>



“There could always be slashing depending on the use case, where you could have to say that, ‘if this thing happens, then your stake will get slashed by X percent,’” Kumar added.&nbsp;



Rollups deployed using AltLayer currently hold over $11 billion in total value locked (TVL), according to <a href="http://stats.altlayer.io">stats.altlayer.io</a>.



YQ Jia, founder of Alt Research, called the past six months “a huge learning curve for AltLayer.” While deeply engrained in the work of EigenLayer from the beginning, he called it “an evolution period for this nascent but exciting restaking market as a whole.”



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AltLayer’s Wizard simplifies EigenLayer AVS deployment

The US Commodity Futures Trading Commission settled charges with Uniswap early today to the tune of $175,000.



Two commissioners, however, say regulators should never have brought the case in the first place.&nbsp;



Regulators claim Uniswap “illegally offered leveraged or margined retail commodity transactions in digital assets via a decentralized digital asset trading protocol.”&nbsp;



CFTC Commissioner Summer K. Mersinger issued a dissenting <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090424?utm_source=govdelivery">opinion</a> following the settlement announcement, claiming that the case against Uniswap “has all the hallmarks of what we have come to know as regulation through enforcement.”&nbsp;



Read more: <a href="https://blockworks.co/news/cftc-settlement-uniswap-labs">Uniswap Labs to pay $175K in CFTC settlement</a>



The settlement ultimately makes “sweeping statements” about the broader crypto industry and employs “legal theories” outside of a courtroom setting, Mersinger added.&nbsp;



Commissioner Caroline Pham issued a separate dissenting <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement090424">opinion</a>, questioning how the <a href="https://blockworks.co/tag/cftc">CFTC</a> came up with the charges in the first place, given there is “no evidence” that Uniswap ever advertised a leveraged token. It appears regulators are unfairly targeting decentralized finance, she alleged.&nbsp;



Read more: <a href="https://blockworks.co/news/regulation-by-enforcement-unsustainable">Regulation by enforcement is unsustainable, CFTC Chair tells Congress</a>



“Applying the logic of the CFTC’s legal argument, it seems that any commercial transaction to purchase a cow, a bushel of oats or a barrel of oil that involves the word ‘financed’ and is delivered in 30 days is a violation of [commodities laws] and needs to be executed on a futures exchange,” Pham wrote. “I am skeptical that the CFTC would try to enforce these statutory provisions outside of DeFi.”&nbsp;



It is not the first time either commissioner has expressed concern about how their agency approaches digital assets.



In October 2023 at the State of Crypto <a href="https://www.coindesk.com/video/regulatory-keynote-fireside-chat-cftc-commissioner-mersinger/">event</a>, Mersinger said the only way forward for crypto regulation is through clarity from Congress.&nbsp;



“Until we offer some sort of clarity, we&#8217;re going to see this activity…move away from the US,” she said. “We could lose out on a lot of innovation and opportunities in our financial markets.”&nbsp;



As it currently stands, Mersinger added, it’s the enforcement teams at both the CFTC and US Securities and Exchange Commission that are determining which cases to bring, and therefore, making most of the rules.&nbsp;



In 2023, Pham also <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement101223">dissented</a> against the CFTC’s interpretation of commodities laws when it comes to crypto lending, stating that she “cautioned” her fellow regulators of reaching beyond their authority.&nbsp;



Read more: <a href="https://blockworks.co/news/cftc-says-kucoin-complaint-undermines-sec">CFTC Commissioner Pham says KuCoin complaint ‘undermines’ SEC&nbsp;</a>



<a href="https://blockworks.co/tag/uniswap">Uniswap</a>’s CFTC settlement comes months after the exchange <a href="https://blockworks.co/news/sec-issues-uniswap-wells-notice">received a Wells notice</a> — a heads up that enforcement actions are incoming — from the SEC. In its response to regulators in May, Uniswap argued that the SEC <a href="https://blockworks.co/news/uniswap-responds-to-sec-wells-notice">lacks the authority to regulate</a> bitcoin, ether or stablecoins, which are the primary assets traded on the Uniswap protocol.



Uniswap further asserted that tokens traded on its platform are not securities but rather alternative assets such as stablecoins, community and utility tokens and commodities. Uniswap also pointed out that — per its decentralized nature — the protocol does not maintain user accounts or collect personal data, complicating the <a href="https://blockworks.co/tag/sec">SEC</a>‘s push for increased transparency and regulatory oversight​.



The <a href="https://blockworks.co/tag/sec">SEC</a> has not publicly announced charges against or a settlement with Uniswap. Uniswap did not immediately respond to Blockworks’ request for comment.



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CFTC Commissioners dissent on Uniswap settlement

John Deaton came out on top in a three-way Republican primary Tuesday night, positioning the cryptocurrency advocate and attorney to take on incumbent Massachusetts Senator Elizabeth Warren in November.&nbsp;



“Tomorrow, we begin the next phase of the campaign — an effort that will hold Elizabeth Warren accountable for her failures on the border, the unaffordable cost of supporting a family, a broken healthcare system, abandoning our ally Israel and restoring faith in our politics,” Deaton said in a statement Tuesday evening.&nbsp;



Deaton received almost two-thirds of votes in Tuesday’s primary, latest vote counts show. He also beat his opponents when it came to funding. The Deaton campaign, as of mid-August, had raised a total of $1.7 million, $1 million of which was a loan from Deaton himself.&nbsp;



Read more: <a href="https://blockworks.co/news/elizabeth-warren-challenger-senate">Pro-XRP lawyer John Deaton launches bid against Elizabeth Warren</a>



Industrial engineer Robert Antonellis — who was Deaton’s runner-up in the primary with 26% of votes — had raised $46,449 for his campaign as of mid-August, per Federal Election Commission <a href="https://www.fec.gov/data/candidate/S4MA00291/">filings</a>. About half of this amount was from a personal loan from Antonellis.&nbsp;



Polling data for the Warren vs. Deaton race is not yet available, but Warren has historically performed well against Republican opponents. In 2012, she won her seat by defeating incumbent GOP Sen. Scott Brown with 53% of the vote. In her most recent election in 2018, she secured re-election by a 60%-36% margin against Republican Geoff Diehl.



While the topic of crypto in the presidential election has so far been one-sided, the race for Massachusetts’ US <a href="https://blockworks.co/tag/senate">Senate</a> seat now includes two candidates with a track record in digital asset policy.



<a href="https://blockworks.co/tag/elizabeth-warren">Warren</a> last session introduced the “Digital Asset Anti-Money Laundering <a href="https://www.warren.senate.gov/imo/media/doc/DAAML%20Act%20of%202022.pdf">Act</a> Of 2022,” a bill that would reclassify crypto companies, including wallet providers and miners, as money services businesses. She re-introduced the <a href="https://www.congress.gov/bill/118th-congress/senate-bill/2669/all-actions">legislation</a> in December 2023, although the bill has not yet made it to the floor for a vote.&nbsp;



Read more: <a href="https://blockworks.co/news/aml-bill-gets-new-support">Senate money laundering bills continue to duel, Dems get 9 new sponsors</a>



In December 2023, Warren penned a letter to crypto exchange Coinbase and lobby groups Coin Center and the Blockchain Association, accusing the organizations of hiring ex-government officials in an attempt to “<a href="https://blockworks.co/news/senator-warren-on-crypto-partnerships">undermine” digital asset regulation progress</a> in Washington.&nbsp;



Deaton, on the other hand, emerged as somewhat of a hero in the crypto industry — at least for Ripple fans — in 2021 when he filed a motion to intervene on behalf of thousands of XRP holders in the <a href="https://blockworks.co/news/empire-newsletter-ripple-sec-legal-battle">Securities and Exchange Commission’s case against Ripple</a>, arguing that their interests were not being represented in the case. Deaton also owned XRP.



Ripple later donated $1 million to the Commonwealth Unity Fund, a super political action committee (PAC) also backed by Gemini co-founders Tyler and Cameron Winklevoss. Commonwealth Unity Fund has spent around $1.3 million on pro-Deaton efforts as of early August, FEC records show.&nbsp;



Other pro-crypto PACs Fairshake and Defend American Jobs have so far not supported Deaton.&nbsp;



While Deaton does not have a formal crypto policy plan on his website, his campaign has been accepting cryptocurrency donations since March.&nbsp;



Deaton and Warren do not yet have a debate scheduled, but Deaton said on Tuesday he looks forward to the opportunity to address the Senator on stage. 



A modified version of this article first appeared in the daily On the Margin newsletter. Subscribe <a href="https://blockworks.co/newsletter/onthemargin">here</a> so you don’t miss tomorrow’s edition.



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John Deaton cinches Republican nomination with $1.3M in crypto support 

Today, enjoy the On the Margin newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:



<ul>
<li>A reminder from a TradFi CEO: Banks and brokerages will ultimately go “headfirst into bitcoin.”</li>



<li>NVIDIA’s woes seem to bring the whole market down with it. But things may be looking up. </li>



<li>There’s a new politician in town, and his sights are set on Elizabeth Warren’s seat. </li>
</ul>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">Banks ready to go ‘headfirst’ into BTC</h2>



Bitcoin’s price is bouncing around. It was trading below $20,000 in early 2023 before <a href="https://blockworks.co/news/bitcoin-all-time-high">hitting an all-time high price</a> above $73,000 last March. BTC was trading just north of $58,000 at midday Wednesday.



“But ultimately over the next five years, as it gets invited into this party, up we go,” Howard Lutnick, CEO of financial firm Cantor Fitzgerald said in a <a href="https://x.com/howardlutnick/status/1831080474124681316?s=46">video</a> posted on X.&nbsp;



This party he’s referring to? A festival of sorts where some of the world’s biggest companies reverse bitcoin’s historic role as “an outsider to the TradFi community.”&nbsp;&nbsp;



“Banks still can’t clear [bitcoin]. Banks still can’t transact in it. Banks still can’t [custody] it…and they won’t finance it,” Lutnick added.



He paused before adding, “Yet.”



There’s a misunderstanding that TradFi players don’t want to transact in bitcoin, Lutnick claimed.&nbsp;&nbsp;



“If the regulatory environment was good, you [would] see all the traditional financial service companies — the big banks, the big brokerage companies — they’re all going to go headfirst into bitcoin,” he noted.



(Sidenote: Maybe <a href="https://blockworks.co/news/vanguard-disallows-bitcoin-etf-trading">Vanguard really is an exception</a>, as they’ve said repeatedly. Still, some believe they’ll come around.)



Lutnick pointed out that for banks to custody a client’s bitcoin, “they would have to set aside their own money equal to that amount in sort of like a jail.” This is thanks to the SEC’s Staff Accounting Bulletin (SAB) 121.&nbsp;&nbsp;&nbsp;



On that note, financial organizations said in a February <a href="https://www.sifma.org/wp-content/uploads/2024/02/SAB-121-Joint-Trades.pdf">letter</a> to SEC Chair Gary Gensler that SAB 121 “has curbed the ability of the Associations’ members to develop and bring to market at scale certain digital asset products and services.”



Though lawmakers came together in May to <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">pass a resolution that would invalidate SAB 121</a>, President Joe Biden vetoed it.&nbsp;&nbsp;



The rule has “effectively precluded” banks from <a href="https://www.duanemorris.com/articles/banks_as_crypto_custodians_may_rest_sec_bulletins_fate_0624.html">safeguarding</a> crypto, the letter added. Notice that Coinbase (rather than big TradFi banks like State Street) are custodying the BTC for spot bitcoin ETFs issued by BlackRock and a handful of others.



Speaking of State Street, the financial giant last month teamed up with crypto infrastructure provider Taurus to add tokenization and digital custody offerings. Deutsche Bank too said last year it was <a href="https://blockworks.co/news/deutsche-bank-crypto-custody-tokenization">set to establish crypto custody and tokenization services</a> with Taurus’ help.



With institutional traders looking to mitigate counterparty risk by finding trustworthy custodians, that market is projected to see a compound annual growth rate of 23% through 2028, according to a recent OKX research <a href="https://www.okx.com/learn/okx-economist-impact-report">report</a>.&nbsp;



Beyond just custody, we’ve talked before about the tokenized money market funds of asset management titans BlackRock and Franklin Templeton. <a href="https://blockworks.co/news/jpmorgan-tokenized-blockchain-portfolio-avalanche">JPMorgan</a>, <a href="https://blockworks.co/news/goldman-sachs-future-public-blockchains">Goldman Sachs</a> and others continue to <a href="https://blockworks.co/news/tradfi-blockchain-trials-mass-adoption">explore blockchain tech use cases</a>.



OKX chief commercial officer Lennix Lai told Blockworks “a point made forcefully” by financial executives at the crypto exchange’s <a href="https://blockworks.co/news/on-the-margin-newsletter-inevitable-institutional-digital-assets-involvement">second quarter roundtable</a> was indeed that greater regulatory clarity would be a significant catalyst for growth. They praised the EU’s Markets in Crypto Assets Regulation and UAE regulatory advancements, he noted.&nbsp;



While we know TradFi players have shown interest in crypto in recent years and months, hearing Lutnick’s blunt words that essentially all of them want in feels like a welcome reminder during what could be deemed a <a href="https://blockworks.co/news/empire-newsletter-crypto-trends">weird time for crypto</a>.&nbsp;



And to realize the upcoming presidential election could help <a href="https://blockworks.co/news/more-crypto-remarks-likely-coming-from-trump-harris">spur more crypto policy discussion </a>— and maybe that coveted regulatory clarity — perhaps makes the possible wait time feel more manageable.



— Ben Strack



<h3 class="wp-block-heading">$175,000</h3>



The amount Uniswap is set to pay <a href="https://blockworks.co/news/cftc-settlement-uniswap-labs">to settle allegations made by the CFTC</a>.



Uniswap, according to a Wednesday CFTC <a href="https://www.cftc.gov/PressRoom/PressReleases/8961-24">release</a>, “illegally offered leveraged or margined retail commodity transactions in digital assets via a decentralized digital asset trading protocol.”



Uniswap didn’t immediately return Blockworks’ request for comment.



In a dissenting <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090424">statement</a>, CFTC Commissioner Summer Mersinger said: “Wielding the hammer of enforcement against these DeFi protocols may result in some short-term ‘wins,’ but in the long-term, without more, it will only create problems.”&nbsp;



<h2 class="wp-block-heading">NVIDI-Oh No&nbsp;</h2>



It’s been a tough couple weeks for NVIDIA.&nbsp;



Despite beating earnings expectations last week, shares of NVDA lost as much as 7% in pre-market trading and 2% at the open on Aug. 29 — the day after its record-setting report dropped.&nbsp;



The stock had hardly pared losses before yesterday’s <a href="https://blockworks.co/news/on-the-margin-newsletter-ism-pmi-goods-disinflation">ISM report sent most stocks lower</a>. And then, just as the market was closing, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-09-03/nvidia-gets-doj-subpoena-in-escalating-antitrust-investigation">reported</a> the Justice Department had sent NVIDIA and others subpoenas as part of an antitrust violation investigation.&nbsp;



Combine all that and you get some disappointing results: NVIDIA lost roughly $279 billion in value on Tuesday. It was the largest single-day loss in market value for the US company so far in 2024.&nbsp;



It looks like we have some dip buyers out there, though. NVDA shares were up 0.7% as of 2 pm ET. The stock is down around 15% over the past five trading days but still up 9% over the month (and 126% year to date).&nbsp;



The Philadelphia Stock Exchange semiconductor index dipped to its lowest level since March 2020 on Tuesday, but was also paring losses by Wednesday, trading 0.9% higher at 2 pm ET.&nbsp;



Still, things could be worse. The VIX hit 22.6 this morning, which is a five-day high but a far cry from levels hit a month ago, when the index approached 40.&nbsp;



Analysts say the key level to watch for NVDA will be $100 (shares were hovering around $109 at 2 pm ET). I’m not one to give investor advice, but the last time shares went below triple-digits, they came back more than 30% in less than two weeks.&nbsp;



One quick note: You may have seen reports on social media that US Rep. Nancy Pelosi sold her NVIDIA shares just before news circulated that the DOJ had subpoenaed the chipmaker. These claims were fabricated; there are no filings showing Pelosi’s shares aren’t just as in the red as everyone else’s. Well, unless you bought NVDA this morning.&nbsp;



— Casey Wagner&nbsp;



<h2 class="wp-block-heading">It’s Warren v. Deaton&nbsp;</h2>



Crypto advocate and attorney John Deaton will be up against Elizabeth Warren in November for her seat in the US Senate. Deaton blew the competition out of the water last night, winning the Republican nomination with close to a 65% majority (as of this morning, when 95% of votes had been counted).&nbsp;



“Tomorrow, we begin the next phase of the campaign — an effort that will hold Elizabeth Warren accountable for her failures on the border, the unaffordable cost of supporting a family, a broken healthcare system, abandoning our ally Israel and restoring faith in our politics,” Deaton said in a statement Tuesday evening.&nbsp;



Deaton likely owes a good portion of his success to his funding. As of mid-August his campaign had raised $1.7 million — $1 million of which was a loan from Deaton himself. He has not repaid himself any amount, FEC filings show.&nbsp;



Industrial engineer Robert Antonellis — Deaton’s runner-up in the primary with 26% of votes — had raised $46,449 for his campaign as of mid-August, per FEC <a href="https://www.fec.gov/data/candidate/S4MA00291/">filings</a>. About half of this amount was a personal loan from Antonellis.&nbsp;



It’s still a bit early for polling, but Warren has a strong track record against Republican candidates. She defeated GOP incumbent former Sen. Scott Brown in 2012 with 53% of votes. In 2018 she won against Republican Geoff Diehl, 60% to 36%.&nbsp;



So far, <a href="https://blockworks.co/news/more-crypto-remarks-likely-coming-from-trump-harris">crypto remarks from presidential hopefuls</a> Donald Trump and Kamala Harris have been very one-sided. But with Warren vs. Deaton now confirmed, I’m expecting this race to be far more crypto-centric.&nbsp;



Here’s a review of Warren’s crypto track record:&nbsp;



<ul>
<li>Last year she penned a letter to crypto exchanges and lobbying groups accusing them of <a href="https://blockworks.co/news/senator-warren-on-crypto-partnerships">undermining bipartisan efforts</a> to regulate the industry by hiring ex-government officials. </li>



<li>In January she said the SEC <a href="https://blockworks.co/news/sec-wrong-bitcoin-etf-elizabeth-warren">shouldn’t have approved spot bitcoin ETFs</a>, stating that regulators were “wrong on the law and wrong on the policy.” </li>



<li>In May she doubled down on her stance that crypto companies need far more robust anti-money laundering policies. </li>
</ul>



Meanwhile, Deaton has emerged as a pro-crypto candidate — despite not having a formal digital assets platform on his website. He became a leader of the so-called “XRP army” in 2021 when he <a href="https://blockworks.co/news/elizabeth-warren-challenger-senate">championed token holders</a> during the SEC’s lengthy lawsuit. His campaign started accepting crypto donations in March.



Deaton has expressed interest in debating Warren, although nothing has been scheduled yet. Should the two face off, I’d be willing to bet that “bitcoin” is mentioned and golf handicaps are not.&nbsp;



— Casey Wagner



<h2 class="wp-block-heading">Bulletin Board&nbsp;</h2>



<ul>
<li>Bitcoin was trading at about $57,900 just after 2 pm ET Wednesday — up 0.8% in the last 24 hours but a 2.5% drop from seven days ago. ETH, down just slightly in the past week, has also seen a lift in the trailing 24 hours, amounting to about 1%.</li>



<li>The net capital flowing out of US spot bitcoin ETFs totaled $288 million on Tuesday. This marked the highest single day of outflows for the category since May 1, Farside Investors data <a href="https://farside.co.uk/bitcoin-etf-flow-all-data/">shows</a>. </li>



<li>Speaking of crypto ETFs, Tuesday marked the ninth time in the last 11 trading days that the largest spot ether ETF — BlackRock’s iShares Ethereum Trust (ETHA) — saw zero flows. Net outflows for the segment now total $525 million since the US spot ether funds’ <a href="https://blockworks.co/news/nine-us-spot-eth-etfs-live-post-approval">July 23 launch</a>.   </li>



<li>After Riot Platforms yesterday <a href="https://blockworks.co/news/riot-questions-bitfarms-proposed-acquisition">criticized Bitfarms’ proposed acquisition</a> of Stronghold Digital Mining, <a href="https://blockworks.co/news/bitfarms-defends-pending-acquisition-riot">Bitfarms fired back</a>. The company said the comments made by Riot (its largest shareholder) were “misleading,” adding that Riot is “attempting to acquire Bitfarms at a discounted price.” </li>
</ul>



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Banks and brokerages will ultimately go ‘headfirst into BTC’: TradFi CEO

Binance executive Tigran Gambaryan appeared in court for the second time this week on Wednesday.&nbsp;



The American, who’s been detained in Nigeria for over six months, faced a hearing on a bail application submitted earlier this week by his lawyers after he appeared in court earlier this week.



The prosecutor for Nigeria’s Economic and Financial Crimes Commission (EFCC) pushed back on a new bail application filed by Gambaryan’s lawyers on medical grounds, arguing that the US executive isn’t in ill health. But then, according to a Gambaryan family spokesperson, the prosecutor also claimed that he’s refusing treatment, which doesn’t seem to add up.&nbsp;



Nigerian officials have accused Gambaryan, and his employer <a href="http://v">Binance</a>, of money laundering. The two are being charged separately.&nbsp;



The executive was initially <a href="https://blockworks.co/news/binance-comments-on-exec-nigeria-detention">detained back in February</a> and was transferred to the Kuje Correctional Facility earlier this year. His health has deteriorated while in prison. He’s currently suffering from a herniated disk, as well as <a href="https://blockworks.co/news/binance-detained-exec-charges-dropped-nigeria">bouts of pneumonia</a>. According to a family spokesperson, he’s also suffered from malaria and tonsillitis.&nbsp;



A video shared on X earlier this week shows a distressed Gambaryan attempting to walk into the courtroom. He was, per a spokesperson, unable to use his wheelchair. And, according to Gambaryan in the video, officials were told not to offer aid.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">“Nigerian Prison Official Abandons Binance Executive To Struggle In Pains In Court Premises As He Begs for Help ” <a href="https://t.co/q8GhvIluNq">pic.twitter.com/q8GhvIluNq</a>&mdash; Oyindamola🙄 (@dammiedammie35) <a href="https://twitter.com/dammiedammie35/status/1830651090175693237?ref_src=twsrc%5Etfw">September 2, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“This is f*cked up,” Gambaryan says. He then points to the guard walking next to him and exclaims, “He was told not to help me.”



“Why can’t I use a goddamn wheelchair? This is a show!” Gambaryan adds. “I’m f*cking innocent.”



In a tweet earlier Wednesday, Rep. French Hill — who <a href="https://x.com/RepFrenchHill/status/1803898800966091087">visited</a> Gambaryan in Nigeria earlier this summer — called the situation “outrageous.”&nbsp;



“It&#8217;s clear Tigran&#8217;s condition is rapidly deteriorating — the <a href="https://blockworks.co/tag/nigeria">Nigerian</a> government must release him immediately,” he added. Hill previously called for the American’s release.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This is outrageous. It&#39;s clear Tigran&#39;s condition is rapidly deteriorating &#8211; the Nigeran government must release him immediately. <a href="https://t.co/lzmfUalcBb">https://t.co/lzmfUalcBb</a>&mdash; French Hill (@RepFrenchHill) <a href="https://twitter.com/RepFrenchHill/status/1831330870721978606?ref_src=twsrc%5Etfw">September 4, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Binance CEO Richard Teng shared the video, calling on the “inhumane treatment” to end.&nbsp;



“He must be allowed to go home for medical treatment and to be with his family,” Teng added.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This inhumane treatment of Tigran must end. He must be allowed to go home for medical treatment and to be with his family. <a href="https://t.co/HsQNoyE0cS">https://t.co/HsQNoyE0cS</a>&mdash; Richard Teng (@_RichardTeng) <a href="https://twitter.com/_RichardTeng/status/1830869029705441553?ref_src=twsrc%5Etfw">September 3, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Gambaryan told a Nigerian judge earlier this week he’s not receiving adequate medical care and hasn’t been able to communicate with his legal team or embassy representatives.



Officials for Nigeria also <a href="https://blockworks.co/news/binance-executive-denied-bail-in-nigeria">sought tax evasion charges</a> against both Binance and Gambaryan but dropped the charges against Gambaryan specifically over the summer.&nbsp;



Before either of these trials commenced, <a href="https://blockworks.co/news/binance-ends-support-nigeria-naira">Binance ended support </a>in Nigeria — shortly after Gambaryan was detained.&nbsp;



“It is useful to point out that Nigeria has never been a big market for Binance. The Government has said that we made $26B in revenue from Nigeria in 2023. That is not the case. The $21.6B figure is the total transaction volume from 2023. To provide an understanding of transaction volume: if a person were to take $1000 and trade it 1000 times, that would represent $1m in transaction volume,” Teng wrote in a <a href="https://www.binance.com/en/blog/leadership/from-richard-teng-binance-ceo-tigrans-deteriorating-condition-after-6-months-of-unjust-detention-426448993678618773?hl=en">blog post</a> last week.&nbsp;



“The US Government must do more to help Tigran. I urge them to use every available tool to free an innocent American who is at risk of permanent damage,” Yuki Gambaryan, Tigran’s wife, said in a statement. 



A modified version of this article first appeared in the daily Empire newsletter. Subscribe <a href="https://blockworks.co/newsletter/empire">here</a> so you don’t miss tomorrow’s edition.



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