Kyber Network is an Ethereum based decentralized exchange focused on rapid onchain execution of transactions. 

Kyber Network Crystal

Ben Strack

The growth of tokenized financial products likely represents the tip of the iceberg, as the world’s biggest financial players continue to investigate the potential of blockchain technology.



This interest could lead to the proliferation of on-chain funds that might challenge the dominance of stablecoins, according to Colin Butler, Polygon Labs’ head of institutional capital.



Franklin Templeton launched its OnChain US Government Money Fund in 2021. It uses the Polygon and Stellar blockchains to process transactions and record share ownership.



<a href="https://blockworks.co/news/blackrock-tokenized-fund-trading-circle-usdc">BlackRock debuted its own tokenized offering</a> — the USD Institutional Digital Liquidity Fund — on the Ethereum Network in March. The world’s largest asset manager <a href="https://blockworks.co/news/blackrock-tokenization-investment">then led a funding round by Securitize</a>, a firm focused on bringing physical and traditional financial assets onto the blockchain.



The BlackRock and Franklin Templeton funds had amassed $375 million and $368 million in assets under management, respectively, as of April 30.



Their future asset growth will depend on how investors use them, Butler noted.



<a href="https://blockworks.co/tag/franklin-templeton">Franklin Templeton</a> got regulatory approval to allow institutional investors to transfer shares of its on-chain fund to other shareholders.



“What you could do is have a venture capital firm on one side sending yield-bearing digital assets to one of their crypto-native portfolio companies that don’t have banking relationships,” he said. “That’s one idea; I don’t know what sort of adoption that receives.”



Read more: <a href="https://blockworks.co/news/stablecoin-with-yield-franklin-templeton">A stablecoin with yield? Tokenized fund perhaps just the start for fund giant</a>



The <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> market is currently sized at about $160 billion. But unlike the Franklin Templeton fund, for example, stablecoins don’t offer users a yield.&nbsp;



“To the extent you can make them more permissionless and fit certain use cases, I can see these products chipping away at that existing [total addressable market], let alone the future TAM,” Butler said.



Keep reading for more excerpts from Blockworks’ interview with Butler.&nbsp;



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Blockworks: What sorts of conversations are financial institutions having with blockchains as they mull their presence in the <a href="https://blockworks.co/tag/tokenization">tokenization</a> space?&nbsp;



Butler: Trust and credibility are the most important factors for any Wall Street transaction. The entity looking to collaborate really needs to understand that the chain doesn’t go down.&nbsp;



Virtually 100% reliability is what they’re looking for, because you can’t have a transaction just kind of disappear and fall through the cracks.



When you’re a big player thinking of coming on-chain, you also have to think about future-proofing your solution. Because if you spin something up that’s kind of a sandbox or walled garden, and there’s no future connectivity, then you have a product that’s limited in scope and you’re going to have to re-engineer everything at some point.



Read more from our opinion section: <a href="https://blockworks.co/news/future-tokenization-permissioned-blockchains">The future of tokenization? Permissioned blockchains</a>



Blockworks: How might <a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s entrance into the tokenized fund space affect how others move ahead here?



Butler: They are a thought leader, a technology leader and an innovation leader, and so when they make an action there tends to be a lot of replication.



You should just assume that almost everybody in the top 20 globally [in assets under management] has a plan for blockchain adoption. I can’t tell you when those plans will be realized, but there’s only — from my personal knowledge — one or two of the top 20 that aren’t really materially invested…without a team or a roadmap.



When BlackRock comes, it accelerates the plans for all of these other players because now they know they have air cover to do it.



And each one has a different angle on it. It’s not just BlackRock did this and now everybody replicates. Everybody’s looking to do something slightly different or build on what’s been done before, because nobody wants to be the third fund to do the exact same thing.



But broadly speaking, fund tokenization on blockchain is a huge conversation at most of the large players.



Blockworks: Private markets investment firm Hamilton Lane and hedge fund manager Brevan Howard have tokenized funds on Polygon. Do you expect more where that came from?



Butler: Longer term the vision is for everybody from banks to large RIAs, and everyone in between, to distribute these tokenized assets.&nbsp;



Why it’s interesting is that these assets are not available in any other format. So they’re going to go with both hands after that, because it enables a growth trajectory that they currently don’t have.&nbsp;



There’s deep financial incentives for the providers of financial products and the distributors, such as banks, to participate in this new ecosystem. That’s why people are so motivated to participate and come on-chain.



Blockworks: What do you make of the latest effort by Visa, Mastercard, JPMorgan, Citigroup and others <a href="https://blockworks.co/news/tradfi-blockchain-trials-mass-adoption">aimed at using a shared ledger technology to settle tokenized assets</a>?&nbsp;



Butler: Many of the players listed in that announcement have been working on this for so long. I would say mentally they’ve been very serious about it for the last two years, and to me, it takes about two years to get to the point of approval for production use cases at major financial institutions.



That’s why I think that while you may have seen announcements similar to this maybe two years ago, qualitatively it’s very different because of the stage that a lot of the global financial institutions are at internally.



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Tokenized funds could chip away at stablecoin market, Polygon exec says

Casey Wagner

There’s a new crypto Political Action Committee (PAC) on the scene.&nbsp;



Coinbase-initiated nonprofit Stand With Crypto announced it is launching a new PAC Friday.&nbsp;



The associated PAC, which means only individual Stand With Crypto members can contribute up to $5,000 each, plans to back “candidates who support the crypto community,” the nonprofit <a href="https://x.com/standwithcrypto/status/1788950211252891790">said</a> on X Friday.&nbsp;



Stand With Crypto, a 501(c)(4) nonprofit organization, <a href="https://blockworks.co/news/coinbase-nonprofit-crypto-policy">launched last summer</a> as an effort to give crypto fans more access to information about policy makers and candidates, leaders said.&nbsp;



“This is a grassroots, organic bottom-up effort,” Kara Calvert, Coinbase’s head of US policy, said in August 2023 when announcing the new initiative.&nbsp;



“It can provide a lot of tools to people, they can learn about the members of Congress, they can access a scorecard, they can access a legislative action portal…it will really give them the tools that they need to engage with their members of Congress,” Calvert added.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/only-a-fool-would-vote-on-crypto-alone">Only a fool would vote on crypto alone</a>



While federal law makes contributions to the PAC tricky, companies and individuals are free to make donations to the nonprofit itself. Crypto payments operation Moonpay on Monday announced a $1 million pledge, an effort the company said was inspired by upcoming elections.&nbsp;



“Today, two things are abundantly clear: This year&#8217;s election will define the future of our industry in the United States, and it is our responsibility to step up and stand alongside those organizations that want to positively advance crypto innovation for everyone,” Ivan Soto-Wright, Moonpay CEO, said in a statement Monday.&nbsp;



Stand With Crypto’s PAC comes on the scene as crypto-focused Super PAC trio Defend American Jobs, Fairshake and Protect Progress continue to dish out cash. The three groups have collectively deployed $31,752,033.81 so far this calendar year, according to Federal Election Commission filings.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-super-pacs-election-primaries">Crypto PAC-backed candidates sweep in US election primaries&nbsp;</a>



The PACs made a big financial push during the March Congressional primary cycle, doling out more than $10.1 million to fund advertisements against Rep. Katie Porter, the incumbent Democrat from California who ultimately lost her bid for the late Sen. Dianne Feinstein’s seat.&nbsp;



The trio is also backing Alabama Democrat Shomari Figures, who is vying for a US House seat in November. Protect Progress donated close to $2 million during his primary campaign in March and April, filings show.&nbsp;



Stand With Crypto has not yet filed contribution and disbursement forms with the FEC, but has revealed its first five endorsements: Figures; Jim Banks, a Republican running for Senate in Indiana; Jim Justice, a Republican running for Senate in West Virginia; Eddy Morales, a Democrat running to represent Oregon&#8217;s Third District; and Troy Downing, a Republican running to represent Montana&#8217;s Second District.



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Stand With Crypto PAC launches as industry interest in campaign funding ramps up 

The financial world prefers quarterly reviews. But US spot bitcoin ETFs have been alive for one-third of a year, and now seems as good a time as any for a look back.&nbsp;&nbsp;



The sample size captures bitcoin hitting a new all-time high and seeing some corrections since the Jan. 11 ETF launches.



Oh yeah, and adding a fourth month captures the demand (or lack thereof) for bitcoin ETFs after per-block rewards for mining the asset were cut in half last month.



One headline number: US spot bitcoin ETFs have notched net inflows of about $11.7 billion.



Another noteworthy stat: Those inflows occurred despite the Grayscale Bitcoin Trust ETF (<a href="https://blockworks.co/tag/gbtc">GBTC</a>) enduring net outflows of $17.6 billion.



Profit-taking by ETF investors, as well as the Federal Reserve’s likely higher-rates-for-longer posturing, have resulted in a demand drop-off for BTC in recent weeks, according to analysts. Bitcoin’s price (<a href="https://blockworks.co/price/btc">BTC</a>) — at roughly $63,000 Monday at 12 pm ET — is down about 6% from a month ago.



Industry watchers had said it would be hard to sustain the pace of some of the most successful ETF launches of all time.



Read more: <a href="https://blockworks.co/news/macro-headwinds-bitcoin-summer">Macro headwinds could spur a ‘boring’ bitcoin summer — or something worse</a>



The category’s inflow total once stood above $12.5 billion before a month-plus of outflows brought the category back down to Earth.



Net money exiting the funds over the last five weeks (since April 8) stands at $931 million, according to Farside Investors <a href="https://farside.co.uk/?p=997">data</a>. Last week’s positive flows of $117 million broke a four-week bleeding streak.&nbsp;



Crypto exchange-traded product (ETP) volumes — the majority of which come from US spot <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETFs</a> — have continued to slide, CoinShares research head James Butterfill wrote in a Monday report. The offerings saw volumes of roughly $8 billion last week, compared to the $17 billion average in April. “These volumes highlight ETP investors are participating less in the crypto ecosystem at present, representing 22% of total volumes on global trusted exchanges, relative to 31% last month,” Butterfill added.



<h2 class="wp-block-heading">Even BlackRock, Fidelity see demand slow&nbsp;</h2>



Perhaps as expected, <a href="https://blockworks.co/news/blackrock-fidelity-etf-flows-race">products by BlackRock and Fidelity were able to capitalize</a> on their renowned brands and deep client networks out of the gate to attract the most investor assets.



BlackRock’s iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) so far have net inflows amounting to $15.5 billion and $8.1 billion, respectively.



Both offerings enjoyed unprecedented inflow gains for new ETFs.



FBTC saw net inflows during its first 63 days before the streak ended on April 12. The takeaway: It saw about $8 billion of net money enter the fund in those first 63 days, and just $94 million in the 21 trading days since.&nbsp;



<a href="https://blockworks.co/news/blackrock-bitcoin-etf-inflows-streak">IBIT’s run lasted 71 days</a>, before the fund notched a zero in that category on April 24.&nbsp;&nbsp;&nbsp;



So, the fund’s net inflows were nearly $15.5 billion in the first 71 trading days. They are $24 million in the last 13 trading days.



<a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s bitcoin ETF looked poised to pass GBTC in assets under management weeks ago. But the recent demand slowdown has kept Grayscale’s fund in the lead — at about $17.6 billion to $16.6 billion, as of market close on Friday.



IBIT’s trading volumes were roughly $3.6 billion last week, a Blockworks analysis of Yahoo Finance data shows. That gave it a daily average of $720 million, down from a nearly $1.1 billion daily volume average the week before.&nbsp;&nbsp;



GBTC saw its lowest weekly outflow since January from May 6 to May 10, at $171 million. The fund saw its first daily net inflow, gaining $63 million on May 3.&nbsp;



Read more: <a href="https://blockworks.co/news/gbtc-posts-first-net-inflows">Bitcoin ETF snapshot: GBTC surprise helps end sector’s seven-day outflow run</a>&nbsp;



Still, like IBIT, the <a href="http://grayscale">Grayscale</a> fund’s daily volumes average dipped to $338 million last week, according to Yahoo Finance data — down from a daily mark of $446 million from April 29 to May 3.



Financial advisers are expected to contribute massively to future inflows, with <a href="https://blockworks.co/news/13f-filings-institutional-appetite-bitcoin-etfs">some revealing in recent filings</a> that they already hold millions of dollars worth of positions in various BTC funds.



<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">The new high water mark (ex APs/market makers) for bitcoin ETF holdings has arrived. Boston-based Bracebridge Capital has reported owning $262m of <a href="https://twitter.com/search?q=%24ARKB&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$ARKB</a>. It&#39;s also the biggest owner of <a href="https://twitter.com/search?q=%24IBIT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$IBIT</a> too with $81m in that ETF. They also own $20m of <a href="https://twitter.com/search?q=%24GBTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$GBTC</a>. They went wild basically. <a href="https://t.co/RzdpwE2D0k">pic.twitter.com/RzdpwE2D0k</a>&mdash; Eric Balchunas (@EricBalchunas) <a href="https://twitter.com/EricBalchunas/status/1789993013587947765?ref_src=twsrc%5Etfw">May 13, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Christopher Jensen, crypto research director at bitcoin ETF issuer Franklin Templeton, <a href="https://blockworks.co/news/franklin-templeton-institutional-bitcoin-etf-allocation">told Blockworks in an April interview</a> that more institutional investors are considering including bitcoin within long-term investment portfolios.



“There are lots of platforms, there are lots of institutions that are interested and are doing work,” Jensen said at the time. “So we don’t think the flows for the ETPs are done even though they’ve cooled off in recent weeks.”



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Strong start, slowing demand: The first 4 months of US spot bitcoin ETFs        

Tal Zackon

Since Bitcoin’s inception, crypto has faced more than its fair share of ups and downs.



In more recent years, the collapse of “trusted” crypto institutions such as FTX, 3AC, Celsius (and even Mt. Gox) crippled the industry and caused huge trust issues. This level of distrust was echoed across every single Web3 business that held client funds, causing huge market downturns.



But a solution was put forward to solve the issue of trust across crypto as one bastion of hope: proof-of-reserves (PoR).&nbsp;



The problem is that proof-of-reserves is absolutely useless.



<h2 class="wp-block-heading">A false promise of transparency</h2>



Once upon a time, PoR was hailed as a breakthrough in transparency within the crypto space. PoR promised to shine a light on the reserves of the big names we trusted, giving stakeholders the peace of mind needed to navigate the murky waters of digital assets.&nbsp;



Although there were vocal critics of PoR, it still managed to take hold as the de facto standard for auditing the reserve capabilities of exchanges and other crypto service providers. Proof-of-reserves attestations became the go-to solution for bringing back transparency and trust to the broader investor market.



After the FTX collapse, big exchanges such as Binance, Gate.io, KuCoin, Poloniex, Huobi, OKX, Deribit and Bybit all rushed to unveil plans for showcasing PoR snapshots.&nbsp;



But herein lies the problem: A snapshot doesn’t show the whole picture.



<h2 class="wp-block-heading">The failures of proof-of-reserves</h2>



How can we be sure that these exchanges, which are now claiming to conduct PoR audits, are being fully transparent?&nbsp;



We can’t.&nbsp;



The major problem lies with PoR’s static nature and its failure to reflect the dynamic and fast-paced world of crypto: PoR only provides a snapshot of reserves at any given point in time rather than a real-time view.



Furthermore, the system is susceptible to manipulation and exploitation, as evidenced by past fiascos our industry faced.&nbsp;



It&#8217;s also unsuitable for auditing intricate smart contract interactions and token movements, a crucial aspect for the industry.



Being forced to rely on these single-point-in-time snapshots is like trying to assess a bank&#8217;s financial health based solely on a single account statement without considering the full transaction history — unviable. A snapshot is incapable of showing any real context.



Simply put, PoR systems fail in every aspect of their original purpose.&nbsp;



It&#8217;s just not enough to verify through a screenshot that assets exist at a particular point in time. We need real-time transparency and a historical audit trail to ensure the integrity of crypto exchanges and custodial services through traceability of transactions and movements, not a picture that can be easily adjusted and manipulated for the company’s benefit.



<h2 class="wp-block-heading">An industry wake-up call</h2>



So what&#8217;s the solution? It’s simple: better data.&nbsp;



Ultimately, every blockchain has all of the data for every transaction that has ever happened. The issue with digital assets isn’t the lack of data, but instead that the data is going into a contextual blackhole.



Read more from our opinion section: <a href="https://blockworks.co/news/future-tokenization-permissioned-blockchains">The future of tokenization? Permissioned blockchains</a>



The industry needs to shift its focus on understanding why transactions are being made, both historically and in real-time, in order to build real audit trails that can provide usable insights to auditors, regulators and tax authorities. With this shift, gaining transparency for the state of exchanges&#8217; customer funds will be far easier to achieve. It will bring a new wave of trust and accountability to the market, especially for the end-users who are investing their hard-earned money.



Blockchain analytics, on-chain monitoring tools and real-time auditing solutions will all support the future of transparency within our industry. But they all need to be underpinned by accurate, contextual data to offer continuous assurance, real-time insights and a level of transparency that PoR could only dream of.



<h2 class="wp-block-heading">It’s time for a change</h2>



While the collapses of FTX, Celsius and Three Arrows Capital occurred before proof-of-reserves became broadly implemented, we are left to wonder whether a robust and truly transparent system could have shielded the crypto industry from such significant setbacks.



As an industry, we should all push harder to build trust and create systems that enable auditors, regulators and tax authorities to satisfy investors&#8217; thirst for transparency.&nbsp;



If we can’t bring real context to the world of blockchain data, then we’ll be stuck with useless solutions like proof-of-reserves for the foreseeable future.



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


<div class="wp-block-post-author-biography">Tal Zackon is the CEO and Co-Founder of TRES, a Web3 financial data platform, focused on simplifying Web3 financial operations such as accounting, taxation, and audit. TRES was founded in 2022 and is backed by some of the most respected names in Web3, including Circle, Blockdaemon, Moonpay, Alchemy angels from Fireblocks and Chainalysis, and more. 

Prior to founding TRES, Tal was an angel investor and venture capitalist. He has also served as a Board Observer for Portis, 4M Analytics, Dataloop AI, Zero Networks and as a board member at Vayo. Other previous positions include Principal at F2 Venture Capital, Head of Growth at superwise.ai, General Manager at The Junction by F2 VC and Founder &amp; General Manager at Project Upload. </div>


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Proof-of-reserves never cut it — and never will

Jack Kubinec

The DAO governing Jito, the Solana-based liquid staking service, will consider a proposal to spend 7.5 million of its native JTO token on liquidity mining. That’s equivalent to roughly $29 million at current prices, and it’s 3.1% of the 240 million JTO held in the DAO’s treasury.



It’s the second-ever governance proposal for Jito DAO, and follows the lucrative JTO airdrop it carried out in December. The <a href="https://forum.jito.network/t/jip-2-incentive-budget-and-framework-for-strategic-growth/294">proposal</a> was penned by DeFi research firm Gauntlet, one of 17 Jito Foundation-supported delegates which recently parted with Aave’s DAO following disagreements between the two sides.



Read more: <a href="https://blockworks.co/news/gauntlet-discontinues-work-at-aave">Why Gauntlet is leaving Aave after 4 years as ‘risk steward’</a>



Jito runs Solana’s <a href="https://defillama.com/chain/Solana">largest</a> liquid staking service by total value locked (TVL), per DeFiLlama. 78% of Solana validators run its Solana validator fork, called Jito-Solana. The protocol partly distributes maximal extractible value (MEV) rewards, mostly in the form of tips paid to validators by traders hoping to get their transactions to land, to holders of its JitoSOL liquid staking token.



Notably, the MEV collected by validators via Jito has surpassed the MEV paid to Ethereum validators in recent days.&nbsp;



Read more: <a href="https://blockworks.co/news/solana-mev-validators-ethereum">MEV collected by validators is now higher on Solana than on Ethereum</a>



Some of Jito’s recent TVL growth came from a points system that earned on-chain users allocations in the JTO <a href="https://blockworks.co/tag/airdrop">airdrop</a> and drove funds to the protocol.&nbsp;



But after the points-based incentives ended, Jito spent minimally on incentive programs. Notably, Jito’s minimal incentive spend comes as <a href="https://blockworks.co/tag/solana">Solana</a> liquid staking competitors Marinade and Blaze make significant incentives investments, Gauntlet wrote in the proposal.&nbsp;



To stay competitive in a post-points world, Gauntlet recommends Jito spend some of its treasury on “a variety of liquidity mining strategies.” It does not specify precisely what those strategies would be. The funds would be managed by three members of the Jito Foundation and two members of Jito Labs.



Read more: <a href="https://blockworks.co/news/jito-airdrop-value">What to know about Jito&#8217;s $165M JTO airdrop</a>



At the time of writing, the governance proposal was yet to garner any comments from the community. Per Jito’s governance <a href="https://www.jito.network/docs/governance/constitution-of-the-jito-foundation/#jito-improvement-proposals-jips">docs</a>, the proposal has to stay open for 30 days before being submitted to the DAO’s voting platform.



In a message to Blockworks, Jito Foundation delegate Ian Unsworth expressed his support for the proposal and said it was “awesome to see some intentional thinking around liquidity incentives.”



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Jito DAO to consider spending $29M on liquidity mining

David Canellis

Katherine Ross

<h2 class="wp-block-heading">Beating bitcoin ain’t easy</h2>



Not all bitcoin ETF investors are built the same.



It’s been four months since nine spot bitcoin ETFs hit US markets, alongside the conversion of Grayscale’s Bitcoin Trust.



The temptation is to lump them all together —&nbsp;but some are doing better than others.



All the funds are operating as intended by tightly tracking bitcoin. But zooming into each fund shows significant variance in how their respective investor classes have performed.



Take Invesco-Galaxy’s BTCO. It has so far netted $286.8 million since Jan. 11, acquiring about 6,698 BTC. At current prices, BTCO’s bitcoin is worth $421 million — putting current shareholders almost 47% up on their collective investment to date.



Read more from our opinion section: <a href="https://blockworks.co/news/blackrock-bitcoin-etfs-scarcity">BlackRock and other bitcoin ETFs rob bitcoin of its room to grow</a>



Bitcoin, meanwhile, has rallied about 35% during that period. The same analysis of VanEck’s fund shows HODL shareholders are only barely above water, about 1% up on their net flows.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/95LIKXfPhKw7VgbUkkHH2libn_YGD17uOZRpRF7EyIjTuFD2NMivMmG94E6zXlmT50txNOHRNrhv7-L0tc4_UTtbrCwDxye44wnHNwozdIH6Md-Cv7tbLb_duAa0Xw-7CsBC-7njhHnogT96YckrSts" alt=""/></figure>



What’s making the difference? It turns out that Invesco-Galaxy’s BTCO bought the majority of its bitcoin in the first week and a half of the fund’s existence — when bitcoin was in the low $40,000s (current price: $62,500).&nbsp;



A decent chunk of BTCO’s bitcoin was offloaded on the way up, as bitcoin marched to all-time highs in mid-March.



Overall, the fund bought low and sold high — demonstrating how the notion that bitcoin ETF buyers are almost exclusively long-term holders could very well be a meme.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/_5Xp2ybzMRJcZSV083UUrIWue52cvjbpFobk9Jed4K0aCP-ejbsLK2_TTPdHZhmT2LlEmdGBHfXlVCxtr9sErqfTxWL8pTzQiNH5Kl-c-GPDyZZterJlH60bBWK11hkgCwT7-vdz8LYhtYM52PVN1ec" alt=""/><figcaption class="wp-element-caption">The purple columns show bitcoin flows — notice how much came in in the earliest days</figcaption></figure>



Compare that to VanEck&#8217;s HODL. Fund contributors steadily poured in dollars for weeks, with HODL buying about 91 BTC ($5.7 million) per trading day, on average.



Then, in the two days leading up to bitcoin’s all-time high of near $73,800 in March, HODL investors flooded the fund with more than $200 million. HODL was forced to buy 2,800 BTC at the top. An almost simultaneous <a href="https://www.vaneck.com/us/en/press-releases/vaneck-waives-fee-for-bitcoin-etf-hodl.pdf">reduction</a> in fees surely didn&#8217;t help, either.



To make matters worse, HODL has ironically since seen negative flows on three separate days — the worst on May 1 saw 112.25 BTC ($6.5 million at the time) pulled overall, just as bitcoin hit lows around $58,000.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/lvcINAvRorasAqVL7BSs0hiTDIEQ4QaGyvz9fpB5XoE1dB2HWIq1P2mqFI4ZM6ky4_OAX2R5LjEPm0v9KjqP8sDOTzlZv6zdOCPjwvim-BPrG0yF55_YZiHKCAUG6ilhRv3hjTNGd9BuXXvf0GtDpe0" alt=""/><figcaption class="wp-element-caption">HODL bought the top and sold the local bottom</figcaption></figure>



As a cohort, the nine bitcoin ETFs (sans GBTC) have net spent nearly $29.32 billion on 533,919 BTC, now worth $33.56 billion.



That puts those funds almost 15% ahead of their net flows to date.



— David Canellis



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



<ul>
<li>ETH has now been <a href="https://ultrasound.money/">inflationary</a> for a month straight, on track to add $1.3 billion to the supply over the next year at current prices.</li>



<li>$158 million overall has been pulled from Arbitrum <a href="https://defillama.com/bridges/chains">bridges</a> in the past seven days, while $116 million has net flowed into bridges for rival Optimism.</li>



<li>Daily DEX <a href="https://defillama.com/dexs/chains">volumes</a> are at their lowest point since February: $2.71 billion yesterday compared to $15 billion highs in March.</li>



<li>BTC and ETH are doing their best to pare weekly losses, with BTC aiming to reclaim $63,000 as ETH eyes $3,000.</li>



<li>TON has flipped DOGE over the past week to take ninth <a href="https://www.coingecko.com/">place</a> by market cap, and now closes in on Lido Staked ETH.</li>
</ul>



<h2 class="wp-block-heading">Forget the yen&nbsp;</h2>



We’ve <a href="https://blockworks.co/news/empire-newsletter-succeeding-in-crypto">talked</a> about Metaplanet before, specifically after the Japanese company announced that it would copy <a href="https://blockworks.co/tag/microstrategy">MicroStrategy</a>’s bitcoin acquisition strategy.



On Monday, the company announced that it was making a “strategic treasury transformation” in the wake of the Japanese yen’s weakness.&nbsp;



ICYMI: Earlier this month, the Bank of Japan had to intervene to prop up the yen after it hit lows not seen in over 30 years.&nbsp;



This state of affairs led the company to adopt bitcoin as a treasury reserve asset. The firm plans to focus on buying bitcoin “instead of retaining the ever-weaker yen.”



Metaplanet could potentially use share issuances and other “strategic financial offerings” to buy up more bitcoin. “This approach is designed to be accretive on a bitcoin per share basis, underpinning shareholder value on a long term basis,” the firm said.



Mind you, this is a whole new ballpark for Metaplanet.&nbsp;



According to my napkin math, as David would say, the firm owns around 117 BTC. Metaplanet bought 97.85 BTC, its first purchase, at the end of April, and then added 19 BTC a few days ago, meaning that the company has spent over $7 million.



(That’s a drop in the bucket for MicroStrategy, which <a href="https://blockworks.co/news/microstrategy-second-convertible-senior-notes-offering">bought over $800 million</a> worth of bitcoin in a single purchase back in March.)



When Metaplanet first announced its bitcoin focus, I called it the MicroStrategy of Japan (with caveats, of course). But now I’m beginning to think that it could be more like a sibling of the MicroStrategy strategy.&nbsp;



As Metaplanet <a href="https://contents.xj-storage.jp/xcontents/33500/78d457c2/7534/4ed6/abe3/90f046c452cf/140120240510590390.pdf">points</a> out in a white paper released today, focusing on bitcoin allows the firm to protect itself from further currency depreciation, and potentially show the use case of bitcoin in the context of a publicly traded company.&nbsp;



While Saylor’s firm has <a href="https://blockworks.co/news/microstrategy-bitcoin-supply-rivals-blackrock-ibit">seen huge success</a> with its strategy, it has benefited from the bitcoin ETFs and overall bull run. The company hasn’t had to deal with currency issues, obviously, since it’s based in the US.&nbsp;



It’ll take time — and far more bitcoin buying — but Metaplanet’s strategy shift demonstrates its willingness to adapt to an uncertain financial environment.&nbsp;



It also shows an interesting way to do it: Turn to bitcoin.



— Katherine Ross



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



<ul>
<li>Crypto startups led by academics are <a href="https://news.bloomberglaw.com/crypto/crypto-vcs-turn-back-to-professor-coins-as-funding-rebounds">drawing renewed interest</a> from VCs, Bloomberg writes.&nbsp;</li>



<li>House Financial Services Committee Chair Patrick McHenry, R-N.C., said a measure focused on crypto market regulation will receive <a href="https://www.coindesk.com/policy/2024/05/10/us-houses-mchenry-says-bill-on-crypto-market-structure-will-get-floor-vote/">a floor vote</a>, according to CoinDesk.&nbsp;</li>



<li>More than 1 million Pudgy Penguin plush toys have been <a href="https://twitter.com/LucaNetz/status/1789729571262042328">sold</a> in the past year, according to project CEO Luca Netz.&nbsp;</li>



<li>Chinese and US government officials are set to begin <a href="https://www.washingtonpost.com/technology/2024/05/13/us-china-ai-talks/">talks</a> on artificial intelligence in Geneva today, per the Washington Post.&nbsp;</li>



<li>A phishing attack victim’s funds —&nbsp;some $71 million worth of WBTC —&nbsp;were <a href="https://twitter.com/lookonchain/status/1789699903041700023">returned</a> by the attacker, according to X account Lookonchain.&nbsp;</li>
</ul>



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



Sexual misconduct allegations have been raised against Neel Somani, the founder of Eclipse. He denied the claims and <a href="https://twitter.com/neelsalami/status/1788658998411133067?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet">announced</a> he was stepping back from being the “public face” of Eclipse.&nbsp;



I bring this up not because I want to talk about the Somani allegations, but because I think that there’s an interesting discourse bubbling under all of this: Where’s the transparency?



Crypto is hailed for prioritizing transparency, and I think that partially bled into the aforementioned scenario as women spoke out on X about their alleged experiences with Somani.



But I think there’s still room for improvement. Haseeb Qureshi, managing partner at Dragonfly, <a href="https://twitter.com/hosseeb/status/1788710996196065575?s=46">said</a> his firm passed on investing in Eclipse because they heard rumors about Somani’s alleged behavior.&nbsp;



When asked if the firm said anything, Qureshi said they let “a couple folks” know about the rumors, and they also declined to invest. I agree with what Qureshi added, which is that it’s not okay to “put someone on public blast over rumors.”



Qureshi said his firm heard about the “longstanding pattern of behavior” with “minimal diligence.” If that’s the case, why did it take women posting on X for these rumors to go public?



That’s what I’ve spent the weekend mulling over, and I’m not sure there’s a clear or good answer.



But I pose this to you: If crypto wants to be transparent, and it wants to be different from places like Wall Street, then how can we balance more transparency without spreading baseless rumors?&nbsp;



This isn’t just about the money or the technological promises — there are people’s lives to think about as well. They deserve to be informed and protected.



— Katherine Ross



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Empire Newsletter: Not all ETFs buyers were created equal

Crypto’s love affair with derivatives drags on.&nbsp;



In the week’s largest funding round, Arbelos Markets raised $28 million for a principal trading firm specializing in crypto derivatives. Dragonfly led the seed round, which also drew participation from FalconX, Circle Ventures, Paxos and Deribit, among others.



Derivatives are financial contracts that base their value on an underlying asset. Put and call options are examples, as are futures contracts. DeFi pioneered the concept of perpetual futures, a crypto-native innovation that lets futures contracts be traded without an expiration date. Huge leverage, huge risk.&nbsp;



But Arbelos is less degen and more institutional. In a press release, co-founder and CEO Joshua Lim <a href="https://www.prnewswire.com/news-releases/arbelos-markets-raises-28-million-to-rebuild-trust-build-next-generation-crypto-derivatives-trading-business-to-provide-liquidity-for-crypto-capital-markets-302139249.html">called</a> it a “smart principal risk-taker with a strong balance sheet and a flexible product.” Former FTX.US CEO Brett Harrison is building a product in a similar vein.&nbsp;



Read more: <a href="https://blockworks.co/news/brett-harrison-architect-fundraise">Ex-FTX US exec Brett Harrison’s startup raises $12M for derivatives brokerage</a>



But Arbelos is not a brokerage. It’s a firm that provides liquidity and infrastructure for the trading of assets including <a href="https://blockworks.co/tag/derivatives">derivatives</a>. The firm will use the fresh funds to “improve its quant trading infrastructure, hire top talent, and expand its access to new markets and its range of products,” Arbelos said in a press release.



Arbelos seems to be pitching itself as more trustworthy and grown-up in contrast to the crypto firms that played fast and loose with risk controls and blew up the market in 2022.&nbsp;



“Post the collapses of last cycle, Arbelos is rebuilding the DNA of the modern primary dealer, and in the process they’re returning trust &amp; transparency to the space at large,” Dragonfly’s Omar Kanji <a href="https://x.com/TheOneandOmsy/status/1788249516811927956">wrote</a> on X.



<h2 class="wp-block-heading">Founders Fund backs zero-knowledge proof startup</h2>



Peter Thiel-backed Founders Fund led a $13.2 million round in Lagrange. Archetype Ventures, 1kx, Maven11, Fenbushi Capital, Volt Capital, CMT Digital and Mantle Ecosystem Fund also contributed.



Lagrange says it’s building a “hyper-parallel ZK coprocessor.” In plainer terms, Lagrange is trying to apply privacy-preserving <a href="https://blockworks.co/tag/zero-knowledge-proof">zero-knowledge proofs</a> in a way that can handle tons of data — as blockchains tend to do.&nbsp;



Lagrange has launched zk light clients for Ethereum rollups as an actively validated service on EigenLayer.&nbsp;



<h2 class="wp-block-heading">Other notable funding news</h2>



<ul>
<li>AgriDEX, a platform for the tokenization of agricultural commodities, <a href="https://x.com/AgriDexPlatform/status/1788572073704481217">disclosed</a> a $5 million raise.&nbsp;</li>



<li>Blockchain data access protocol Lava Network <a href="https://x.com/lavanetxyz/status/1787879172687503635">announced</a> a strategic $11 million raise.&nbsp;</li>



<li>Solana-based game developer Seeds Labs <a href="https://cointelegraph.com/press-releases/bladerite-game-developer-seeds-labs-raises-12m-seed-funding-strategically-building-on-solana">raised</a> $12 million.</li>
</ul>



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Funding Wrap: Arbelos raises $28M for derivatives-focused exchange

If you’ve been pining for the opportunity to have your favorite photos replicated onto a digital Reebok sneaker, you are in luck.&nbsp;



On Friday, the sports brand announced a new feature in partnership with Futureverse called “Reebok Impact” — an AI-powered tool where users can send a photo via Instagram direct message and in return receive “a custom sneaker in the colors and style of the image.”



Users can create up to four pairs for free and send the file to games like Fortnite and Roblox.&nbsp;



Leveraging AI creates an easy-to-navigate user experience that meets sneaker fans where they are. The future of fashion has arrived, and this is only the beginning,” Futureverse co-founders Shara Senderoff and Aaron McDonald said in a statement.&nbsp;



Reebok is the latest to jump into the digital fashion game. Parent company Adidas <a href="https://blockworks.co/news/web3-branding-adidas-on-chain">announced a “long term collaboration”</a> with move-to-earn app STEPN last month, intended to bring Adidas sneaker NFTs to the platform.&nbsp;



Corporate rival Nike this week also announced new developments in their digital wearable business. .SWOOSH, Nike’s NFT platform now allows users to create their own designs and enter a competition to make their digital shoe real.&nbsp;



Reebok is not offering users the ability to purchase physical pairs of their “Reebok Impact” sneakers, but the company said using Reebok Impact will come with an “incentive” to make some real-life purchases.&nbsp;



<h2 class="wp-block-heading">Is Onchain Summer the new DeFi Summer?</h2>



The so-called “DeFi Summer” of 2020 saw a massive surge in activity with the rise of liquidity mining and yield farming. Now, <a href="https://blockworks.co/tag/base">Base</a> hopes its second-annual Onchain Summer will <a href="https://blockworks.co/news/base-kicks-off-onchain-summer">bring a similar sense of excitement</a> and innovation to the space.&nbsp;



The event kicks off next month with a four-week hackathon. Base says it has 600 ETH to spend on prizes and grants. Learn how to apply <a href="https://base.mirror.xyz/HoH9cZVi8CMdvxVUNjvOzceUPVQcVZvvkf8ZbCOVOco">here</a>.&nbsp;



<h2 class="wp-block-heading">One interesting stat:&nbsp;</h2>



<ul>
<li>If you thought <a href="https://blockworks.co/tag/meme-coins">memecoins</a> were over, think again. Memecoin trading shop Pump.fun has made <a href="https://blockworks.co/news/having-fun-pump-fun">around $500,000 in revenue</a> in the past 24 hours alone. That’s about double Uniswap’s profit, <a href="https://defillama.com/">per</a> data from DeFiLlama.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">In other news:&nbsp;</h2>



<ul>
<li>Creator-driving publishing and newsletter operation Paragraph acquired Mirror, an Ethereum-based decentralized content shop, for an undisclosed amount.&nbsp;</li>



<li>The Sandbox is partnering with Virtual Brank Group and ITV studios to create a new Web3 gaming experience based on NBC’s “The Voice.”</li>



<li>Digital fashion house <a href="https://www.draup.xyz/">Draup</a> is launching a new collection focused on internet trends. Bring on the influencers. (Well, maybe.)</li>
</ul>



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Web3 Watch: Reebok jumps into digital wearable game 

Marc Taverner

Bitcoin is over 15 years “old,” and more and more companies and brands now accept the cryptocurrency as a way of payment. 



But for most people, paying with bitcoin is as familiar as paying with galactic credits.&nbsp;



The truth is bitcoin as it is now won’t be used to buy your coffee. But it might be funding a company that would change your life — which is why we need to give it some room to be used.



By design, bitcoin is scarce. This makes it a reliable store of value, and therefore, people want to be allowed to use it. And as bitcoin is used less for everyday transactions (your coffee, for example), it is becoming increasingly popular as a means of exchange in other ways; like strategic investments in startups by funds, VCs and angel investors. We know this because we’ve seen more startups look for providers to exchange bitcoin for fiat currency in order to run their operations (like paying salaries and office rent).



We have also seen an increase in large institutional investors purchasing bitcoin as an alternative investment, looking for ways to diversify their portfolios and seek returns that hedge against market volatility.&nbsp;&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/bitcoins-21-million-limit-myth">Bitcoin’s 21 million limit is a boomer myth</a>



And, of course, we’ve seen the popularity as a result of the recently approved BTC ETFs, with BlackRock making itself one of the largest purchasers of bitcoin ever. As of <a href="https://www.blackrock.com/us/individual/products/333011/ishares-bitcoin-trust">May 2024</a>, BlackRock&#8217;s iShares Bitcoin Trust had accumulated more than 274,000 bitcoin (worth, at time of writing, around $16 billion).



For these reasons, bitcoin is clearly now seen as a viable investment opportunity for major players. And in turn, it is time to be concerned that big players may be monopolizing the market to the detriment of the companies, founders and investors that still prefer to use bitcoin as a means of exchange.



The vice grip organizations like BlackRock have on bitcoin (in order to fill their ETFs) is a threat to bitcoin’s adoption simply because they limit the circulating supply of bitcoin.&nbsp;



At the same time, the price increases that these institutions drive make bitcoin an even more interesting asset to invest with and hold. It’s bitcoin’s catch-22, and it’s causing real issues already.&nbsp;



As more companies hold bitcoin on their balance sheets, they need the ability to transact and exchange it in a more liquid ecosystem. The ETFs, on the other hand, are designed to not “let go” of their bitcoin. So what’s next?



The only answer with any teeth is regulation. Not to deregulate the bitcoin ETFs themselves, but support the regulatory approval of more financial products leveraging bitcoin’s value and making ETFs not the only game in town.



Approval of other financial products that leverage other digital assets (like the impending decision on the Ethereum ETF) could also relieve some ETF buying pressure. And the licensing and approval of more fiat to bitcoin payments and exchange rails (so the way to access bitcoin is not just through a brokerage), could also help get more bitcoin back on the market.&nbsp;



Within the Web3 ecosystem, more and more investors are using crypto assets to back promising startups. Some many great projects and initiatives are already funded with BTC or other stablecoins, and we should see more of them in the future.&nbsp;



But in order to make this happen, we need to make sure there is enough bitcoin circulating in the market. That requires more financial products with different buying models and different digital currency backing, as well as more access to mediums of exchange so that investors and companies funding their companies with bitcoin can still grow.&nbsp;



Best of all, the BlackRocks of the world should be on board with this plan — if their bitcoin ETFs were any indication, there’s only growing demand for digital currency investment products.



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


<div class="wp-block-post-author-biography">Marc Taverner is the CEO and co-founder of XEROF, a leading Swiss financial services provider specializing in cryptoassets. He has more than 30 years of experience in the technology industry and now pioneers the use of cryptoassets for liquidity and efficiency in financial services worldwide.

Previously, Marc founded InComm Conferencing, a company focusing on detailed events ranging from large-port calls, operator-assisted conferences, webcasts, medical education events, investor relations calls, and onsite production. He successfully sold the company to join the C-suite of the leading European Bitcoin and blockchain firm, Bitfury. Marc then directed INATBA, one of the largest multi-stakeholder blockchain trade associations in Europe, backed by the European Commission and Abu Dhabi Global Market. During his tenure, he led the multi-stakeholder response to the EU cryptoasset regulation MiCA. Marc is also an angel investor and advisor to several web3 and crypto companies.</div>


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BlackRock and other bitcoin ETFs rob bitcoin of its room to grow

A month ago, Monad raised $225 million on the promise of a high-throughput Ethereum-compatible layer-1 blockchain. It’s now putting those funds to use on the hiring front.



Kevin Canlas announced he joined the protocol as a senior designer. Canlas has previous experience in similar roles at the NFT collection Isekai Meta and smart contract security firm Cyfrin.&nbsp;



At Monad, Canlas will be “leading internal designs and helping startups build on the Monad ecosystem,” he <a href="https://x.com/kvncnls/status/1788547718195069432">said</a> on X.



Read more: <a href="https://blockworks.co/news/paradigm-leads-monad-parallel-evm-fundraise">Paradigm leads $225M round for high-throughput blockchain Monad</a>



Also this week, SungMo Park joined Monad as its APAC lead and head of Korea. Park previously served as head of business for Asia Pacific and for Korea during a nearly two year stint at Polygon Labs.



Park also becomes Monad’s first hire in the APAC region, he <a href="https://x.com/sungmo_nad/status/1788569126832848902">said</a> on X.&nbsp;



Hear more: <a href="https://blockworks.co/podcast/0xresearch/98ca33d6-6303-11ee-a8d9-e7be60ee99b1">Monad: Unleashing parallel execution on the EVM</a>



Monad isn’t done hiring yet either. Charlie Noyes, of lead Monad investor Paradigm, <a href="https://x.com/_charlienoyes/status/1788666277709402570">advertised</a> an open role for a senior crypto economics researcher at the protocol. Monad currently <a href="https://boards.greenhouse.io/monad">lists</a> twelve job openings in total, mostly in its engineering department.&nbsp;



<h2 class="wp-block-heading">Mini-Q&amp;A: What crypto firms are looking for</h2>



Blockworks spoke with Stephen Moskowitz, founder and managing partner of Web3 recruiting firm Pyxis, about his recent observations on the crypto labor market.&nbsp;



Keep reading for excerpts from Blockworks’ interview with Moskowitz, edited for brevity and clarity.



_________________________________________________________________________________________



Blockworks: What sorts of roles are most in-demand at the moment?



Moskowitz: Almost every single company in crypto right now is trying to hire either a head of marketing or a [chief marketing officer], and there&#8217;s a huge supply-demand imbalance there. There’s just a lack of crypto-native marketing talent.&nbsp;



What I am seeing happen is that there&#8217;s a lot of title inflation in crypto, so people can go out with a head of marketing title, and they end up hiring someone that is coming from maybe a marketing manager or marketing lead type of role, or maybe they&#8217;ve got a couple of years of experience, and those people also might be more crypto-native, like someone coming out of school who spent a couple years in marketing.&nbsp;



I think that those people are gonna be the next crop that kind of rises up as opposed to very senior Web2 people moving into Web3. Maybe at the CMO level that might happen if they don&#8217;t need someone quite as native, but if they want somebody who’s tweeting and more like an [individual contributor]-level role, I think that it’s gonna have to be the junior talent that steps up into these more senior titles because there just aren&#8217;t enough of these people that exist.&nbsp;



<h2 class="wp-block-heading">Other notable hiring news</h2>



<ul>
<li>Wyatt Lonergan, the head of Circle Ventures, <a href="https://x.com/Wyatt_Lonergan/status/1788959345843019805">departed</a> the firm.</li>



<li>Polygon Labs head of DeFi Jack Melnick <a href="https://x.com/jackmelnick_/status/1788590852303908994">announced</a> he’s left the company.</li>



<li>Elisha Aswani <a href="https://www.linkedin.com/posts/elishaaswani_keepbuilding-activity-7191702040639586306-Y1Eo/?utm_source=share&amp;utm_medium=member_desktop">left</a> a growth role at Binance.</li>
</ul>



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Crypto Hiring: Monad is using its $225M haul to load up on talent

Molly Jane Zuckerman

Jeff Albus

US presidential candidates on both sides of the two-party spectrum are taking advantage of the crypto industry.



You’ll notice how I didn’t say that crypto will be a hot button topic this election season, or that the crypto space will play any sort of role in shaping election discourse.&nbsp;



No. It’s clear to me that some of the main players in this presidential race are planning to exploit the crypto world for money and votes — and those in crypto should stop playing along.



Why should favorable cryptocurrency legislation take precedence over all else? Perhaps you really believe that the financial system is broken, and that a path forward for cryptocurrency in the US is the best way to create a new, more egalitarian society that will allow all to flourish.&nbsp;



But that’s not what I see.&nbsp;



What I see is a small number of wealthy individuals, who made that wealth from cryptocurrency, looking for the government to let them continue growing that wealth unfettered.



<a href="https://twitter.com/twobitidiot/status/1788389754502856707?s=46&amp;t=HJ9nSw8K9AtRcTq80T7XVw">Among diehard crypto evangelists right now</a>, “voting for crypto” means voting Republican for president. According to this side of the debate, any other decision will virtually assure the death of the American crypto industry.&nbsp;



This fear (true or not) has led some major personalities in Web3 to push crypto supporters into becoming single-issue voters. Their message is clear: Choose your 2024 candidates based solely on their cryptocurrency stance, or else.



In other words, Americans should prioritize their own selfish financial interests over broader societal and ethical concerns. When you promote the idea of voting for America’s crypto industry above all else, you’re deciding to ignore all of the other issues that are really at stake this election season — healthcare access, Social Security, gun legislation, women’s rights, LGBT issues, immigration, to name a few.&nbsp;&nbsp;



I want to be clear — I do not care if you vote Republican, Democrat, or third-party, as long as you care about the issues at stake, and truly believe that the candidate in question is representative of your views. But voting for a candidate you would not otherwise support, simply because they favor the deregulation of a sector in which you hold a profit motive, is a compromise that you should not make.



<h2 class="wp-block-heading">Crypto isn’t political by accident</h2>



Cryptocurrency has undeniably (and perhaps unfortunately) become a partisan issue.



Blockchain technology, which underpins the entire crypto industry, is neither inherently good or bad. But it’s the actions of individuals and what they do with this technology that has drawn regulatory scrutiny over the years. This has transformed a neutral technology stack into a deeply partisan issue, with sharply divided views across party lines concerning its integration into the American financial system and beyond.



On the left side of the political spectrum — the same side already in favor of stricter financial regulations — politicians often place crypto against a global backdrop of scams, money laundering and market manipulation to strengthen their calls for oversight. Their tagline is to keep consumers safe.



Lawmakers on the right — who already favor less financial regulation as a rule — instead posit that intense crypto regulation will cripple innovation and impede technological advancement. They say that their aim is to keep American innovation moving forward at a brisk pace, far ahead of other countries like China.&nbsp;



However, their supposed motivations are arguably applicable only during the election season. Because what all politicians actually want is your attention, your money, and ultimately your ballot. As with most issues, when the time comes, it is unlikely that much in the way of meaningful change will come from either side of the aisle. Instead, it will be the actions of the innovators within the crypto space that move the needle forward — which you would think that anyone who truly supports a limited government would appreciate.



The very idea that crypto needs to be “voted” into office has led to the platforming of some very unsavory people who really have nothing to do with crypto at all —&nbsp;besides a shared desire to solicit donations from this niche, newly rich subset of Americans.



Vivek Ramaswamy <a href="https://messari.io/mainnet/videos/fireside-with-presidential-candidate-vivek-ramaswamy">gave a fireside chat</a> at Messari’s Mainnet last fall, promoting his presidential crypto plan a few months before he dropped out of the race. Consensus will have <a href="https://www.coindesk.com/policy/2024/05/07/robert-f-kennedy-jr-a-pro-crypto-presidential-candidiate-to-appear-at-consensus-2024/">Robert F. Kennedy Jr. speak</a> this year, announcing the news with a headline calling him a “pro-crypto presidential candidate.” I can think of a lot of other modifiers for RFK Jr. that are more headline-worthy than his stance on crypto. 



And most importantly, Crypto Twitter has, for the most part, <a href="https://twitter.com/twobitidiot/status/1788389754502856707?s=46&amp;t=HJ9nSw8K9AtRcTq80T7XVw">widely embraced</a> former President Donald Trump’s words of support for NFTs and crypto. And far be it for me to say whether that support is genuine, or more largely based on the fact that he&#8217;s made millions of dollars selling NFTs branded with his own image.



Backing these candidates simply because they seem to make positive noise about crypto isn’t taking back the power from Wall Street or helping make the world a more financially equitable place —&nbsp;it’s falling for empty campaign rhetoric.&nbsp;



The idea that any presidential (or gubernatorial or senatorial) candidate is trying to win favor with the crypto crowd because they truly believe in crypto is laughable. These candidates are looking for crypto money, nothing more and nothing less. Those in crypto who support such candidates are either willing to pretend that these officials understand even the basic strokes of how crypto works under the hood (let alone its implications for the broader frameworks of finance and democracy), or they are willing to compromise their morals and ethics for the mere possibility of moon-making crypto legislation in the future.



As the one, big, obvious example: If you believe that Donald Trump will truly support the crypto industry, you have to be willing to overlook his judicially acknowledged sexual assault charges, overt institutional fraud and genuine attempts to overthrow American democracy when you cast your vote in November.&nbsp;



Is cryptocurrency really that important to you?



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



Molly Jane Zuckerman is the opinion editor at Blockworks. She previously led educational content at CoinMarketCap and ran the news desk at Cointelegraph. Molly Jane is now based in New York after almost a decade in Russia, and can talk your ear off about Russia lit and detective novels. 



Jeff is an editor at Blockworks, based in the United States. He has been a part of the blockchain space for over a decade, most recently working as US news editor at Cointelegraph. His areas of focus include empowering artists and creators through technology, using proof-of-participation methods to reward self-improvement, reducing the effectiveness of Sybil attacks, seeking transparent equity for disadvantaged communities, and exploring fairer models of world governance.

Only a fool would vote on crypto alone

The Securities and Exchange Commission asked a court to deny Coinbase’s motion for an interlocutory appeal on Friday.&nbsp;



The regulatory agency and the crypto exchange have been locked in a legal battle for nearly a year after the agency charged Coinbase with operating as an unregistered exchange and alleged that its Staking program was violating securities laws.



“Interlocutory review is not warranted simply because Coinbase proposes a new legal test and disagrees with the Court’s rejection of that test, nor can it be supported by Coinbase’s desire for quicker appellate review of its invented test,” the SEC said in the filing.&nbsp;



The <a href="https://blockworks.co/tag/sec">SEC</a> further argued that there’s no “substantial ground for difference of opinion,” because that would mean there is more than the obvious disagreement between the two parties. Coinbase, the SEC said, has yet to create “substantial doubt” about the court’s ruling.



“It is also possible that <a href="https://blockworks.co/tag/coinbase">Coinbase</a> simply does not like the answer provided for years now by the SEC and the courts, having decided to structure its business in ways that now may make it difficult or costly to comply with the securities framework put in place by Congress and the SEC over our capital markets for nearly a century,” the SEC wrote.&nbsp;



Read more: <a href="https://blockworks.co/news/judge-rules-against-coinbase-sec-dismissal">Court largely rules against Coinbase’s dismissal efforts in SEC case</a>



“But Coinbase’s desire to change the rules, to do so quickly, and to enlist the federal judiciary in this endeavor, supply no basis to certify an appeal,” the filing continued.



Coinbase Chief Legal Officer Paul Grewal, in a post on X, pushed back against the response. He said that the SEC “couldn&#8217;t help contradicting its own arguments for the same kind of appeal in Ripple.”



<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">Today <a href="https://twitter.com/SECGov?ref_src=twsrc%5Etfw">@SECGov</a> filed its response to our request to file an interlocutory appeal with the 2nd Cir. The Commission couldn&#39;t help contradicting its own arguments for the same kind of appeal in Ripple. Here&#39;s just example&#8211;compare what they said before to what they say now. 1/3 <a href="https://t.co/LkbXefV07N">pic.twitter.com/LkbXefV07N</a>&mdash; paulgrewal.eth (@iampaulgrewal) <a href="https://twitter.com/iampaulgrewal/status/1789033328936710636?ref_src=twsrc%5Etfw">May 10, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The SEC’s response comes after Coinbase filed for an interlocutory appeal last month. Coinbase wanted a higher court to review whether or not the SEC can <a href="https://blockworks.co/news/coinbase-dismissal-denial-staking-and-securities">apply Howey to crypto transactions</a>.&nbsp;



The company noted that the amount of differing opinions — from regulators to politicians on Capitol Hill — shows the “difficulty of the subject matter.”



Coinbase and the SEC have been engaged in multiple legal battles since last year after the SEC <a href="https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal">served</a> the former with a Wells notice last March. Coinbase <a href="http://sec.gov/cgi-bin/browse-edgar?company=&amp;CIK=&amp;type=S-1&amp;owner=include&amp;count=40&amp;action=getcurrent">took</a> to the courts afterward, asking for answers from the regulator. Then, in June, the <a href="https://blockworks.co/news/sec-sues-coinbase">SEC filed its suit</a>.&nbsp;



Last December, the SEC denied Coinbase’s rulemaking petition, <a href="https://blockworks.co/news/coinbase-to-sec-rules-for-securities-just-do-not-work-for-digital-assets">which it filed in 2022</a>. The petition asked the regulator to create rules for crypto and argued that the current securities laws don’t work for the blossoming industry. The SEC, notably, had made the opposite claim and it shows through its regulation-by-enforcement approach under Chair Gary Gensler.&nbsp;



Read more: <a href="https://blockworks.co/news/coinbase-will-rechallenge-sec">Coinbase says it will challenge SEC crypto rulemaking rejection</a>



Coinbase, in a ruling last month, was mostly denied its motion to dismiss. However, the court found that the SEC’s claims against its wallet service — the SEC alleged that it acted as an unregistered broker by offering the service — were unfounded.&nbsp;



“The factual allegations concerning Wallet are insufficient to support the plausible inference that Coinbase ‘engaged in the business of effecting transactions in securities for the account of others’ through its Wallet application,” Judge Katherine Polk Failla wrote.



Failla said that the SEC could move forward with its claims against the Staking service and Coinbase’s role as an unregistered exchange. The SEC, she said, “plausibly alleged” that Coinbase violated parts of the security act.&nbsp;



The reasoning, she said, is because Coinbase’s “managerial effort” could meet Howey’s standards, which would make it a security offering.



Updated May 10, 2024 at 5:17 pm ET: Added comment from Coinbase CLO.



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SEC asks court to deny Coinbase’s motion for interlocutory appeal

Following the recent reduction in bitcoin mining rewards, the largest public bitcoin miners have begun to hone in on fresh strategies in an attempt to maintain a competitive edge.



Segment standouts continue to tout the importance of greater scale and revenue diversity, with one prepared to jump with both feet into high-performance computing.



<h2 class="wp-block-heading">Marathon touts growth, revenue diversity plans&nbsp;</h2>



Marathon Digital said it plans to have half its revenue come from outside of <a href="https://blockworks.co/tag/mining">mining</a> over the long term.



Such targets are consistent with industry-wide efforts to diversify revenue streams after per-block mining rewards <a href="https://blockworks.co/news/bitcoin-halving-2024-occurs">dropped from 6.25 BTC to 3.125 BTC on April 19</a> as part of the roughly quadrennial Bitcoin halving event.&nbsp;&nbsp;



<a href="https://blockworks.co/tag/marathon-digital">Marathon</a> debuted an immersion cooling system, as well as firmware and control board, in March. A month prior, it introduced a transaction submission service on Bitcoin called Slipstream, that executives expect will help the company capture more transaction fees.



North America’s largest miner by self-mining capacity also has a huge balance sheet, and talks about it often.&nbsp;



Its cash and bitcoin holdings were worth a combined $1.6 billion, as of March 31. Such resources have allowed the Florida-based miner to <a href="https://blockworks.co/news/marathon-digital-aquisition-bitcoin-halving">acquire sites in Nebraska and Texas</a> so far this year.



“If we were to construct such sites on our own, it would have taken us more than a year to energize and likely cost twice the amount on a per megawatt basis,” Chief Financial Officer Salman Khan said during a Thursday earnings call.



Marathon, with an energized hash rate of 29.9 exahash per second (EH/s) as of April 30, is on track to reach 50 EH/s by the year’s end, executives noted.



Read more: <a href="https://blockworks.co/news/marathon-post-halving-expansion">A bitcoin mining giant is ahead of schedule on its post-halving expansion</a>&nbsp;&nbsp;



CEO Fred Thiel said on the Thursday call that he expects more opportunities to continue buying capacity, adding, “we’re not going to stop at 50 exahash.”



In addition to acquiring sites for scale, its latest buys mark a shift from Marathon outsourcing its operations to third-party hosting providers to owning and operating sites.



Such control can reduce costs and puts any operational complexities into the owner’s hands.



Now, 54% of Marathon’s 1.1 gigawatts-capacity mining portfolio is housed on sites it owns and operates — up from 3% before the start of this year.



Despite that improvement, this is an area rival miner Core Scientific has Marathon beat.&nbsp;



<h2 class="wp-block-heading">Core ready to pull HPC lever</h2>



Sure, Core Scientific’s balance sheet, comprising $98 million in cash as of the end of March, pales in comparison to some of its competitors. The company is required to sell all the bitcoin it mines as part of the terms upon emerging from bankruptcy in January, limiting the BTC it can hold.



Core Scientific is also behind Marathon in self-mining energized hash rate, with 20.4 EH/s as April’s end.



Read more: <a href="https://blockworks.co/news/adam-sullivan-core-scientific-bitcoin-halving">Core Scientific CEO: Machine buys, deleveraging key around Bitcoin halving</a>



But the Texas-based company’s “significant advantage” over industry peers is its exclusive control over its in-demand high-power data center infrastructure, Core Scientific CEO Adam Sullivan said on a Wednesday earnings call.&nbsp;&nbsp;



“We own and control every structure, every transformer and every concrete pad in our seven mining data centers,” he said. “We now believe our infrastructure is well positioned to take advantage of the enormous demand for power and infrastructure required for high-performance compute.”



That HPC segment is “the next major growth opportunity for our business,” Sullivan added. Others, like Hut 8 Mining and Hive Digital Technologies, have <a href="https://blockworks.co/news/bitcoin-miners-ai-computing">also gravitated toward this space</a>.



Read more: <a href="https://blockworks.co/news/hut-8-diversification-around-bitcoin-halving">Bitcoin miner Hut 8 doubles down on diversification, discipline around halving</a>



Core Scientific said in March that it would lease up to 16 MW of capacity in its Austin data center to cloud provider CoreWeave. Possible revenue from the deal exceeds $100 million, the company said at the time.



More than 500 MW of the miner’s total 1.2 gigawatts of contracted power can be utilized for alternative compute workloads, executives noted.



“We can offer clients a shorter time to power as compared to them waiting potentially three to five years for new greenfield data center capacities to come online,” Sullivan said. “We see this as a powerful mix that provides the potential for multi-year, high visibility, cash flows to buffer against the inherent volatility of bitcoin pricing.”



Compass Point Research &amp; Trading analyst Joe Flynn said in a Thursday research note that Core Scientific’s stock can “re-rate” upon the company retrofitting its existing capacity to service HPC clients.



After all, annual revenue from such deals are estimated at between $1.5 million and $1.7 million per megawatt, he wrote.



Core Scientific’s price of about $3.50 was 10% down on Friday at 12 pm ET. The shares are roughly flat year-to date.&nbsp;



Flynn’s price target for Core Scientific is $8.50, and he maintained a buy rating for the stock.



<h2 class="wp-block-heading">Riot and CleanSpark continue expansion</h2>



Public mining competitors Riot Platforms and CleanSpark, meanwhile, are also among the industry planning to capitalize on post-halving opportunities.



Riot Platforms intends to grow its self-mining hash rate capacity from 12.6 EH/s on April 30 to 31 EH/s by the end of 2024. It <a href="https://blockworks.co/news/riot-plots-hash-rate-growth">ordered 66,560 MicroBT machines</a> for $290.5 million in December and 31,500 more miners in February.



The company, which operates primarily in Texas, also appears better positioned to benefit from power curtailment revenue as temperatures start to increase.



<a href="https://blockworks.co/tag/riot-blockchain">Riot</a> is able to take advantage of periods of high volatility in power markets, as was experienced during Texas heat waves last summer.&nbsp;



It received $31.6 million in power and demand response credits last August, for example.



“In a declining hashprice environment post-<a href="https://blockworks.co/tag/bitcoin-halving">halving</a>, revenue generated from bitcoin mining on a per megawatt hour will decrease, giving Riot more windows of opportunity to economically curtail power and participate in demand response,” Riot CEO Jason Les told Blockworks. “We view our contracts as being a hedge against declining mining break-evens after halving because of our ability to sell power anytime the price of power exceeds mining break-even amounts.”



Meanwhile <a href="https://blockworks.co/tag/cleanspark">CleanSpark</a>, just minutes before its Thursday earnings call, said it agreed to acquire 75 MW worth of mining sites in Wyoming for $18.75 million.



The pending purchase comes after the company bought <a href="https://blockworks.co/news/crypto-miners-hash-rate-bitcoin-halving">three bitcoin mining facilities in Mississippi</a> earlier this year.



CleanSpark CEO Zach Bradford said Thursday the company intends to be “one of the most measured and active acquirers in the industry.”



Scale allows CleanSpark to better cover overhead costs with bitcoin production margins so that profits stemming from additional capacity go straight to its bottom line, he added.



“Many try to find a single metric that levels the playing field between small and large miners, but the playing field isn’t level,” Bradford said. “A company that has scale can achieve escape velocity with much lower incremental inputs.”



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Rival miners Marathon, Core Scientific each think they have an edge over peers

Santiago Roel Santos

<h2 class="wp-block-heading">Why AI needs crypto</h2>



Crypto is very good at one thing: getting humans to do one thing. This will become incredibly important in an AI world.&nbsp;



Technology is deflationary and creates abundance, but it is also a centralizing force. Look at Google (<a href="https://www.proceedinnovative.com/blog/search-engine-market-share-2023-2024/#:~:text=According%20to%20statistics%20from%20Statcounter,Bing%20%E2%80%93%203.31%25">owns 90% of search</a>) and social (TikTok, Meta).&nbsp;



Chris Dixon documents this phenomenon well in his latest book “Read Write Own.” Unlike internet protocols (TCP/IP, HTTPS, SMTP), internet service companies like Google and Meta have amassed monopoly-like market shares. These companies own your data and, after achieving scale, adopt monopoly-like practices to squash competition. Meta shut down their App Store, OpenAI did the same, and Google has crushed multiple calendar-app startups.&nbsp;



In theory, you can use other social media platforms, but none achieve the same level of network effects as TikTok or Meta.&nbsp;



Read more: <a href="https://blockworks.co/news/ai-monopoly-privacy-blockchain">AI has a monopoly on power and privacy. Blockchain fixes this.</a>



The centralizing effect of technology may be even greater with <a href="https://blockworks.co/tag/artificial-intelligence">AI</a>. I recently came across Anthropic’s CEO interview on CNBC where he estimates “we&#8217;re going to see models trained in the next year are going to be about $1 billion…and then 2025, 2026, we&#8217;re going to go to $5 billion or $10 billion. And I think there&#8217;s a chance it may go beyond that to $100 billion.” Few companies will afford that.&nbsp;



Perhaps more importantly, companies that own the data will have an edge to train models. A startup may be able to raise a couple billion, but they won’t be able to easily replicate clinical trial data or years of user behavior data.



The promise of technology is that it is democratizing and lowers the barriers for companies to reap the benefits. This narrative rings true with AI&nbsp; —&nbsp;after all, companies will be able to embed LLMs and other forms of AI (robots, automation processes etc)&nbsp; to unlock productivity gains. Like trickle-down economics, trickle-down tech will benefit many. But the centralizing effect of technology will likely be no different and perhaps even greater with AI.&nbsp;



So where does crypto fit into all of this?



Crypto has proven to be very good at getting humans to do a specific action which benefits the overall network. From Bitcoin to DePIN, crypto networks are case studies on how to scale networks more efficiently by transferring the costs to do-it-yourself (DIY) participants incentivized to spend resources (time, hardware, compute) expecting to earn in return tokens which represent ownership in the network.&nbsp;



The challenge is that bootstrapping and scaling the supply side of networks can be very capex-intensive in these networks. Historically, this has been one of the reasons why there is network centralization. You have 1-2 ride-sharing companies and social media platforms. But when you radically lower the financial burden to bootstrap a network from a company/protocol to participants, then you level the playing field.&nbsp;



You can more easily overcome the cold-start problem networks face by attracting supply and demand because both sides are incentivized to earn tokens (i.e., ownership in the network).



Giving network participants a greater cut of revenue/profits will be the reason why crypto networks from DePIN to AI will <a href="https://blockworks.co/news/solana-depin-projects-with-real-world-utility">emerge as leaders</a> and will be able to displace incumbents.&nbsp;



One area I see this already playing out is in training —&nbsp;specifically, reinforced learning from human feedback (RLHF).&nbsp;



In short, AI models with human feedback are superior to AI models without it. The more RLHF you have, the better the model. Capturing human feedback can be very expensive. But again, crypto has proven to be good at getting people to do a specific action with token incentives, so we may be able to create systems that capture RLHF in greater scale and in a more cost-effective manner than traditional methods.&nbsp;



Instead of having one company to raise a ton of VC money to fund RLHF, a network can finance this with clever cryptoeconomics.



Crypto may also be crucial to minimize data selection for training bias (data is open, accessible and immutable in blockchains) and platform risk.&nbsp;



Look at Google’s Gemini as an example — one platform has many opinions on the data on which the models are trained. The bet is that companies/developers will want certainty that the models they are utilizing are as unbiased as possible and have cryptographic proofs that models are doing what they are being told.



The most exciting thing about this is that the impact crypto can have on AI is already being felt.&nbsp;



AI will be explosive. Its effect will be felt by everyone, but incumbents may capture even more value. Crypto offers an interesting and viable solution to counteract the centralizing force of technology and restore the original principles of the internet. I see a world where crypto —&nbsp; specifically, this idea of creating participatory networks — will become the de facto go-to-market mechanism for networks.&nbsp;



Crypto is the extension pack of the internet.



— Santiago Roel Santos



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



<ul>
<li>Bitcoin’s price is up over 3% to $63,000 early Friday.</li>



<li>Marathon mined 2,811 BTC last quarter, a decrease of over 30% from the previous quarter.</li>



<li>Pump.fun has brought in nearly $500,000 in revenue over the past 24 hours, per <a href="https://defillama.com/fees/simple">DefiLlama</a>.</li>



<li>Grayscale’s outflows have picked back up, with $43 million leaving the fund yesterday, according to data from <a href="https://farside.co.uk/?p=997">Farside</a>.</li>



<li>ETH’s price is up 2% to over $3,000, per <a href="https://www.coinbase.com/price/ethereum">Coinbase</a>.</li>
</ul>



<h2 class="wp-block-heading">Not selling is still holding</h2>



<a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s memecoin balance is piling up.



Nearly $200,000 in random tokens are parked in addresses linked to BlackRock’s onchain money market fund, BUIDL. New deposits come in every day.



To be clear, BlackRock is not buying memecoins, despite the spoofed Uniswap <a href="https://basescan.org/tx/0x08b85d42432c433fe160fd6310996da4502577f99b60591b4f0930e9c6af314c">trades</a> that suggest it had bought trillions of BOMEPEPE.



It’s long been tradition for memecoin holders, and maybe even the creators themselves, to direct funds to the wallets of popular figures.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/blackrock-ethereum-memecoins-tornado-cash-dusting">BlackRock clearly wants to take crypto seriously. Too bad it’s forever silly.</a>



Think of it as part hat-tip, part marketing spend — the onchain equivalent of renting a billboard inside a blockchain explorer.



BUIDL’s onchain history has seen more than 500 transactions but only about two dozen appear to be actioned by BlackRock itself.&nbsp;



BlackRock initially <a href="https://etherscan.io/tx/0xe71e19859070d965af84c4d6163a09974767563866729ef222762a851bc7faa1">funded</a> BUIDL with 1 ETH from Kraken and 200 USDC <a href="https://etherscan.io/tx/0xd08188e628719167fa76d1ba5d18c7dbab3110470d7b9c3cdf99ae8ee643c9cd">minted</a> directly via Circle. The fund then sent small amounts of USDC between itself, in early-to-mid March, apparently to warm up, about a week before the fund was formally announced.



Since then, Larry Fink’s firm, the world’s largest asset manager, has been interacting with Ondo Finance, which has been <a href="https://www.coindesk.com/markets/2024/04/30/blackrocks-buidl-becomes-largest-tokenized-treasury-fund-hitting-375m-toppling-franklin-templetons/">acquiring</a> BUIDL’s tokens as one of its reserve assets (there are <a href="https://etherscan.io/token/0x7712c34205737192402172409a8f7ccef8aa2aec">currently</a> 13 holders of BUIDL).&nbsp;



All while almost 300 different tokens have flooded BUIDL’s addresses, not just on Ethereum, but on any EVM-compatible chain with an analogous wallet, including Binance Smart Chain, Polygon and Avalanche.



Most of the tokens sent to BlackRock to date are worthless. But there are some with active markets, which gives them real value, and not all are strictly <a href="https://blockworks.co/tag/meme-coins">memecoins</a>. 



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/yC6WDUNDKUHIbWy26a2ETyGmcttn_BiCutjdaWuhmc540gjPOwN33q38WsganZHGVoci1g08S85mGhZ3NMv8XcaD93YJwmHolWYb2E3U66sUnLpVRfTNWOJCzpyDlcRs33HFFc9sXliSonqJML9DXJg" alt=""/><figcaption class="wp-element-caption">Caution is advised when looking into any of these tokens — their place in BlackRock’s wallet isn’t exactly an endorsement.</figcaption></figure>



BlackRock has been forced to hold more than $60,000 worth of UBXS alongside its legitimate stablecoin balance. UBXS is pitched as a utility asset for tokenized real estate app Bixos.&nbsp;



There’s also nearly $30,000 of ISP, which supposedly powers open-world, play-to-earn metaverse platform Ispoverse that can support virtual hackathons.&nbsp;



Although, I’m not sure it really helps perception of those projects to be placed alongside tokens like FINKWIF, NOODS, PEEON and BOBO MUMU.



Still, BlackRock hasn’t sold any of the tokens playing stowaway in its Ethereum wallet. Does that count for anything?&nbsp;



Probably not. Sad.



— David Canellis



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



<ul>
<li>Kraken is pushing harder for a <a href="https://www.bloomberg.com/news/articles/2024-05-10/kraken-battles-sec-over-investment-concept-wording-in-filing?embedded-checkout=true">dismissal</a> in its SEC lawsuit, Bloomberg writes.&nbsp;</li>



<li>Token projects are increasingly <a href="https://www.coindesk.com/business/2024/05/09/inside-cryptos-kol-economy-influencer-investors-get-special-treatment-in-token-deals/">turning</a> to online influencers for help, according to CoinDesk’s Danny Nelson.</li>



<li>Neel Somani, founder of Ethereum scaling startup Eclipse, <a href="https://twitter.com/neelsalami/status/1788658998411133067">says</a> he is “reducing” his role amid sexual misconduct <a href="https://twitter.com/jiwoo_jun/status/1788038821663178852">allegations</a> made against him.&nbsp;</li>



<li>Espresso and Polygon Labs are <a href="https://blockworks.co/news/espresso-polygon-partnership-rollup-interoperability">partnering</a> on rollup interoperability.</li>



<li>US airlines are expanding their <a href="https://www.nytimes.com/2024/05/10/travel/airlines-artificial-intelligence.html">use</a> of AI, according to the New York Times.</li>
</ul>



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



Pump.fun is exactly what Gary Gensler and the <a href="https://blockworks.co/tag/sec">SEC</a> are afraid of.&nbsp;



It’s also one of those things that is so unique to crypto — mixing fun with the potential to profit.&nbsp;



But it’s also risky, as Blockworks reporter Jack Kubinec <a href="https://blockworks.co/news/having-fun-pump-fun">pointed out</a> in the Lightspeed newsletter yesterday. Folks who go to casinos are probably of the same mindset as a lot of folks on Pump.fun, and for them, the risk is worth the potential reward.&nbsp;



For the SEC and <a href="https://blockworks.co/tag/gary-gensler">Gensler</a>, though, this is a scenario they claim they want to protect investors from. While Pump.fun says it prevents rug pulls or exit scams, it can’t stop shady people from doing shady stuff.&nbsp;



So while the SEC continues its crusade against companies that have said they want to — or have tried to — come in and register, I’ll sit back and watch crypto’s latest venture play out.



— Katherine Ross



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Empire Newsletter: How crypto can solve AI’s centralization problem

The TradFi world has been exploring more ways to use blockchain tech for years now.



But the sheer number of financial players involved in the latest proof-of-concept makes it different from most. Not to mention the size of the entities, and their approach.



Payment giants Visa and Mastercard are coming together with banks JPMorgan, Citigroup and others to test a so-called Regulated Settlement Network.&nbsp;



The proof-of-concept sets out to experiment with shared ledger technology to settle tokenized commercial bank money, wholesale central bank money, US Treasury securities and other tokenized assets, a Wednesday news release notes.



Read more: <a href="https://blockworks.co/news/digital-asset-summit-tradfi-crypto">Digital Asset Summit Day 2: Financial giants say they’re here to stay</a>



This project represents a new phase of the Regulated Liability Network. Launched in November 2022, the <a href="https://regulatedliabilitynetwork.org/wp-content/uploads/2022/11/The-Regulated-Liability-Network-Whitepaper.pdf">initiative</a> set out to demonstrate the use of shared ledger technology for regulated money movement on one platform.



The Securities Industry and Financial Markets Association (SIFMA) is set to manage the new proof of concept. Others involved include Swift, TD Bank, US Bank, USDF, Wells Fargo and Zions Bancorp.



Lamine Brahimi, co-founder of crypto platform Taurus, said he welcomes any initiative that puts cash on-chain at scale.&nbsp;



“The real benefits of tokenization will come when both the securities and the cash legs of a transaction are both on-chain,” he told Blockworks.



<h2 class="wp-block-heading">An evolution of projects</h2>



Financial players have long explored how it could unlock greater automation and more standardized data rails via blockchain tech while cutting costs and offering greater transparency.



Blockchain-focused proof-of-concepts and other tokenization efforts have seemed to ramp up in recent months.&nbsp;



JPMorgan’s blockchain arm Onyx last year <a href="https://blockworks.co/news/jpmorgan-tokenized-blockchain-portfolio-avalanche">carried out tests under the Monetary Authority of Singapore’s Project Guardian</a> to explore how fund managers could tokenize portfolios on various blockchains in a permissioned manner.



BlackRock used JPMorgan’s Tokenized Collateral Network to tokenize shares in one of its money market funds around the same time. It then sent those tokenized interests to Barclays as collateral for an over-the-counter derivatives trade.



Also under Project Guardian, Switzerland-based <a href="https://blockworks.co/news/jpmorgan-tokenized-blockchain-portfolio-avalanche">UBS brought a tokenized investment fund</a> on Ethereum in November.



Even more recently, Citi tokenized a private equity fund issued by Wellington Management on Avalanche’s Spruce subnet in February.



Read more: <a href="https://blockworks.co/news/citibank-explores-tokenization-wisdomtree">Citi the latest TradFi player to test out asset tokenization</a>



But the latest efforts revealed on Wednesday appear “incrementally more important” than prior trials, said Colin Butler, global head of institutional capital at Polygon.



“I say that because the parties mentioned are looking to align on a standard, to which they&#8217;re getting closer,” he told Blockworks. “This represents to me the five-yard-line for mass institutional adoption.&#8221;



The financial industry’s approach to more recent blockchain projects is “qualitatively different” than in the past several years, said Ralf Kubli, board member of The Casper Association.



“It is clear that large institutions have decided that shared ledger technology offers a compelling value proposition in many critical areas of the value chain, and that they must be part of this development,” he explained.&nbsp;



Institutional involvement in this space has come through experimentation, or by investing in or acquiring startups with mature technology stacks, Kubli noted.



The Depository Trust and Clearing Corporation (DTCC) closed its deal in December to acquire Securrency — a blockchain-based financial and regulatory technology developer.&nbsp;



The world’s largest asset manager last week led a $47 million funding round for Securitize, a firm focused on bringing physical and traditional financial assets on-chain.



Read more: <a href="https://blockworks.co/news/blackrock-tokenization-investment">BlackRock doubles down on tokenization via investment in Securitize</a>



“This strong commitment by established financial institutions will drive the emergence of enterprise grade infrastructure by startups and spinouts, as well as provide a glimpse on the future interaction between public chains and permissioned environments,” Kubli told Blockworks.&nbsp;&nbsp;



<h2 class="wp-block-heading">Proof-of-concept expectations</h2>



The proof-of-concept will publish an analysis of whether the network could operate under existing laws or guidance in the United States. Findings intend to inform “next generation settlement models,” SIFMA said in a news <a href="https://www.sifma.org/resources/news/members-of-the-u-s-financial-sector-to-explore-multi-asset-settlement-using-shared-ledger-technology/">release</a>.



Brahimi said he hopes to see “the confirmation of major efficiency gains” by having both securities and cash on-chain. The experiment could also demonstrate reduced counterparty risk and improved collateral transfers between institutions.



“A legal assessment of what needs to be modified to scale these activities will also be useful,” he added. “Based on the projects Taurus is involved in, it will be faster than what people think.&#8221;&nbsp;



Read more: <a href="https://blockworks.co/news/taurus-custody-tokenization-platforms">Tokenization top of mind for Taurus in 2024 after FINMA approval</a>



Morgan Krupetsky, who leads business development for institutions and capital markets at Ava Labs, said she is encouraged by the array of entities involved.&nbsp;



Still, more buy-side participation from asset managers, corporates, hedge funds and pension funds, for example, in such blockchain trials would be beneficial. Having that segment’s buy-in and support will be critical, she added.



“They often experience comparable pain points, [and] they&#8217;re increasingly viewing this space as a strategic imperative,” she told Blockworks. “[It] would provide valuable input and insight to the banks who ultimately service these, and other, clients.”



Those anxiously awaiting an overhaul of legacy financial services infrastructure and systems will have to stay patient.&nbsp;



The lengthy experimentation ultimately helps financial institutions, infrastructure providers and regulators assess the benefits of dedicating resources to ultimately building products that use shared ledger tech, Krupetsky explained.&nbsp;&nbsp;



Kubli added: “I believe we will see serious and productive environments in the coming six to 12 months as part of the various peer-to-peer engagement…and more importantly, through the various sandbox approaches and <a href="https://blockworks.co/news/bis-tokenization-central-banks-cryptocurrencies">central bank-led initiatives</a>, including <a href="https://blockworks.co/news/cbdcs-tokenized-deposits-unified-ledger">the [Bank for International Settlements</a>].”



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How the latest TradFi blockchain trial could mark the ‘five-yard-line’ for mass adoption

President Joe Biden has promised to back Securities and Exchange Commission Chairman Gary Gensler after a resolution to overturn an agency accounting practice advanced out of the House Wednesday evening.&nbsp;



The House on Wednesday approved joint resolution 109 — which would invalidate the SEC’s Staff Accounting Bulletin (SAB) 121 — in a 228-182 vote. The measure now moves on to the Senate, but Biden’s administration warned it would veto the resolution if it makes it to the president’s desk.



“Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto assets would introduce substantial financial instability and market uncertainty,” the Biden administration wrote in a <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">statement</a> Wednesday.&nbsp;



SAB 121, introduced in March 2022 and enacted the following month, states that digital asset custodians <a href="https://blockworks.co/news/sec-staff-call-for-crypto-entities-to-show-liability-on-balance-sheet">should report a liability and “corresponding assets”</a> on their balance sheets for all custodied cryptocurrencies. The practice, SEC staff <a href="https://www.sec.gov/oca/staff-accounting-bulletin-121">said</a>, is intended to guard against the “significant risks and uncertainties associated with safeguarding crypto assets.”&nbsp;



Reps. Mike Flood, R-Neb., Nick Wiley, D-N.C., Tom Emmer, R-Minn., Darren Soto, D-Flo., and French Hill, R-Ark., introduced the joint resolution in the House in February.&nbsp;



“The SEC issued SAB 121 without conferring with prudential regulators despite the accounting standard’s effects on financial institutions’ treatment of custodial assets, and the SEC issued SAB 121 without going through the notice-and-comment process,” Rep. Flood said of the resolution in a statement earlier this year. “In the face of overreach by a regulator, it is the role of Congress to serve as a check.”&nbsp;



Read more: <a href="https://blockworks.co/news/us-gao-sec-violation-law">SEC failed to follow the Congressional Review Act, may have broken the law</a>



While SABs are not enforceable rules under <a href="https://blockworks.co/tag/securities">securities</a> law, they are used by staff for interpretations and practices, the <a href="https://blockworks.co/tag/sec">SEC</a> said. Unlike traditional rules issued by the agency, SABs do not require public notice or comment periods and do not reflect the official approval of Commissioners, a point Flood and his co-sponsors find troubling.&nbsp;



All voting House Republicans were in favor of passing the joint resolution Wednesday. 21 Democrats also supported the measure.



Senator Cynthia Lummis, R-Wyo., a long-time crypto supporter, <a href="https://blockworks.co/news/senators-oppose-sec-accounting-standards">introduced a companion joint resolution</a> in the Senate, although she lacked bipartisan support. <a href="https://blockworks.co/tag/cynthia-lummis">Lummis</a>’ effort has not advanced to Committee markup or a vote, and now that the House’s resolution is making its way to the Senate, the measure is all but dead.&nbsp;



<a href="https://blockworks.co/tag/gary-gensler">Gensler</a> in December 2023 defended SAB 121, saying it was “just a staff accounting bulletin,” and it is consistent with precedent set in US bankruptcy court.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-gary-gensler-crypto-regulation">Empire Newsletter: The SEC’s internal rift</a>



“It basically addresses whether liabilities should be on balance sheet, and what we have found actually in bankruptcy court, time and again, many times now, that indeed bankruptcy courts have said that crypto assets are not bankruptcy remote,” <a href="https://blockworks.co/tag/gary-gensler">Gensler</a> said during a Dec. 2023 appearance hosted by the American Bar Association. 



Gensler, who has previously <a href="https://www.bloomberg.com/news/articles/2024-02-14/gensler-vows-to-advance-with-sec-s-rule-agenda-as-election-looms">denied</a> that he is working against the clock, could face significant headwinds in advancing his agenda after this year’s election. Should Republicans gain control of both chambers in November, additional efforts to overturn and undermine agency policy are likely to continue.



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