Popcorn

Ben Strack

Casey Wagner

Felix Jauvin

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



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Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Casey Wagner and Felix Jauvin. 



Here’s what you’ll find in today’s edition:



<ul>
<li>We are halfway through the year! Here’s where crypto markets stand. </li>



<li>Initial jobless claims came in higher than analysts expected, a sign the labor market isn’t as strong as the Fed would like. </li>



<li>Soft data got you down? Don’t worry, we also break down the latest economic indicators. </li>
</ul>



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<h2 class="wp-block-heading">Crypto’s wild year is only half over</h2>



The first half of 2024 is officially in the books, and with a fresh set of tailwinds and hurdles, the next six months should be pretty interesting for the crypto industry.&nbsp;



A potential Federal Reserve rate cut, and of course the US presidential election, are among the catalysts that could move crypto markets later this year.



Not to mention the impact of potential regulatory progress and/or more SEC lawsuits.&nbsp;



But let’s look backward for a moment.&nbsp;



Bitcoin’s price is up 36% year to date despite declining from its <a href="https://blockworks.co/news/bitcoin-all-time-high">$73,000-plus all-time high</a> hit in mid-March.&nbsp;



ETH has similarly risen 40% from the start of 2024 despite a price setback in June that saw it lose 10% over the month.&nbsp;&nbsp;



US spot bitcoin ETFs have seen $14.5 billion of net inflows since launching in January. Their ether counterparts are expected to debut shortly, <a href="https://blockworks.co/news/sizing-up-demand-for-us-eth-etfs">bringing more investors</a> into another segment of the space via traditional vehicles.&nbsp;&nbsp;



Then there were the <a href="https://blockworks.co/news/lightspeed-newsletter-spot-solana-etf-filing">filings for spot Solana ETFs</a> (by <a href="https://blockworks.co/news/vaneck-files-for-solana-etf">VanEck</a> and then 21Shares) last week.&nbsp;



VanEck’s crypto research head <a href="https://x.com/matthew_sigel/status/1807775290396942559">confirmed</a> in an X post that the firm’s plans are essentially a bet on Donald Trump (a potential <a href="https://blockworks.co/news/on-the-margin-newsletter-trump-bitcoin-mining-meeting">pro-crypto candidate</a>) winning the presidency.&nbsp;&nbsp;



The reality of soon having two crypto assets with their <a href="https://blockworks.co/news/on-the-margin-newsletter-crypto-etf-filing-frenzy">own US spot ETFs</a> (and a potential third in SOL, even if <a href="https://blockworks.co/news/us-spot-crypto-etf-approvals-outlook">unlikely to gain approval</a> for now) highlights the growing interest/adoption by TradFi service providers and investors, noted Fineqia International analyst Matteo Greco.&nbsp;



“This trend projects a positive outlook for the digital assets market in the mid- to long-term, with increased establishment in financial markets accompanied by rising inflows, liquidity and transparency,” he added.



It appears TradFi service businesses are not just eyeing investments into crypto assets (or the ETFs holding them) — with industry watchers expecting such firms to buy into the sector via M&amp;A.&nbsp;



“[They] continue to be inhibited by regulatory uncertainty,” Architect Partners managing partner Eric Risley told Blockworks. “However, Robinhood’s <a href="https://blockworks.co/news/robinhood-bitstamp-institutional-clients">acquisition of Bitstamp</a> is evidence of ‘bridge transactions’ on the horizon.”



As TradFi and crypto get more tangled, <a href="https://blockworks.co/news/macro-headwinds-bitcoin-summer">macroeconomic forces</a> — and how they impact the sector — will be key.



Fed funds futures data suggests the market is still expecting and pricing in two rate cuts in 2024, according to Bitfinex derivatives head Jag Kooner.



“The Fed&#8217;s statements and a possible continuation of a more hawkish stance are important factors to watch,” he added.



We also shouldn’t forget the historical price peaks that can come as far as 12 to 18 months after a halving (the last of which occurred on April 19).&nbsp;



Price uptrend in crypto bull markets typically resumes within 10 to 12 weeks from the event, Kooner said. That timeline colliding with potential US spot ETH ETF launches could offer an additional catalyst.



Aside from all that, regulation continues to weigh on the space — in both good ways and bad. While crypto lawmaking <a href="https://blockworks.co/news/on-the-margin-newsletter-capitol-hill-mining-stocks">efforts have lulled</a> after <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">bipartisan progress</a>, post-election efforts could prove pivotal.&nbsp;&nbsp;



Then, there’s seeing who the SEC might choose to sue next following its recent actions against <a href="https://blockworks.co/news/sec-lawsuit-against-consensys-securities">Consensys</a> and <a href="https://blockworks.co/news/sec-sues-silvergate-bank-for-misleading-public">Silvergate Bank</a>, launched just days apart. The agency’s progress in greenlighting crypto funds has not exactly lightened them up on the enforcement side.&nbsp;



A lot is uncertain, but that’s part of the fun. I guess it was a good time to start this newsletter.&nbsp;



— Ben Strack



<h2 class="wp-block-heading">$3.2 billion&nbsp;</h2>



The amount of capital venture investors put into crypto companies during the second quarter of the year, according to a new report from Galaxy Digital Research. This is an increase from the first quarter, when VCs allocated $2.5 billion to the sector.&nbsp;



Deal count decreased slightly in the second quarter, dropping from 603 to 577.&nbsp;



<h2 class="wp-block-heading">Disappointing report shows labor market is slowing&nbsp;</h2>



US initial jobless claims came in higher than expected last week, the latest <a href="https://www.dol.gov/ui/data.pdf">report</a> from the Labor Department shows.



First time unemployment applications hit 238,000 last week, up from 234,000 the week prior. The print marks the ninth straight week of increases in initial claims.&nbsp;



Continuing jobless claims increased to 1.86 million in the week ended June 22, the highest recorded figure since November 2021. An increase in recurring applications shows labor demand easing as the economy slows.&nbsp;



The report comes a day after Fed Chair Jerome Powell said he’s hopeful the economy is headed in a “disinflationary” direction. He noted that additional data is needed before central bankers can commit to a rate cutting schedule.&nbsp;



The Fed finds itself in a difficult position, he added.&nbsp;



“We’re well aware that if we go too soon, we could undo the good work we’ve done in bringing down inflation, and if we go too late, we could unnecessarily undermine the recovery and the expansion… we’re aware that we have two-sided risks now, more so than we did a year ago,” Powell said Tuesday.&nbsp;



On Friday we’ll get the monthly employment report from June, which analysts expect will show an increase of 190,000 nonfarm payrolls. The economy added 272,000 jobs in May, Labor Department data shows.&nbsp;



Stocks rose and bond yields fell on the report. The S&amp;P 500 and Nasdaq Composite indexes posted gains of around 0.2% each at the open. Markets closed early Wednesday ahead of the July 4 holiday, and trading will resume Thursday.&nbsp;



Bitcoin and ether slipped following the release of the report, losing 3% and 2.7%, respectively, according to Coinbase.&nbsp;



— Casey Wagner&nbsp;



<h2 class="wp-block-heading">How do we deal with conflicting soft data?</h2>



ISM Services printed a 48.8 today, much lower than the expected 52.5.



At the same time, however, we received data from S&amp;P Global US Services PMI, which rose to 55.3 from 54.8.&nbsp;



These two data points attempt to do the same thing: provide a leading forecast of economic activity in the services sector. As a quick reminder, the remainder of inflation is largely driven by services. Goods have been deflationary on a month-over-month basis for several months now.



So while one print is screaming that this economic slowdown is about to accelerate and lead to further services disinflation, the other is screaming that we have a resilient economy and people should continue to spend on services like crazy.&nbsp;



If your head is spinning trying to figure out which way is up based on what economists call “soft data” (survey-based data points that are inferred, not observed directly from the economy), I don’t blame you. So is mine. We’ve been in a weird business cycle ever since coming out of COVID, which has led to weird soft data like we’re seeing today.&nbsp;



I generally believe that markets are somewhat efficient, so to understand which way these prints are leaning, I’m deferring to the bond market to tell me what to make of things. With the US 10 year yield lower by 8.5 basis points, it’s clear that the ISM Services print wins today.



— Felix Jauvin



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



<ul>
<li>Odds that President Joe Biden <a href="https://blockworks.co/news/biden-presidential-debate-impacts-polymarket-odds">drops out</a> of the presidential race increased to 75% on <a href="https://polymarket.com/event/will-biden-drop-out-of-presidential-race?tid=1720018635701">Polymarket</a> Wednesday after the New York Times reported that Biden was weighing whether to continue. Betters have wagered $9.9 million on Polymarket so far. </li>



<li>A federal judge has <a href="https://x.com/BillHughesDC/status/1808141882762891747">agreed</a> to consider the “merit” of the <a href="https://blockworks.co/news/sec-has-it-in-for-consensys">SEC’s case against Consensys</a>. The question on the table is whether the agency has Congressional authority to regulate MetaMask as a securities broker and issuer. </li>



<li>We hope our US readers enjoy the July 4 holiday tomorrow! We’ll still be sending out our newsletter on Thursday and Friday, so keep an eye on your inboxes. In the meantime, catch up on the latest On the Margin Podcast episodes on <a href="https://www.youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu">YouTube</a>, or wherever you get your podcasts.</li>
</ul>



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



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



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

On the Margin Newsletter: A look at crypto’s performance halfway through 2024

Jack Kubinec

Jeff Albus

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



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Howdy!&nbsp;



We’re currently in the worst sports month of the year — especially with the USA knocked out of Copa America — and the situation got so dire that I started watching the Tour de France. Congrats to Mark Cavendish for breaking some kind of record. I should really go touch some grass.



Now for the story of someone who bought Solana at $0.04 per token:



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<h2 class="wp-block-heading">Q&amp;A: The true confessions of Solana’s first VC</h2>



Edith Yeung was investing in early stage companies at 500 Startups when she met Anatoly Yakovenko, who pitched her on the idea for a fast and cheap blockchain that would become Solana. She saw Solana’s early days unfold — and made an incredibly lucrative venture investment in the process. Read on for an excerpt from my conversation with Edith.



Comments have been edited for brevity and clarity.



Jack: How did you first meet Anatoly?



Edith: Anatoly and I actually met through a friend. His name is David. I can&#8217;t even make this shit up — David played water polo with Anatoly. I can barely swim, so the fact that somebody can play polo underwater, I think, is insane. David knew that I was very into crypto, so he said, “hey, you should meet this guy Anatoly.”&nbsp;



When he pitched me about Solana, first off, it wasn&#8217;t even called Solana. It was called Loom. He basically said proof-of-work doesn&#8217;t really work. It can never be fast. You cannot make a horse go as fast as a car. You just need to build it from scratch and I just felt like his thoughts and ideas were pretty refreshing. But at the same time, he really had nothing, not even a whitepaper. So it was purely founder trust and belief when we invested.



[After launching, the Solana team] grew from one to four to a whole bunch of people to the point that our office manager basically said: “You guys have way too many people. We need to kick you out now.”&nbsp;



[Solana co-founder Raj Gokal] basically said we need a new space. I found them the space on One Hawthorne Lane. It&#8217;s walking distance from where I am. It&#8217;s right next to the Gold Club, which is a strip club across the street. They stayed there until Covid basically, and now they are on a better street.



Jack: How did people in San Francisco think of Solana in the early days?



Edith: &nbsp;A lot of investors just sort of dismissed it, and in fact, mid-2018 to early 2019 was a bear market, so if I remember correctly, the valuation of the Solana was $15 million to $20 million. That&#8217;s it. And most people didn&#8217;t want to invest in it.&nbsp;



There are people that actually pulled out [of the first round] because it was such a bad market and they didn&#8217;t want to get involved — and that’s a lot of the people who even are active in the crypto space. They just didn’t see, “there&#8217;s going to be another Ethereum.”



Jack: What was your initial investment in Solana?



Edith: It was $250,000 at $0.04 [per SOL token], and that was the seed round. My fund was very small, it was a $10 million fund, so when the $0.04 got to $14.25, it already 7x’ed my fund.



But having said that, we waited about two years to get to the point where the token actually launched, which is common, same thing even for equity IPO-type companies. Then it started trading, and so my LPs who supported me were like, what is this thing? Because most people who supported me had no idea what crypto is.



I distributed tokens to my LPs in early 2021 and I I basically told them, “look, you may not understand what it is, but please trust me and keep it as long as you can and please don&#8217;t sell.”



After that, Solana went up to, I think, $260. Some of the LPs were like, “what the hell?” And I was just sort of like “you&#8217;re welcome.” And that was that.



Jack: A big thing that people point to with the early Solana days was when FTX came in and launched the decentralized exchange Serum. What was FTX&#8217;s involvement like in Solana pre-collapse?



Edith: Sam [Bankman-Fried] really was the one that picked Solana as the one he wanted to build Serum on. What they were looking for is, “can we find an alternative to Ethereum [for traders]?”&nbsp;



When Serum launched, it was super popular because FTX was obviously pushing it, but more importantly it was an amazing showcase for Solana to show off the fact that [it is] fast enough for DEXes. [&#8230;] The FTX team was very supportive of Solana and really put them on the map in the DeFi ecosystem early on, but of course that didn’t really last for that long.



Jack: Are you still holding onto those original tokens?



Edith: Yes, of course, and I’m very thankful.



I love investing in people, and they are really the investment of a lifetime for me.



— Jack Kubinec



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



Magic Eden’s Solana NFT market share keeps inching higher:



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1398" height="896" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png" alt="" class="wp-image-88881" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=1398 1398w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=401 401w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=407 407w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=342 342w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-11.png?w=80 80w" sizes="(max-width: 1398px) 100vw, 1398px" /></figure>



According to a Dune dashboard from 21co, Magic Eden has held between 90-95% of the combined trading volume between itself and rival Tensor for much of the past month. Tensor saw more than 75% of the combined volume briefly in January, but since then, Magic Eden took the lead and solidified it.



— Jack Kubinec



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



Helium recently <a href="https://x.com/helium/status/1807812910468776300">announced</a> it is expanding beyond its decentralized wireless mission to create a larger decentralized physical infrastructure network (DePIN). Traditionally, high cost centralized networks have dominated the infrastructure landscape. According to Helium, these traditional players have hampered scalability and innovation for years, especially in segments like asset tracking, cellular solutions, disaster detection, and other wireless-enabled solutions.



Helium <a href="https://blog.helium.com/network-of-networks-24c58012d2e9">outlined</a> its intention to create a more efficient and scalable infrastructure through its Network of Networks initiative. The protocol intends to leverage its global footprint and community to support new decentralized networks for compute, storage, mobility, and more.



On X, community member @hansaFL <a href="https://x.com/hansaFL/status/1807888541138977158">speculated</a> that Helium might introduce a Proof of Location (PoL) network. He highlights how Helium hotspots could <a href="https://x.com/hansaFL/status/1807888550756770178">verify</a> device locations, enhancing trust and utility in the DePIN space. <a href="https://x.com/hansaFL/status/1807888548277686624">According</a> to Hans, &#8220;Before Helium, there was no way to prove location &#8211; GPS was too easy to game.&#8221;



Community members responded with various predictions. @Sunbasher <a href="https://x.com/Sunbasher/status/1807985850351079674">suggested</a> possibilities like bandwidth or compute, while @BloodReaver <a href="https://x.com/BloodReaver/status/1807981202470850836">guessed</a> it might involve WiFi. @ke6jjj <a href="https://x.com/ke6jjj/status/1807969431362195722">clarified</a> that any new network would require community voting, emphasizing the collaborative nature of Helium&#8217;s expansion.



— Jeffrey Albus



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



A message from Edith Yeung, an early investor in Solana:



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="554" height="964" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-12.png" alt="" class="wp-image-88882" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-12.png?w=554 554w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-12.png?w=172 172w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-12.png?w=148 148w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-12.png?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-12.png?w=126 126w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-12.png?w=46 46w" sizes="(max-width: 554px) 100vw, 554px" /></figure>



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



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



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

Lightspeed Newsletter: A conversation with Solana’s first VC

Macauley Peterson

In the arena of zero-knowledge proofs, STARKs are the OG and the Iron Man suit: foundational and cutting-edge.



Most major zk provers in production are STARK-based: zkSync’s Boojum, Polygon’s zkProver, Aleo’s Varuna​, Aztec Protocol and RISC Zero’s Zeth all employ STARKs (Scalable Transparent ARguments of Knowledge) underneath.



Recent research has significantly advanced the scalability of STARKs — increasing proving capacity by 100 times — for what’s being called Stwo, short for STARK Two. 



Scalability, when it comes to provers, means generating and verifying proofs quickly and cheaply. The “Transparent” part of STARKs <a href="https://blockworks.co/news/addresses-helping-ethereum-scale">eliminates the need for trusted setups</a> required by many SNARK-based provers.



Read more: <a href="https://blockworks.co/news/a16z-zkrollup-proof-system">Zero-knowledge proof systems have room for improvement, say cryptography researchers</a>



Stwo, which will be available in 2025, will eventually replace the current prover, Stone — for “STARK One.”



The secret to Stwo’s speed and efficiency lies in its use of the eighth <a href="https://en.wikipedia.org/wiki/Mersenne_prime">Mersenne prime</a> (or M31) for computations, which fits well with modern computer architectures to significantly speed up operations compared to Stone.



A Mersenne prime is a prime number that is one less than a power of two. These primes are named after the French monk Marin Mersenne, who studied them in the early 17th century. Specifically, a Mersenne prime can be expressed in the form Mn​=2n−1, where n itself is an integer. Not all numbers of this form are prime, but those that are have significant properties and applications in number theory and computer science.



They fit naturally with the way data is handled in modern computers, which often use fixed-size binary word lengths such as 32-bit or 64-bit integers. Operations involving M31 can therefore be efficiently implemented using standard binary arithmetic.



Without getting too far into the weeds, the breakthrough in this new research is the use of something every child learns about at an early age: the Circle.



Circle STARKs — a collaboration between <a href="https://blockworks.co/tag/starkware">StarkWare</a> and Polygon Labs — use a clever geometric method to make cryptographic proofs faster, and the M31 field makes these operations even more efficient. Together, they enable the Stark Two prover to generate proofs quickly and with less computational power.



<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">Our new prover Stwo just blew our mind 🔥 Here&#39;s a demo by <a href="https://twitter.com/PapiniShahar?ref_src=twsrc%5Etfw">@PapiniShahar</a> and <a href="https://twitter.com/EliBenSasson?ref_src=twsrc%5Etfw">@EliBenSasson</a> of our next-gen prover, Stwo, and its groundbreaking performance: proving 620,000 hashes per second using an M3 laptop! This is x1000 better than our current prover, Stone, and is the… <a href="https://t.co/FJ0fF2zcra">pic.twitter.com/FJ0fF2zcra</a>&mdash; StarkWare 🐺🐱 (@StarkWareLtd) <a href="https://twitter.com/StarkWareLtd/status/1807776563188162562?ref_src=twsrc%5Etfw">July 1, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The research won’t only benefit Starknet, but many other proving systems, according to Ventali Tan, co-founder of Lita, which is building the Valida zk-Virtual Machine.



“Stwo gives another confirmation of the speed and power of the FRI polynomial commitment scheme, which is the main cryptographic ingredient in STARKs,” Tan told Blockworks. “This is the same scheme used as the basis of several of the most performant proof systems of recent generations, such as Plonky2 and Plonky3 — Valida, as well as Succinct’s SP1, is built on Plonky3.”



Tan notes that support for the circle STARK protocol and the M31 field are already on the roadmap for Plonky3, being developed by <a href="https://blockworks.co/tag/polygon">Polygon Labs</a>.



StarkWare’s Eli Ben-Sasson told Blockworks all VMs will eventually benefit from this improved speed. “However, ZK-friendly VMs such as Cairo are designed to maximize STARK-proving efficiency and this added efficiency will likely remain,” he said.



Other provers may benefit less directly, suggests Ian Miers, a research scientist at Aleo.



“Aleo uses a different proof system, Varuna, built on different techniques than StarkWare’s work,” Miers told Blockworks. “Many SNARKs, of which STARKs are a sub-variety, are optimized for <a href="https://blockworks.co/tag/rollups">rollups</a>, where a server sees everyone&#8217;s transactions and compresses as many as possible to save gas fees.”



Privacy-preserving blockchains like Aleo are aiming to give users more control over their own data by cutting the rollup operator out of the middle.



“There are trade-offs here, and excelling in one area may not mean excelling in another,” Miers said.



Read more: <a href="https://blockworks.co/news/privacy-zk-tech-data">Privacy is paramount, and zero-knowledge cryptography is the way</a>



In the fast moving world of zero-knowledge cryptography, there’s only one thing for certain, Miers added.



“There will always be a newer, better zk proof system, and you will eventually need to upgrade,” he said.



Updated July 3, 2024 at 2:59 pm ET: Clarifying the collaboration between StarkWare and Polygon Labs was limited to the circle STARK research. Added comment from Eli Ben-Sasson.



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



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



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

A STARK breakthrough: Next-gen provers may be at least 100x faster

David Canellis

Germany and the US are seemingly competing for who can spook bitcoin markets more.



Addresses linked to German and US governments have recently sent $737.6 million in bitcoin to exchanges including Coinbase, Bitstamp and Kraken, as well as some to OTC desk operator-slash-market maker Flow Traders.



Germany makes up about three-quarters of that total, with its deposits spread across 30 different transactions — usually in the morning around 9 am local time.&nbsp;



While it’s unclear whether all the bitcoin was actually sold (a portion has since been returned to the original addresses), Germany’s transfers to exchanges are believed to be the first ever, at least going by Arkham Intelligence data.&nbsp;



Local authorities had previously seized bitcoin via various criminal cases, including <a href="https://blockworks.co/news/german-police-bitcoin-seizure">pirate portal Movie2k</a>.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1512" height="1130" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png" alt="" class="wp-image-88862" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=1512 1512w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=344 344w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=349 349w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=293 293w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=80 80w" sizes="(max-width: 1512px) 100vw, 1512px" /><figcaption class="wp-element-caption">Bitcoin transfers to exchanges from governments have ramped up significantly.</figcaption></figure>



Over the past two weeks, Germany has sent 7,828 BTC in transfers that appear to be part of liquidation efforts.&nbsp;



That bitcoin was altogether valued at $496.4 million at the respective transaction times, implying an average price of $63,400. Bitcoin currently trades for $60,200, although a direct causal link between Germany’s transfers and falling prices is tough to draw.



As for the US, the Feds used to sell bitcoin at auction. Now, it <a href="https://blockworks.co/news/doj-bitcoin-silk-road-mempool">sells on Coinbase</a>.&nbsp;



The US sent a single 3,940 BTC deposit to Coinbase Prime at 11 am ET on June 26. The bitcoin, which once <a href="https://www.justice.gov/opa/pr/dark-web-vendor-sentenced-distributing-narcotics-and-ordered-forfeit-150m">belonged</a> to drug dealer Banmeet Singh, was worth $241.22 million at the time, while the same haul would fetch $237.35 million right now.&nbsp;



Aside from the bitcoin sold at <a href="https://jlopp.github.io/us-marshals-bitcoin-auctions/">auction</a> in years prior, putting an exact value on how much the US government has offloaded over the years is difficult.&nbsp;



Some transactions are obvious, like the Coinbase deposits. Others only end up on exchanges after being sent through multiple single-use addresses. (For the sake of this analysis, crypto that was first sent to an in-between address before being forwarded to an exchange also counted towards the totals.)



After combing through the chain for exchange deposits, and other transfers that have all the hallmarks of sales, it looks like the US government may have now either liquidated or moved to liquidate almost $590 million in bitcoin since November 2020 (valued at the time of transfer). Which is about 20% more than Germany’s recent moves.



<figure class="wp-block-image is-resized"><img loading="lazy" decoding="async" width="1520" height="1134" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png" alt="" class="wp-image-88863" style="width:642px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=1520 1520w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=344 344w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=350 350w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=294 294w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=80 80w" sizes="(max-width: 1520px) 100vw, 1520px" /><figcaption class="wp-element-caption">It’s hard to say whether these transfers have moved markets. Although, bitcoin definitely hasn’t gone up.</figcaption></figure>



The data suggests that:



<ul>
<li>The US sold 15,903 BTC for approximately $37,000 on average since 2020.</li>



<li>Had the US held all that bitcoin until now, it could’ve netted $958.7 million.&nbsp;</li>



<li>The US missed out on an estimated $370 million by selling too soon, and that’s not counting the billions missed by selling at auction over the last decade.</li>
</ul>



World governments moving around their bitcoin tend to make a lot of noise. But the onchain data indicates that the US has been selling seized ETH for as long as BTC.&nbsp;



Split between Coinbase and Kraken, addresses tagged as the US government have sent $49.1 million in ETH to trading platforms since September 2020. An additional $2.6 million in DAI and a small amount of USDC was also sent to an address that forwarded it onto Kraken.



All up, using the same analysis as the bitcoin exercise above, the US government appears to have liquidated 108,673 ETH for an average price of $452 (current price: $3,300). Had it held all that and sold today, it would’ve scored over $358 million — missing out on nearly $310 million.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1513" height="1132" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png" alt="" class="wp-image-88864" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=1513 1513w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=343 343w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=349 349w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=293 293w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=80 80w" sizes="(max-width: 1513px) 100vw, 1513px" /><figcaption class="wp-element-caption">The plus symbols represent ETH deposits to exchanges and other apparent sales, while the diamond is for DAI and USDC.</figcaption></figure>



The ETH came from wallets designated to seizures from cases involving defunct crypto debit card ploy Centra Tech and Gary Harmon, who, ironically, <a href="https://www.justice.gov/opa/pr/man-sentenced-stealing-over-712-bitcoin-subject-forfeiture">stole</a> bitcoin seized by the US government, among others.



Combining it altogether shows the US and Germany have directed close to $1.14 billion in seized bitcoin, ether and stablecoins to exchanges and other trading platforms over the past four years.



The US is still sitting on about $13.3 billion in crypto, mostly bitcoin, as well as a combined $300 million in ether and tether. Germany otherwise continues to hold 43,549 BTC ($2.6 billion).



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US, German governments have sent $738M in bitcoin to exchanges over the last 2 weeks

Jason Allegrante

The European Union’s “Markets in Crypto Assets Regulation” (MiCA) marks a major milestone for the crypto industry.



With MiCA set to enter into phased implementation this summer, the EU is inviting crypto market participants into the regulatory perimeter for the first time. And while there are still uncertainties and challenges ahead, there is hope that MiCA will prove to be an important step towards long-term stability for crypto markets, enhanced protections for users and a more attractive investment environment for entrepreneurs.



The drafters of MiCA got a number of things right. One of them was to acknowledge that certain aspects of the crypto ecosystem (like decentralized smart contracts and NFTs) do not map neatly onto existing European concepts for financial system regulation (i.e., the MiFIDs). These activities were rightly left out of MiCA, with an understanding that they would become subject to further rulemaking at a later date.&nbsp;&nbsp;



But would it have been better for stablecoins or “e-money” tokens to have received the same treatment?&nbsp;



As it stands under MiCA, certain USD-referenced “e-money” tokens — including USDT, USDC and BUSD — are subject to caps on issuance and transactions. Per EU rules, caps for these instruments (as well as certain others) are 1 million transactions by volume, or 200 million euros by notional value.&nbsp;&nbsp;



Not only are the caps — as adopted — far too small to support current levels of activity, but their enforcement is likely to result in major disruptions to the proper functioning of the crypto ecosystem.&nbsp;&nbsp;



Globally, the total market capitalization for stablecoins sits at a staggering <a href="https://defillama.com/stablecoins">$162 billion</a>. USDT, USDC and BUSD collectively comprise roughly 75% of that amount. The European share of these figures is already orders of magnitude beyond the present limits, ensuring an almost immediate need to take action to curtail its use when MiCA is implemented.



The fundamental reason this all matters is because stablecoins have become integral to enabling a number of critical use cases — particularly non-speculative use cases.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/stablecoin-regulation-necessary-now-us">The time for US stablecoin regulation is now&nbsp;</a>



Importantly, stablecoins serve as the bridge between the fiat-based world of traditional finance and digital assets. As a reliable store of value for investors, they are a safe haven from more volatile assets — the opposite of the “crypto casino” that has come to be regarded so skeptically.&nbsp;



Stablecoins have proven essential in cross-border payments, not least because they can protect those in countries facing hyperinflation or other local currency debasing risks. Stablecoins are also frequently used to interact with smart contracts, and therefore form a central component of the lending and yield generating ecosystem.&nbsp;



By restricting such a thriving and growing area of the digital assets ecosystem, MiCA runs the risk of undermining one of its primary goals: fostering a vibrant and innovative industry within the region.&nbsp;



The e-money limitations could also put Europe on the backfoot compared to other jurisdictions that do not impose such measures. While these restrictions are likely intended to protect the euro and mitigate the potential systemic risks posed by large-scale stablecoin usage, overly restrictive limits will stifle the growth and adoption of stablecoins and create significant disadvantages for EU-based stablecoin issuers and users.&nbsp;



For the foregoing reasons, it is imperative that the competent European authorities must revisit e-money restrictions.



As the European Securities and Markets Authority, the European Banking Authority and other European authorities engage in secondary rulemaking and technical standard-setting, there is still hope that such revisions can be accomplished without waiting for a MiCA II. For example, authorities could adopt a more nuanced, tiered system that instead scales limits based on the size and maturity of the issuer.&nbsp;



Whatever the method, it should be possible to strike a better balance of competing interests and concerns than what we have in MiCA today.



As I have argued in other contexts, stablecoins are one of a group of “weapons of mass adoption” at play for the digital asset industry. These products and services, like ETFs and stablecoins, are capable of entering the lives of consumers and giving them a positive experience of blockchain technology with an extremely low bar to entry. Stablecoins fit that definition across multiple factors. As a product offered by regulated institutions, they serve as a point of entry for banks and other financial issuers. In being used by consumers, they are the perfect instrument to enable Web3 commerce and smart contract interaction — in many cases seamlessly as part of gaming or other internet environments.&nbsp;&nbsp;



For all their consumer benefits, stablecoins also touch on questions of monetary policy, sovereign debt issuance and competition for the export of global soft power. European regulators are right to proceed cautiously — but not at the expense of a lynchpin technology for the entire crypto ecosystem. Ultimately, if digital asset markets are to thrive in Europe under MiCA, stablecoins must be given the conditions to thrive too.&nbsp;



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


<div class="wp-block-post-author-biography">Jason Allegrante is the Chief Legal and Compliance Officer at Fireblocks. He is an experienced Counsel with a demonstrated history of working in the financial services industry with both large, traditional financial institutions as well as early stage fintech startups.

</div>


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MiCA can bring clarity – but stablecoin restrictions must be revisited

Katherine Ross

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<h2 class="wp-block-heading">Are we there yet?</h2>



Ether ETFs are on the way. They could even launch later this month.&nbsp;



Obviously, the bitcoin ETFs were a success at launch, and since then we&#8217;ve seen a big appetite for the funds.&nbsp;



Last quarter, we <a href="https://blockworks.co/news/13f-filings-institutional-appetite-bitcoin-etfs">discussed</a> the adoption of bitcoin ETFs by asset managers (as disclosed in their 13Fs). We’ll do a check-in later on when the next round of SEC filings drops, but it’s reasonable to expect more disclosures from firms buying up the ETFs.



But the question on my mind is: How successful will the ETH ETFs be?



There’s no defined answer, and success may be a moving target, since it’s unclear if we can expect the same welcome received by the bitcoin ETFs.



Matt Hougan, Bitwise’s chief investment officer, <a href="https://experts.bitwiseinvestments.com/cio-memos/the-tech-play-why-ethereum-etps-could-be-more-successful-than-you-think?utm_medium=email&amp;_hsenc=p2ANqtz--J_0eAtdi-Fo2E1lUEOlh6_jCDuf2X46S1UGyUa67TtAfRdCXSQtit7leTMJGFp5udj5GL3hOK0Gi3dJa8lklblMdCWA&amp;_hsmi=314110377&amp;utm_content=314110377&amp;utm_source=hs_email">thinks</a> they could “surprise to the upside.”



Take tech stocks for example. There’s clearly demand for them. And, if investors understand ETH, then Hougan says it’s reasonable for some to lighten their tech holdings and diversify into an ether ETF.&nbsp;



Hougan says he expects the ether ETFs to have roughly $15 billion in assets around 18 months from launch.&nbsp;



Keep in mind, though, that Grayscale’s following a similar path to its ether ETF and plans to convert its closed-ended Trust into a redeemable spot fund. There could be outflows like we saw with its Bitcoin Trust, but perhaps not on the same level.



The fee war has also yet to play out, which will also <a href="https://blockworks.co/news/latest-eth-etf-filings-outlook">set the scene</a> for what funds seem the most competitive. Franklin Templeton’s planned fee of 0.19% for its proposed fund is the lowest one so far.



A few months ago, when the SEC suddenly engaged with issuers and all of the language around staking <a href="https://blockworks.co/news/proposed-ether-etfs-not-staking-eth">disappeared</a> from their filings, there were some questions about the success of these products without staking.&nbsp;



“You could argue that Ethereum ETPs will underperform my estimate because they will not stake assets, which will lower demand. I don’t think this is true — staking income is a rounding error on ETH’s average annual return, and I think ETP investors will be happy simply having exposure. But it is a valid critique,” Hougan wrote in a memo last week around staking.



While Hougan’s sticking to $15 billion in the next 18 months, he also thinks the products could even outperform his expectations.&nbsp;



Numbers-wise, they’ll still underperform bitcoin ETFs but they are two different products. An optimist may even note that bitcoin could be carving the path for the ETH ETFs.



“Bitcoin ETPs have already pulled in $14 billion in net flows after less than six months on the market. I expect that number to swell to north of $50 billion by the end of 2025, as bitcoin ETPs are approved on large platforms like Morgan Stanley and Merrill Lynch,” Hougan wrote.



But Hougan brings up a valid point: Investors — outside of crypto — are pretty familiar with bitcoin and its use cases. How familiar are they with ETH? If we stick to the tech comparison, then the appetite could grow so long as investors do their due diligence and focus on the differences between ether and bitcoin.



As it stands, the next six or so months are going to be fascinating.&nbsp;



— Katherine Ross



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



<ul>
<li>The Ethereum validator <a href="https://www.validatorqueue.com/">queue</a> is at its emptiest since the end of May, with 327 currently waiting. One month ago, there were 6,500 validators waiting to join the chain.</li>



<li>ETH supply is at its highest <a href="https://ultrasound.money/">point</a> since mid-December after <a href="https://blockworks.co/news/ethereum-longest-inflationary-period-since-merge">reversing months of deflation</a>.</li>



<li>Solana users <a href="https://tokenterminal.com/terminal/projects/solana">paid</a> $52.9 million to use the network last month, up from $46.8 million in May.</li>



<li>The entire top-end of crypto is down today, with ENS, TAO and LDO all falling more than 12.5%. ENS is still up 12% over the past week.</li>



<li>BTC and ETH have both slipped 4% to $60,300 and $3,300 each.</li>
</ul>



<h2 class="wp-block-heading">Uncle Paperhands</h2>



A riddle for you: Is it a top or bottom signal when world governments dump hundreds of millions of dollars in bitcoin?



As it turns out, Germany and the US are seemingly competing for who can spook bitcoin markets more.



Since June, addresses linked to German and US governments have sent $737.6 million in bitcoin to exchanges including Coinbase, Bitstamp and Kraken, as well as some to OTC desk operator-slash-market maker Flow Traders.



Germany makes up about three-quarters of that total, with its deposits spread across 30 different transactions — usually in the morning around 9 am local time.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1512" height="1130" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png" alt="" class="wp-image-88819" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=1512 1512w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=344 344w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=349 349w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=293 293w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-2.png?w=80 80w" sizes="(max-width: 1512px) 100vw, 1512px" /><figcaption class="wp-element-caption">Bitcoin transfers to exchanges from governments have ramped up significantly.</figcaption></figure>



While it’s unclear whether all the bitcoin was actually sold (a small portion has since been returned to the original address), Germany’s transfers to exchanges are believed to be the first ever, at least going by Arkham Intelligence data.&nbsp;



Local authorities had previously seized bitcoin via various criminal cases, including <a href="https://blockworks.co/news/german-police-bitcoin-seizure">pirate portal Movie2k</a>.



As for the US, the Feds used to sell bitcoin at auction. Now, it <a href="https://blockworks.co/news/doj-bitcoin-silk-road-mempool">sells on Coinbase</a>.&nbsp;



The US sent a single 3,940 BTC deposit to Coinbase Prime at 11 am ET on June 26. The bitcoin, which once <a href="https://www.justice.gov/opa/pr/dark-web-vendor-sentenced-distributing-narcotics-and-ordered-forfeit-150m">belonged</a> to drug dealer Banmeet Singh, was worth $241.22 million at the time, while the same haul would fetch $237.35 million right now.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1516" height="1136" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png" alt="" class="wp-image-88820" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=1516 1516w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=343 343w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=348 348w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=292 292w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-3.png?w=80 80w" sizes="(max-width: 1516px) 100vw, 1516px" /><figcaption class="wp-element-caption">It’s hard to say whether these transfers have moved markets — but bitcoin definitely hasn’t gone up.</figcaption></figure>



Aside from the bitcoin sold at <a href="https://jlopp.github.io/us-marshals-bitcoin-auctions/">auction</a> in years prior, putting an exact value on how much the US government has offloaded over the years is difficult.&nbsp;



Some transactions are obvious, like the Coinbase deposits. Others only end up on exchanges after being sent through multiple single-use addresses.



But after combing through the onchain data for exchange deposits, and other transfers that have all the hallmarks of sales, it looks like the US government may have now either liquidated or moved to liquidate almost $590 million in bitcoin since November 2020. Which is about 20% more than Germany’s recent moves.



The US is still sitting on about $13.3 billion in crypto, mostly bitcoin, as well as a combined $300 million in ether and tether.



Germany otherwise continues to hold 43,549 BTC ($2.6 billion).&nbsp;



— David Canellis



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



<ul>
<li>Kraken is mulling the use of nuclear energy as a source of power, CoinDesk <a href="https://www.coindesk.com/tech/2024/07/02/crypto-exchange-kraken-is-considering-going-nuclear/?_gl=1*1dxdtoh*_up*MQ..*_ga*NDcyMjE4MDAuMTcyMDAwNzkzMA..*_ga_VM3STRYVN8*MTcyMDAwNzkyOS4xLjEuMTcyMDAwODE2MS4wLjAuMjAxNTg5Njk3OA..">reported</a>.</li>



<li>Fidelity International and Sygnum <a href="https://www.sygnum.com/news/sygnum-and-fidelity-international-partner-with-chainlink-to-provide-fund-nav-data-onchain/">partnered</a> with Chainlink to provide NAV data onchain.</li>



<li>Crypto futures may be coming to Robinhood following its Bitstamp acquisition, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-07-02/robinhood-said-to-consider-offering-crypto-futures-in-us-europe">reported</a>.</li>



<li>CoinDCX, an Indian crypto exchange, <a href="https://x.com/CoinDCX/status/1808463199924347367">bought</a> BitOasis.</li>



<li>Genesis Digital Assets is weighing a US IPO, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-07-02/alameda-backed-miner-genesis-digital-assets-said-to-weigh-us-ipo?embedded-checkout=true">reported</a>.</li>
</ul>



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



Q: Is major marketing spend cringe in crypto?



I think it is…at least in this cycle. The marketing push we saw pre-FTX collapse is decently fresh in people’s minds. I still get questions from family and friends about crypto companies when they pop up at sports arenas or on jerseys.&nbsp;



I’m not saying marketing isn’t important, or that this kind of spending shouldn’t happen in a healthy environment. Just that it’s an uphill battle to get folks to forget the former FTX Arena down in Miami.&nbsp;



Crypto’s recovered, and it’s different than it was, but we don’t need back-to-back ads during prime sportsball games to convince the non-crypto folks that this time is different. Let them come to us.



— Katherine Ross



It’s not so much the major marketing spend. It’s the undisclosed paid partnerships and hidden payments to influencers.



Big flashy promos, crossover branding deals and silly Superbowl ads can mostly be forgiven. You gotta spend cash on something.&nbsp;



But there’s something so tacky about encouraging crypto to celebrate major partnerships with household brand names, and other cultural moments that appear organic, only to find out it was all bought and paid for.



There’s fake it until you make it, and then there’s just faking it. Better to avoid the latter.



— David Canellis



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Empire Newsletter: ETH could debut on Wall Street this month

Candace Kelly

The European Union has begun to enforce its Markets in Crypto Assets (MiCA) regulation, with stablecoin provisions now taking effect.&nbsp;



But while this landmark legislation provides crucial safeguarding for consumers and businesses, it also introduces challenging requirements for issuers, such as limits on transactions and strict capital, reserve and redemption requirements.&nbsp;



More than just a step forward in crypto regulation in Europe, MiCA warrants further discussion on ways that other jurisdictions like the United States can build and improve on regulatory requirements.&nbsp;&nbsp;



Crypto sentiment in the US is at an all-time high. With the looming election, both parties are eyeing crypto as a way to demonstrate action and progress. The passage of the Financial Innovation and Technology Act for the 21st Century (FIT21) in the House is a case in point and the product of many conversations asking for greater regulatory clarity.



However, we should not stop here. Perhaps even more so than other jurisdictions, the US must pass stablecoin legislation that addresses the $150 billion global market for dollar-denominated stablecoins.



Many other countries have already recognized the importance of stablecoin legislation: for example, Singapore, the United Kingdom and other countries in the European Union have each enacted some sort of stablecoin regulation. In the US, a bill introduced by Sens. Lummis and Gillibrand in April was the latest attempt at clarity for stablecoins — and with the movement of FIT21, there is still hope that we can get a well-shaped bill across the finish line.



Read more from our opinion section: <a href="https://blockworks.co/news/end-sec-war-on-crypto">It’s time to end the SEC’s war on crypto</a>



A lack of stablecoin regulation at the federal level is concerning. Without clear legislation, US stablecoin issuers will continue to be subject to dozens of state money transmitter laws that are neither uniformly designed nor consistently enforced regarding segregation of clients’ funds and the integrity of assets kept in reserve.



Between industry support and precedent from other countries, it is clear that legislation can and should be passed.&nbsp;



Fortunately, industry and policy leaders already agree on many of the components for sound stablecoin regulation, such as robust issuer requirements that prioritize consumer protection. Establishing clear guidelines can better support US businesses and unlock more opportunities for regular people.&nbsp;



The ability of stablecoins to open new paths for payments, cross-border remittances and financial access cannot be overstated —&nbsp;and many of these use cases are already happening. Solutions built using stablecoins today are created with the everyday user in mind, from facilitating bulk disbursements for humanitarian aid to refugees in Ukraine to enabling safe, cashless payments to workers in rural Colombian towns. Stablecoins provide a global digital asset with price stability, enabling swift, low-cost transfers and easy conversion to local currencies, thus addressing critical financial needs in volatile or underserved regions.



These examples may sound distant to the US reality, calling into question whether the US should even bother with stablecoin regulation. But that would be a mistake. Like it or not, more than 95% of stablecoins in circulation are dollar-denominated, putting the US at the center of the stablecoin debate. In practice, stablecoins are a way for people around the globe to hold digital dollars. That’s why Congress must have a say on stablecoin regulation, especially on how dollar-denominated stablecoins are issued and how its backing reserves are held.



For the US to fully realize the benefits of these new technologies, we need Congress to pass a strong legal framework for stablecoins. Doing so is critical to ensure the US leads the stablecoin debate, so that we’re not left watching from the sidelines.



The time for US stablecoin legislation is now. It will benefit consumers, the industry, America&#8217;s leadership in financial innovation and ultimately the position of the dollar as the global currency of choice.



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


<div class="wp-block-post-author-biography">Candace Kelly is the Chief Legal and Policy Officer for the Stellar Development Foundation (SDF), a non-profit organization that supports the development and growth of Stellar, an open-source network that connects the world&#8217;s financial infrastructure. She leads the team responsible for SDF’s legal affairs and the policy team that is focused on bridging the gap between the public and private sectors. Previously, Candace worked for Uber Technologies, Inc., where she helped navigate the company’s response to regulatory investigations and advised on safety, security, privacy, consumer protection, and law enforcement response. Prior to that she served for 17 years at the United States Department of Justice.</div>


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The time for US stablecoin regulation is now 

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



<ul>
<li>You watched the debate, but did you watch the bond market? </li>



<li>Jerome Powell is in Sintra, but it sounds like he’s more concerned about inflation than getting a tan. We recap his remarks below. </li>



<li>Silvergate Bank may have shut its doors last year, but that doesn’t mean it’s off the SEC’s radar.</li>
</ul>



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



<h2 class="wp-block-heading">As Biden&#8217;s odds of winning implode, so goes the bond market</h2>



Everyone saw the debate. Everyone’s seen the memes. I don’t need to get into that here. But one thing is for certain: The odds of a Republican sweep in the election are soaring.



The probability of a Trump win has one of the largest spreads between two frontrunners that I’ve ever seen:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXeRFhmsjSZSo-x_lyjQ9GUf0TiUnuA33hfwdgzwbwGyx5hz_rzh20n9WnZFd0R-Ye0PgftAljdUeDpXaW-dYyeAgavG4ckTIX3koOr744pDZViA0q0AgWhT959A8S4lXeihVBOIgcJRH6pgsMDdHUmsOB-p?key=rZcIjckoLJ6AAXgwgsGfWg" alt=""/></figure>



And more importantly, the odds of a Republican sweep have now increased substantially:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXe2FEZ4NKSi6O2SH1AEkp5R1gcRyOLAW9m2NYzE_S0YN7bJ3hpbS0RrAz1OetHdtlNCWzeCPnYm4duILVZ4B8nkLSgVxaMZSu9JZ2LdztzGUR9gzw3c88kgzwhx1iW1wy3ZivPZMjzdqfJoy_8INvYF2bmr?key=rZcIjckoLJ6AAXgwgsGfWg" alt=""/></figure>



In terms of market impact, the increasing likelihood of a sweep is what interests me. To start, one thing is certain: Both parties want to spend and print money and run a deficit, but each will do so differently.&nbsp;



<ul>
<li>If Democrats win, expect large fiscal stimulus bills, debt forgiveness and outsized investment in government sectors such as health care. </li>



<li>If Republicans win (especially under Trump), expect major tax cuts for individuals and corporations, a heavier hand in forcing dovish monetary policy and further incentives for corporations through removal of regulatory red tape. </li>
</ul>



Either outcome will lead to increased deficits regardless of where we are in the business cycle. However, what is uncertain is where Congress will end up (a split or a sweep). I believe this is what the market is beginning to wrap its head around.



Like I said, a Republican sweep is looking increasingly likely. This means they will have no issue passing any bill they want, allowing them to easily pursue policy objectives like tax cuts. Sure, a Trump presidency will lead to some executive orders that are friendly to corporations. But for real policy change to occur, he needs control of Congress.



I believe that the increasing odds of a Republican sweep is what set the bond market ablaze this week.



As Biden’s odds of winning the election imploded, so did long end bonds:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXeb9QyAwPnHYjEifL8PIeolSttk8mglcPFB_oxKgYC5-Fs555bl71J8sDDdt2bYSLPKa_et3Y8Yj0WFlLZ5btGDFmCDAmMZO3Rr2zHJqoR0SS9Sc_jd-GF8wrr5aZymabW7qhfqcGx-cSA_Cw1As-4TNgCI?key=rZcIjckoLJ6AAXgwgsGfWg" alt=""/></figure>



As bondholders saw the likely Republican sweep crystalize, they also realized that deficits are going to remain wider, leading to more debt needing to be issued and absorbed. Plus, inflation is likely to remain secularly higher.&nbsp;



In this brave new world of huge fiscal spending, you don’t want to be the sucker holding fixed income that is getting eroded by more debt issuance and higher inflation.



This is a crossing of a Rubicon-type moment as the US global monetary system increasingly resembles an emerging market rather than a global reserve currency one.



Someone who’s been all over this is regular On the Margin Podcast guest Luke Gromen, who tweeted the following:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXfbjqaM8x91fVwinGiuoDtp6o1qbC-ruG7cTWrHpCqFhYGknPASO5j56ONt_70saRXX9vvw0X7G04dFfMYW41-2aq7bn9aEQHqu71Rimr0NkRpiyhB1m-_PI2RN3tVEcjSr6-ufk-j7zwVgeR7BJZoDIYZW?key=rZcIjckoLJ6AAXgwgsGfWg" alt=""/></figure>



Indeed, since the end of the debate, the bond market has sent a clear message: Things are changing, and fast.



— Felix Jauvin



<h2 class="wp-block-heading">$107 million&nbsp;</h2>



The total value of crypto the German and US governments collectively moved on Monday.&nbsp;



German officials moved 1,500 BTC (valued around $95 million), while the US government transferred 3,375 ETH (worth about $12 million), according to analytics firm Arkham Intelligence.



“While this isn’t an indication of immediate selling, it can weaken buyer enthusiasm, contributing to recent sell-side dominance,” analysts from Wintermute said of the moves.



<h2 class="wp-block-heading">Powell’s European summer </h2>



Fed Chair Jerome Powell appeared alongside ECB President Christine Lagarde and Central Bank of Brazil President Roberto Campos Neto during the ECB Forum on Central Banking.&nbsp;



The trio talked inflation, interest rates and just a little bit of politics.&nbsp;



Powell said he expects US inflation to drop to the “mid-to-low” 2% range within a year, i.e., just above the Fed’s target. He added that central bankers need to see further economic data before they can confidently cut rates. When specifically asked about September — which <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">Fed fund futures markets</a> are still eyeing confidently — he was evasive.&nbsp;



“I&#8217;m not going to be landing on any specific dates here today,” Powell said.&nbsp;&nbsp;



“Let me also say that we&#8217;re well aware that if we go too soon, that we could undo the good work we&#8217;ve done in bringing down inflation, and if we go too late, we could unnecessarily undermine the recovery and the expansion… we&#8217;re aware that we have two-sided risks now, more so than we did a year ago,” he added.&nbsp;



Lagarde, unsurprisingly, evaded questions herself, declining to comment on the results of the French election. She did say the ECB is highly attuned to how markets react to political developments. We imagine Powell feels similarly, but he kept his answer diplomatic when asked if a second Donald Trump presidency would threaten central bank independence.&nbsp;



“I am not focused on that at all,” he said. “I worry about getting the job right.”



On a lighter note, Europe does have something we don’t this summer: a Taylor Swift tour. Nomura analysts <a href="https://www.nomuraconnects.com/focused-thinking-posts/swiftonomics-the-economic-power-of-superstar-concerts/#:~:text=In%20the%20US%2C%20Taylor%20Swift's,effect%20is%20probably%20more%20subdued.">say</a> Swift’s US tour last summer generated total consumer spending of $5 billion, almost half of which was retail sales. The <a href="https://www.philadelphiafed.org/-/media/frbp/assets/surveys-and-data/beige-book/2023/230712-bb.pdf">Philadelphia Fed</a> even said the Eras Tour boosted tourism across the region.&nbsp;



Powell can rest easy, though —&nbsp;Swift will be returning for a second US leg in October.&nbsp;



— Casey Wagner



<h2 class="wp-block-heading">Another day, another lawsuit </h2>



If I had a dollar for everytime I wrote “the SEC sued…,” I probably wouldn’t have to keep writing about lawsuits. But I won’t quit my day job just yet.&nbsp;



Yesterday, the SEC announced charges against Silvergate Bank, the crypto-friendly financial institution that collapsed last year.&nbsp;



The securities regulator says Silvergate <a href="https://blockworks.co/news/sec-sues-silvergate-bank-for-misleading-public">misled investors</a> in the aftermath of FTX’s <a href="https://blockworks.co/news/ftx-meltdown-timeline">implosion</a> by intentionally downplaying the impact. The bank was also deceptive about its anti-money laundering and Bank Secrecy Act compliance programs, the SEC alleges.&nbsp;



Also named in the suit were three former Silvergate executives: CEO Alan Lane, Chief Risk Officer Kathleen Freher and CFO Antonio Martino.



Silvergate, without confirming or denying the allegations, agreed to pay $63 million to federal and state regulators, plus $50 million to the SEC in a settlement agreement. Lane and Fraher also settled for $1 million and $250,000, respectively.&nbsp;



These settlements are always interesting. They allow firms to avoid costly and time-consuming litigation without admitting defeat or risking a loss in court.&nbsp;



But in Silvergate’s case, it’s a bit different. The bank is already in liquidation. Plus, the breakdown of the fines means Silvergate is paying $43 million to the Fed and $20 million to California&#8217;s Department of Financial Protection &amp; Innovation.&nbsp;



Silvergate won’t have to pay the $50 million fine the SEC assessed as long as the Fed and California regulators get paid.&nbsp;



Silvergate in March announced it was entering into “voluntary liquidation.” At its peak, Silvergate reported assets of more than $16 billion.&nbsp;



The settlements are all subject to court approval.&nbsp;



— Casey Wagner



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



<ul>
<li>Crypto equities have notched a solid first half of the year. MicroStrategy is up 380%, while Coinbase and Robinhood have gained 329% and 122%, respectively. Crypto mining stocks Hut 8 and Bitfarms are up 86% and 34%, respectively, since the halving. </li>



<li>Circle has received a license to <a href="https://blockworks.co/news/circle-first-stablecoin-issuer-eu-compliant">operate in the EU</a> under the Markets in Crypto Assets (MiCA) regulation. The news comes amid ongoing confusion about how stablecoins would operate in the post-MiCA era. </li>



<li>In case you missed the viral <a href="https://blockworks.co/news/only-a-fool-would-vote-on-crypto-alone">opinion piece</a> Blockworks published on being a single-issue crypto voter, catch up with the Empire Podcast, which recently featured crypto-founder-turned-Trump-ally Ryan Selkis. Listen <a href="https://blockworks.co/news/only-a-fool-would-vote-on-crypto-alone">here</a>, or wherever you get your podcasts.</li>
</ul>



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On the Margin Newsletter: What a Republican sweep would mean for markets

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Howdy!



Since it’s national poking fun at the British week: It’s a Chewsday, innit!



And speaking of chewing, a bit more on those pesky sandwiches:



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



<h2 class="wp-block-heading">Solana’s sandwich attackers are hanging around</h2>



In early June, the Solana Foundation <a href="https://blockworks.co/news/lightspeed-newsletter-sandwich-attacks">blocked a group of validators</a> found to be participating in private mempools that facilitate “sandwich attacks” from receiving a delegation from the foundation’s stake.



The Solana Foundation is a non-profit entity developing the Solana network. It has a sizable stake of solana tokens that it delegates with the goal of diversifying the field of Solana validators. Validators who help facilitate sandwich attacking — or front-running user transactions to manipulate prices and pocket the difference — shouldn’t be recipients of what are essentially grants from the Solana Foundation, the thinking went.



The foundation’s announcement came with a groundswell of anti-sandwich activity: Jito’s DAO proposed to blacklist malicious validators, and Stakewiz began labeling known sandwich attackers, to name a couple examples.



More recently, the popular Solana NFT marketplace Magic Eden introduced “mempool protection” that keeps user buys from being replaced.



But nearly a month later, <a href="https://blockworks.co/tag/solana">Solana</a>’s sandwich attack woes don’t seem to have abated. A <a href="https://sandwiched.me/">dashboard</a> crafted by the data outfit GhostGraph shows these sorts of attacks happening every couple seconds, and the Discord channel where Solana’s validators talk shop is still cloudy on the path forward.



A couple things appear evident from GhostGraph’s dashboard: First, the several sandwich attacks being tracked per minute are memecoin swaps, meaning unsophisticated retail traders are being exploited by more savvy sandwichers. Second, these transactions are being processed through reputable block leaders, which are the validators who create given blocks.&nbsp;



That’s not to say these leaders are bad actors: They may just not realize their block includes sandwich transactions, as a developer <a href="https://discord.com/channels/428295358100013066/689412830075551748/1253413131472994338">pointed</a> out on Discord.&nbsp;



It’s also clear that the Solana Foundation’s un-delegation of stake wasn’t a silver bullet. Practically speaking, it’s difficult to slice out sandwich attackers — and to even find the private mempools where many of them reside.



I’ve heard of some in Solana running transactions with high slippage settings to purposely get sandwiched and identify attackers, but as Jito Labs CEO Lucas Bruder said in Discord, finding and blocking sandwichers is still a “cat and mouse game.”



When I asked the foundation’s ecosystem engineering lead Jon Wong about the difficulty of rooting out all sandwichers, he said “even if this is only an 80% type effort, I think it may be enough to at least dissuade everyone except the most dedicated attackers.”



These dedicated attackers can be quite dedicated though: A MarginFi researcher <a href="https://x.com/HypoNyms/status/1802100776346763406">documented</a> a sandwich bot named “arsc” pocketing $30 million over a couple months via sandwich attacks.



— Jack Kubinec



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



<h3 class="wp-block-heading">$79.55 million</h3>



That’s the market <a href="https://defillama.com/stablecoins/Solana">capitalization</a> of PYUSD on Solana, making PayPal’s stablecoin the third-largest on the network, according to DeFiLlama. PYUSD is the eleventh-largest stablecoin <a href="https://www.coingecko.com/en/categories/stablecoins">generally</a>, per CoinGecko.



In late May, <a href="https://blockworks.co/tag/paypal">PayPal</a> deployed its <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> on Solana to much fanfare but little immediate adoption — the coin had 56 holders two days after launching, we <a href="https://blockworks.co/news/lightspeed-newsletter-paypal-solana-institutional-adoption">reported at the time</a>.



That number has <a href="https://solscan.io/token/2b1kV6DkPAnxd5ixfnxCpjxmKwqjjaYmCZfHsFu24GXo">grown</a> to 652 now, which is bigger but still smaller than the number of subscribers to this newsletter (eat your heart out, PayPal).



PYUSD launched on <a href="https://x.com/KaminoFinance/status/1807762629852643429">Kamino</a> and <a href="https://x.com/JupiterExchange/status/1807767504376471912">Jupiter</a> this week, which will perhaps further grow adoption numbers, though the token was pitched as being focused more on payments than on DeFi.



— Jack Kubinec



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



Jupiter Exchange, the Solana-based DEX aggregator, is <a href="https://x.com/JupiterExchange/status/1807792180112847237">contemplating</a> an overhaul of its Jupuary event — a yearly token airdrop and community rewards initiative. The first Jupuary, which took place <a href="https://blockworks.co/news/jupiter-airdrop-draws-criticism">in the leadup</a> to a Jan. 31 airdrop, <a href="https://x.com/weremeow/status/1746923653055586716">featured</a> substantial token emissions and community rewards, though some concerns have arisen over high emissions and inflated FDV.



Founder Meow recently <a href="https://x.com/weremeow/status/1807689721973477699">proposed</a> a 30% reduction in JUP token supply, team allocations, and Jupuary emissions to address these issues; the <a href="https://x.com/weremeow/status/1807689721973477699">goal</a> being to streamline the tokenomics of Jupiter&#8217;s core asset, JUP, and foster strong community alignment.



Community sentiment has been mixed, but <a href="https://x.com/web3sven/status/1807692898185441510">many</a> <a href="https://x.com/MummyNinj/status/1807718219769335955">see</a> <a href="https://x.com/scripted_whiz/status/1807693442744467834">the</a> <a href="https://x.com/aboladejohn_/status/1807665225455309057">changes</a> as essential for long-term growth. User @SuperSolana <a href="https://x.com/SuperSolana/status/1807718460308193363">stated</a>, &#8220;We need to be less selfish; the first Jupuary saved a lot of people and gave back to thousands who lost in the bear market.&#8221; While others shared strong opinions on how to reward community engagement, such as, &#8220;Platform usage as in swap volume should definitely be the most ‘rewarded’ activity.&#8221;



Not all feedback <a href="https://x.com/entwolken/status/1807840788749115754">has</a> <a href="https://x.com/matsuokaayane/status/1806862294846148861">been</a> <a href="https://x.com/david_boo11/status/1807677693191749861">positive</a>. User @Oo7Shubh <a href="https://x.com/Oo7Shubh/status/1807680385330868499">expressed</a> skepticism, noting, “If we get the chance to vote, then I will definitely choose NO. Because in terms of circulating supply this will create a huge impact and that&#8217;s what stopping people to buy or hold JUP.&#8221;



A more favorable sentiment was captured by community member @JohnVagabonder, who <a href="https://x.com/JohnVagabonder/status/1808028079496855984">added</a>, &#8220;It reminds me of Christmas, if you&#8217;ve been good all year and not on the naughty list Santa Meow will give you a present in January.&#8221; Others expressed deep trust and belief in the Jupiter team&#8217;s vision, with users like @dynatronix <a href="https://x.com/DynatroniX/status/1807957845130072513">signaling</a>, &#8220;I have such belief, such faith, such trust. Jupuary was the best event in crypto history as I see it. Catdets like myself will never forget it! And the pie will grow!&#8221;



— Jeffrey Albus



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



A message from Mert Mumtaz, CEO of Helius:


<div class="wp-block-image">
<figure class="aligncenter"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXdJ-fRt6E8tyo4cbWotymnrm4I5HdstSNE4wIf9lf0MVUBIxboIpJY6klyH90RCeGC1dd1CCgFc39tBInVb6eb5ol5uD-Sw5dGwd7Rvd-7edmZurUyeXQbfb-N0ZysBnfzfTeEtxw6KJP7WDxd9pTbgpbSC?key=ObPorV4ad96Tq5itsfs8Ww" alt=""/></figure></div>


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Lightspeed Newsletter: Solana users are still getting frontrun

Pi Squared, the visionary team on a mission to enable the next generation of verifiable computing, has announced the completion of its seed round, raising $12.5 million. Led by Polychain Capital, the syndicate comprises ABCDE, Bloccelerate, Generative Ventures, Robot Ventures, and Samsung Next, and a cohort of angel investors including Shumo Chu, Harish Devarajan, Justin Drake, Sreeram Kanaan, Csongor Kiss, George Lambeth, Yilong Li, Calvin Liu, Lucian Mincu, Karthik Raju, and Common Prefix.



With its seed round complete the Pi Squared team is ready to deliver on the power and promise of its breakthrough “Proof of Proof” (PoP) concept.&nbsp;&nbsp;&nbsp;



<h2 class="wp-block-heading">PoP sets the foundation</h2>



Pi Squared denotes zero-knowledge (ZK) proofs of mathematical proofs: the mathematical proofs are verified by a small, universal proof checker that yields ZK proofs. In other words, the generated results are ZK proofs of mathematical proofs—hence “Proof of Proof.”



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="460" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png" alt="" class="wp-image-88762" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-1.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">Pi Squared applies to all executions and DA systems across platforms. | Source: <a href="https://docs.pi2.network/proof-of-proof/what-is-pop">Pi Squared</a></figcaption></figure>



Just as TCP/IP underpins the Internet, Pi Squared&#8217;s universal mathematical proof checker heralds Verifiable Computing 2.0.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Our mission is to revolutionize verifiable computing, making it universal for all languages and virtual machines, inherently correct-by-construction, and lightning-fast,” says Grigore Roșu, CEO of Pi Squared and CS Professor at University of Illinois Urbana-Champaign. “This will have many applications, including a universal settlement layer (USL) so all Blockchains, L1s and L2s, can be universal, correct, inter-operable and efficient. It does not end there, our long-term mission is to settle all science and knowledge on USL.”
</blockquote>



This innovation fosters a universal computing space with seamless interoperability for languages and VMs, reduces the trust base for correctness certificates, eliminates the need for error-prone traditional language tools such as compilers and interpreters, and makes language updates as straightforward as plug-and-play.



<h2 class="wp-block-heading">Pi Squared’s compelling initial product</h2>



Pi Squared is using ZK technology in a correct-by-construction and fundamentally unique way to ensure their products are fundamentally reliable and precise from the moment of implementation, ensuring verifiable-computing correctness across all languages and virtual machines.



The first product being built on Pi Squared is the Universal Settlement Layer (USL), a modular blockchain architecture defined by several core characteristics:



Universality



Computations can be expressed in any language or virtual machine without the need for compilers.



Provable correctness



Computations verified by the USL are mathematically proven to be correct, and any external entity can independently verify the correctness of the state of the USL.



Trust Base Minimality



USL exposes any trust assumptions in upper-layer computations for increased transparency, end-user awareness, and eventually minimize the trust base through correctness proofs.



App Interoperability



The USL will support validating interoperability between different application modules and networks (e.g. appchains).



Determinism and reproducibility



The validation is reproducible and independently verifiable by any external entity.



<h2 class="wp-block-heading">The tangible impact of USL</h2>



The Pi Squared team envisions USL to be the language and virtual machine-agnostic layer that enables new apps and improves existing services with its settlement layer.



For the Web3 industry, USL will enable the rise of more cross-chain applications and use cases while improving liquidity access across appchains. It’s a noteworthy development set to make the historically difficult lives of Web3 participants easier—builders and end users alike.&nbsp;



Specific applications enabled by USL include:&nbsp;



<h3 class="wp-block-heading">Rollup-in-a-box</h3>



This service facilitates the creation of L2/L3 rollups and appchains, offering support for multiple programming languages and virtual machines for both off-chain code and on-chain smart contracts.&nbsp;



Users can customize rollups by choosing from a menu of system features. Every rollup created with this service has its transactions settled transparently and uniformly by USL.



<h3 class="wp-block-heading">Multi-chain bridging</h3>



Multi-chain bridging enables rollups and applications on USL to effortlessly bridge tokens on-chain across various chains without the need for off-chain code.&nbsp;



Each side of a bridge operation can utilize a different language to create the minting or freezing transactions, while the on-chain code can be defined using yet another language. USL manages this diversity seamlessly, making it invisible to the upper layers.



<h3 class="wp-block-heading">Cross-chain financial applications</h3>



To provide better staking and borrowing rates, USL enables DeFi applications to transition smoothly between different rollups and appchains by settling transactions on USL, even when involved chains may use different VMs and platforms for execution.



In practice, an example of this occurring is a cross-chain DeFi application staking Ether on Cosmos and using the received <a href="https://blockworks.co/tag/liquid-staking">liquid staking token (LST)</a> as collateral to borrow USDC on Solana.&nbsp;



<h3 class="wp-block-heading">Heterogeneous ZK verification</h3>



Users can leverage USL, via support of various ZK rollups and applications, to use the ZK platform of their choosing. USL validates through a ZK proof verification process when transactions occur using the appropriate ZK backend.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Pi Squared’s proof of proof technology will have a transformative impact across Web3 and beyond,” said Karthik Raju, GP at Polychain Capital. “Pi Squared’s universal ZK circuit will significantly increase the reach and applicability of Web3 for everyone, from builders to end users.&#8221;
</blockquote>



<h2 class="wp-block-heading">Ready to trailblaze</h2>



Pi Squared&#8217;s seed round and innovative Proof of Proof technology position it at the forefront of verifiable computing.&nbsp;



Pi Squared will be presenting and exhibiting at events around EthCC in Brussels next week. Readers can listen to Pi Squared’s CEO, Grigore Roșu, speak at <a href="https://lu.ma/restakingdaybrussels">Restaking &amp; Infra Day</a> as well as <a href="https://lu.ma/l2con?tk=i9zmP8">L2con</a> on July 8th &amp; 9th.



To learn more about Pi Squared, visit the <a href="https://pi2.network/">Pi Squared website</a> and follow their <a href="https://x.com/Pi_Squared_Pi2">X (Twitter)</a> account.



This content is sponsored by Pi Squared and does not serve as an endorsement by Blockworks. The veracity of this content has not been verified and should not serve as financial advice. We encourage readers to conduct their own research before making financial decisions. &nbsp;



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<h2 class="wp-block-heading">Cooking with flywheels</h2>



It’s not always the case that crypto prices make sense. DePIN may eventually change that.



Take Bitcoin. It’s tempting to think that its price might go up or down depending on how many people are using the network.&nbsp;



Sometimes that’s true — both 2017 and 2021 bull runs were preceded by huge growth in the number of active wallets. And the number of transacting addresses often falls almost in tandem with bitcoin’s price, usually after markets peak.



But active Bitcoin addresses <a href="https://public.flourish.studio/visualisation/18588654/">grew</a> throughout most of 2022, the depths of the most recent bear market, even as prices went down. There’s an obvious simple explanation: Some of those active addresses were actively selling, pushing prices down.



All this makes predicting bitcoin prices with onchain activity rather squirrely. You never know if that “active wallet” is posturing to buy or sell on a crypto exchange.&nbsp;



DePIN is showing early signs of more reliable metrics, at least on the surface. Helium, for example, pays users crypto for setting up mobile and IoT hotspots around the world. Over the past year or so, almost 42,000 Helium devices have been <a href="https://dune.com/helium-foundation/helium-makers">deployed</a>.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXfTOUeyedB1e8qnfRyQ1WNT-rs1xZZtFfwIvW1Jm1-8Cjin4w4jVV09Yi8Qd2tLitVfBJCUO4hiMU0vfKJ6B9p53o7prFYRcdDGPQYDkhG46_aGZBoXDn_DEVN9Q8eXVdMLXvGszmkFrbkfTjOxHixjFyc?key=W_Dm-GcH-i1BjPnOk3O8Jg" alt=""/><figcaption class="wp-element-caption">Nothing seems to boost new hotspots more than rising prices</figcaption></figure>



It just so happens that the rate of new Helium hotspot deployments matches the price performance of HNT almost exactly.&nbsp;



DIMO is another. It pays vehicle owners a steady stream of tokens in return for their car-related data.&nbsp;



Almost 5,000 unique owners have opted into DIMO since December 2022, reaching close to 300 new <a href="https://dune.com/dimo_network/dimo-protocol">owners</a> per week as markets topped out earlier this year.&nbsp;



New signups have since declined, along with DIMO’s price.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXcXdkBJar8IxHZkogSbqyw1p78jkTEYhL3CbUeqAbuPpY40EKiCz_KV0q2SdC8tirX4eL8JfElDwXo-SR215pCE1EDWHk_1JoCxrVgT-wfXqSEiXyi7bcGoFGt8lVqOG9fQmlprQHwnGSzaKpkma_4mF0u2?key=W_Dm-GcH-i1BjPnOk3O8Jg" alt=""/><figcaption class="wp-element-caption">Looks familiar…</figcaption></figure>



GEODNET, the Real-Time Kinematics project looking to make geo-location more precise with crypto incentives, is following a similar trend.



The project has so far <a href="https://dune.com/geodnet_console/geod-console">onboarded</a> almost 7,400 “sky miners” — small satellites on rooftops and other high places that collect real-time space weather data — over the past two years or so.&nbsp;



Aside from a major uptick in the second quarter of 2023 as GEOD’s price bottomed out, the price of its native token has risen alongside the number of new satellite miners coming online.&nbsp;



Some of the correlation can be explained by the operation <a href="https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-geodnet-why-were-bullish/">spending</a> 80% of its revenue on buying back GEOD and burning it, with about $500,000 removed from circulation to date (~2% of its current market cap).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXf9d7PrAlprM8zo3ahDJv3PimIH7ld1F8bBvMhfOndfQMbOscsE8CtHvHdtir2JFEy8oRQU9Paohesix5QhSL2UWsUS8EUtspMRFG7HOY7bUeEyuKZKSRbiOIA8rxnApaBfHOjNcUJIZjGqepmqXkAJKl_7?key=W_Dm-GcH-i1BjPnOk3O8Jg" alt=""/><figcaption class="wp-element-caption">GEODNET has so far paid out nearly $8 million tokens for mining the sky</figcaption></figure>



Modeling DePIN token prices on how many users are building out the infrastructure looks promising, but frustratingly, it’s a chicken-and-egg problem.



Did rising prices drive users to add devices to the respective networks? Were new sign-ups scared off when markets corrected? We might never know.



What the correlation does suggest is that ‘number-go-up’ could still be the primary driver of infrastructure growth in DePIN, as is tradition in crypto.&nbsp;



DePIN’s ties to the physical world may only get it so far, for now.



— David Canellis



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



<ul>
<li>Weekly Helium <a href="https://tokenterminal.com/terminal/projects/helium">revenues</a> have leveled out after falling for most of this year, currently sitting at about $32,000.</li>



<li>DePIN tokens overall are currently worth $26.6 billion, per <a href="https://coinmarketcap.com/view/depin/">CoinMarketCap</a>, down from $40 billion in March.</li>



<li>BTC and ETH are flat on the day and up 2% in the past seven days, now $62,700 and $3,450 respectively.</li>



<li>Global stablecoin supplies have <a href="https://defillama.com/stablecoins">risen</a> over $1 billion month on month to $161.7 billion but have shed around $300 million in the last week.</li>



<li>Blast processed over 25% of all DEX derivatives <a href="https://defillama.com/derivatives/chains">volume</a> last week amid its airdrop, handling $11.24 billion. Its volumes have since normalized but are still ahead of Arbitrum.</li>
</ul>



<h2 class="wp-block-heading">Circling back</h2>



We’ve <a href="https://blockworks.co/news/privacy-coins-sacrificed-so-crypto-could-run">previously chatted</a> about the staggered Markets in Crypto Assets (MiCA) rollout over in Europe. The first part has arrived and it&#8217;s mostly focused on stablecoins.



In case you missed the hoopla leading up MiCA’s implementation, or Circle’s big announcement yesterday, the stablecoin issuer seems excited about the new rules.



CEO Jeremy Allaire said the framework legalizes stablecoins in a Monday press conference. Through this, the stablecoin issuer can now issue both USDC and EURC in the EU.&nbsp;



In a press release accompanying Circle’s announcement that it was the first EU-regulated stablecoin under the new provisions, Allaire added that the rules unlock “the enormous potential of digital assets to transform finance and commerce.”



Per Chainalysis <a href="https://www.chainalysis.com/blog/mica-stablecoin-regime-challenges-part-1/#:~:text=Transaction%20volumes%20show%20that%20stablecoins,Regulation%20(MiCA)%20takes%20effect.">data</a>, onchain transaction volume reached $10 trillion last year. Stablecoins made up 60% of that volume. Clearly that’s no small sum, and points to how widely used and accepted stablecoins have become. To put that number further into perspective, bitcoin only represented 10% of onchain volume in 2023.



(I want to quickly note that I’m focusing on the big stablecoin issuers, but other European-specific issuers have also become MiCA compliant.)



With that being said, let’s take a look at Tether. CEO Paolo Ardoino seems a tad more hesitant about the new regulations, at least in comparison to Allaire. However, there’s no doubt that such regulations do encourage growth, he noted.



“Tether commends EU regulators for their efforts in establishing a framework for crypto assets. While the effects of these new regulations will take time to manifest, there remain important aspects of the regulation which we continue to believe could render the job of a stablecoin issuer extremely complex but also make EU-licensed stablecoins vulnerable and riskier to operate,” Ardoino told me.&nbsp;



His point is a valid one, though. Chainalysis highlighted that regulation emphasizes the need for issuers to really pay attention to onchain analytics, so they can better understand the use cases for their stablecoins.



“This sort of data can provide insights into holders, balances, and transactional behavior, offering a degree of transparency on the usage of particular tokens on an aggregate-basis, as well as at the transaction-level,” the firm wrote.&nbsp;



“This allows issuers to have a real-time view of active wallets holding their tokens, including holder behavior (i.e. exchange vs. personal wallets, duration of holdings), overall transaction volume across multiple blockchains, and alerts for transactions involving sanctioned entities or jurisdictions.”



Ardoino said more discussions are warranted to better understand and implement the technical aspects of this regulation.&nbsp;



“While Tether is optimistic about MiCA’s long term implementation, it remains crucial that stablecoin regulatory policies enacted are balanced, protect consumers, and nurture growth in our emerging industry,” he said.&nbsp;



Change is hard, but here’s to hoping that MiCA is able to succeed in uniting regulators across the EU. And perhaps the US could learn a lesson or two.



— Katherine Ross



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



<ul>
<li>Bitcoin miner Northern Data is mulling an IPO for its AI and data center business segment, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-07-01/northern-data-weighs-ai-unit-us-ipo-at-up-to-16-billion-value">reported</a>.</li>



<li>Binance.US is “confident” in its legal battle against the SEC, the company <a href="https://x.com/BinanceUS/status/1807905912231022593">said</a> on X.</li>



<li>The Bahamas is prepping regulations requiring commercial banks to provide access to its CBDC, Reuters <a href="https://www.reuters.com/technology/bahamas-regulate-banks-offer-cbank-digital-currency-2024-07-01/">reported</a>.</li>



<li>The SEC <a href="https://blockworks.co/news/sec-sues-silvergate-bank-for-misleading-public">filed</a> a suit against and a settlement with FTX-linked (and now defunct) Silvergate Bank.</li>



<li>The German government continues to send millions in bitcoin to exchanges, per Arkham <a href="https://platform.arkhamintelligence.com/explorer/entity/germany">data</a>.</li>
</ul>



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



Q: Are stablecoins still crypto&#8217;s killer app?



Probably.



I’m not one to say definitively one way or another because there are so many unknowns in this world (can you tell I went to Las Vegas and didn’t spend a dime gambling?) but I think the use cases for stablecoins are strong. I mean, just scroll up and look at the Chainalysis data I mentioned above.



There’s always going to be something sexier and unique in crypto that people hail as the next killer app, but if we’re just looking at utility and overall use, then I think stablecoins have this race locked down.&nbsp;



— Katherine Ross



The maxi suppressed inside of me would say Bitcoin is the ultimate crypto app: uncensorable digital money.



Can’t say the same for tether and USDC. Their respective issuers can freeze whatever balances they like, which they regularly do upon request from law enforcement.



Luckily, crypto has DAI, which doesn’t have that problem. That also makes it uncensorable digital money. So yes, stablecoins are crypto’s killer app…if you don’t count the original.



— David Canellis



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Empire Newsletter: How ‘number-go-up’ fuels DePIN

The Securities and Exchange Commission has filed a lawsuit against Silvergate Bank.&nbsp;



The regulator accused Silvergate, which officially closed and liquidated last year, of misleading clients and investors about the effectiveness of its compliance programs, including its anti-money laundering efforts.



The suit names former CEO Alan Lane, former Chief Risk Officer Kathleen Freher and former Chief Financial Officer Antonio Martino as defendants, in addition to the bank itself.&nbsp;



“SCC, Lane, and Fraher misrepresented the operational and legal risks facing the Bank by falsely stating in SEC filings and other public statements that the Bank had an effective BSA/AML compliance program tailored to the heightened risks posed by its crypto asset customers,” the SEC said in court documents.&nbsp;



Read more:<a href="https://blockworks.co/news/us-congressional-research-crypto-risk"> US Congressional research finds perception of crypto risk spurred bank withdrawals</a>



The bank, the <a href="https://blockworks.co/tag/sec">SEC</a> continued, claimed to have “conducted extensive due diligence and transaction monitoring related to those customers, including one of its now most notorious customers, <a href="https://blockworks.co/tag/ftx">FTX</a> (the crypto asset trading platform that <a href="https://blockworks.co/news/ftx-meltdown-timeline">imploded in November 2022</a>) and FTX’s related entities.” But the program was “inadequate.”



The <a href="https://blockworks.co/tag/silvergate">Silvergate</a> staff were able to trace $9 billion worth of transfers from FTX-related entities in the review that happened less than a week after the collapse.



“​​Most troubling to the BSA staff was the trend of funds that flowed from FTX’s custodial accounts — which held FTX customer funds — to a series of non-custodial FTX-related entities’ accounts, followed by transfers of these funds to other third parties — either through the SEN or to accounts external to the Bank,” lawyers for the SEC wrote.



Following the review, Lane allegedly made a false or misleading statement in a letter posted to his LinkedIn and Twitter accounts, claiming that the bank took the BSA “very seriously” but the SEC said it never did its due diligence on FTX.



Lane was also accused of providing “false or misleading” information to Congress when asked about the relationship between the bank and FTX.&nbsp;



“Had Lane’s Response to the Congressional Letter accurately depicted the facts at the time, it would have contradicted prior public statements by Silvergate, and investors would have learned of the deficiencies in the Bank’s BSA program and could have appreciated the risks of investing in SCC stock,” the SEC said.



Per the filing, Martino allegedly sent a “deceptive” letter to the San Francisco Fed claiming that Silvergate was “well-capitalized” as of Jan. 19, 2023. The bank <a href="https://blockworks.co/news/silvergate-intends-wind-down-operations">would go on to fail</a> just a few months later in March.



The former executives and the bank are accused of violating the Securities Act and Exchange Act.&nbsp;



The SEC’s suit seeks to prevent Lane, Fraher and Martino from “serving as an officer or director of any company that has a class of securities registered under” certain parts of the Exchange Act.&nbsp;



In a <a href="https://www.sec.gov/newsroom/press-releases/2024-82">press release</a> following the suit, the SEC said that Silvergate settled with the regulator. As part of the deal, the defunct bank would pay $50 million. Both Lane and Fraher also opted to settle. Both face “permanent injunctions, five-year officer-and-director bars, and civil penalties of $1 million and $250,000 respectively” pending court approval.



Martino didn’t settle with the SEC, however.



“I am deeply committed to the highest standards of integrity and transparency in financial reporting, as has been the case over the course of my 30+ year career,” Martino said in a statement to Blockworks. “The allegations made by the SEC are unfounded and irresponsible, and I look forward to presenting my case in court and clearing my name.&#8221;



Updated July 1, 2024 at 4:40 pm ET: Added statements from SEC press release.



Updated July 1, 2024 at 4:29 pm ET: Added comment from former Silvergate CFO. 



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SEC accuses Silvergate of misleading the public after FTX collapse

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



<ul>
<li>Binance notched a small win in its suit with the SEC last week. Here’s what else the opinion said. </li>



<li>Why the US ether ETF launches will come after Independence Day.</li>



<li>We are days away from a big holiday weekend, but the economic calendar is still packed.</li>
</ul>



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



<h2 class="wp-block-heading">Binance’s little win</h2>



Like Coinbase did in March, Binance notched a small win in its legal battle with the SEC Friday.&nbsp;



You may remember the securities regulator <a href="https://blockworks.co/news/coinbase-binance-suits-different">sued both</a> Coinbase and Binance in June 2023. Legal teams from each exchange tried to get the cases tossed, but neither effort was terribly successful.&nbsp;



In an opinion published late Friday evening, DC District Court Judge Amy Berman Jackson allowed the SEC’s case against Binance to mostly continue.&nbsp;



Jackson opted to fully dismiss count two: the SEC’s claim that Binance sold its BUSD stablecoin as an investment contract. Counts one and three — alleging that Binance offered and sold BNB, Simple Earn and BNB Vault as unregistered securities — are also partially dismissed.&nbsp;



The remaining 10 counts will proceed, Jackson ruled.&nbsp;



You are welcome to read the full <a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.248.0_1.pdf">89-page opinion</a> for yourself, but here is the CliffsNotes version:&nbsp;



<ol>
<li>The SEC’s allegations relating to BUSD “do not align with the prongs of the Howey test,” the court ruled. </li>
</ol>



<ol></ol>



In its initial complaint against Binance, the SEC claimed BUSD buyers had reasonable expectations of profits from the token (a key principle of the Howey test). But Judge Jackson disagreed, stating the SEC failed to demonstrate a clear link between the token’s value and the success of the platform as a whole.&nbsp;



“As for the ‘common enterprise’ element, the most the SEC can say is ‘the proceeds from investor purchases of BUSD were purportedly pooled in reserves, and Binance earned [50%] of the investment returns on those pooled assets,’” Jackson wrote.&nbsp;



But BUSD holders were never under the impression there was any profit sharing, the court added, so the charge was dismissed.&nbsp;



<ol start="2">
<li>Binance’s defense that there can’t be an investment contract without a real contract doesn’t hold up, the court said. </li>
</ol>



Binance’s legal team argued in January that without a physical contract, an investment contract cannot exist. Judge Jackson was having <a href="https://blockworks.co/news/binance-sec-hearing-motion-dismiss">none of this</a> back then, and her opinion apparently remains the same.&nbsp;



“The notion that a contractual relationship is required has been consistently rejected by other district courts faced with [cryptocurrency] cases in recent years,” Jackson wrote.&nbsp;



Court precedent, Jackson said, states that investment contracts can be an implicit understanding rather than a formal agreement.&nbsp;



<ol start="3">
<li>Secondary BNB sales are not investment contracts, the court said. </li>
</ol>



If you saw any headlines or X posts hailing this opinion as a “big win” for crypto, they were probably talking about the court’s ruling on secondary sales.&nbsp;



Judge Jackson ruled the SEC did not sufficiently prove that secondary BNB sales were investment contracts.&nbsp;



The ruling is not at all a loss for crypto; but it’s also not a major win. Jackson was obviously careful with her language.&nbsp;



“The SEC is not alleging or asking the court to find that the thing in question — the BNB token — is a security,” Jackson wrote. “Its allegation is that during the ICO and after, it was offered as, or sold as, a security.”&nbsp;



Jackson is letting the other claims about tokens listed in the SEC’s original complaint stand for now, so we’ll see if her opinion changes down the line. Because of Jackson’s skepticism about the SEC’s general approach to classification, perhaps the industry isn’t celebrating prematurely after all. 



— Casey Wagner



<h2 class="wp-block-heading">$61 million</h2>



The total outflows from ETH investment products last week, according to data from CoinShares.&nbsp;



It marks the largest weekly capital exit from ETH funds since August 2022, a Monday CoinShares <a href="https://blog.coinshares.com/volume-189-digital-asset-fund-flows-weekly-report-5265d50f2769">report</a> notes.



Roughly the same asset amount ($58 million) left such products the week prior. The latest money exiting these funds has pushed net outflows for ETH investment vehicles negative year-to-date, making it the worst-performing asset on the net flows front.&nbsp;



The price of ETH was down 7% from a month ago, as of Monday afternoon. The asset is still up about 53% since the start of the year.



<h2 class="wp-block-heading">Patience is a virtue</h2>



The US spot ether ETF proposals will need at least a few more days to bake, sources say.&nbsp;



They’ll be ready to serve up to investors soon, though. We know you’ve been hearing that for several weeks now, but it remains true.&nbsp;



A person close to the filings confirmed to Blockworks Monday that the SEC has suggested some more S-1 revisions. The original <a href="https://www.theblock.co/post/302687/sec-returns-s-1-forms-to-ethereum-etf-issuers-with-at-least-one-more-round-to-go-source">report</a> came after a source <a href="https://blockworks.co/news/ether-etf-issuers-await-sec-final-approval">told me</a> issuers could get a launch date from the SEC “at any point” given the “light” last round of registration statement edits.&nbsp;



Issuers are set to address the latest SEC comments and resubmit to the regulator by July 8 — <a href="https://x.com/EricBalchunas/status/1806810886109331520">squashing</a> hopes of pre-Independence Day approval.



The source called the suggested fixes (that they know of) “tiny and immaterial.” A second person familiar with the process added that the latest comments are “reasonable.”



The SEC may have intentionally slowed down the process during the holiday week, the first source guessed. Or, they added, the regulator may be looking to keep issuers “on the same pace” if one has more substantial amendments to make.&nbsp;



The regulator is likely to allow all the ETH funds to launch at <a href="https://blockworks.co/news/sec-should-let-vaneck-launch-eth-etf-first">the same time</a>.



There’s one more detail we learned. The SEC is not requiring an S-1 with every final detail filled in (i.e. management fee) on July 8. This means there will be at least one more flurry of registration statements after that date.&nbsp;



In other words, if the SEC is happy with the July 8 documents, it could quickly turn around and request a last round of filings before giving issuers the coveted “effective” date.



A spokesperson for the regulator declined to comment.



All is to say, it’s possible for the ether ETFs to launch sometime next week. Or it could drag on a bit longer.



— Ben Strack



<h2 class="wp-block-heading">On Our Radar</h2>



Happy Monday! We have an abbreviated holiday week with markets closing early on Wednesday, shut down Thursday and back open Friday. Hopefully you’re one of the lucky ones with an extra long weekend. Either way, here’s what we’re watching this week:



<ul>
<li>Fed Chair Jerome Powell is scheduled to <a href="https://www.ecb.europa.eu/home/html/index.en.html">speak</a> Tuesday morning at the European Central Bank (ECB) Forum on Central Banking in Portugal. We’ll be listening for his comments about last week’s PCE print, the labor market and, of course, how both impact plans for rate cuts. </li>



<li>Initial jobless claims come out Wednesday. First-time unemployment filings dropped 6,000 to a seasonally adjusted 233,000 for the week ended June 22 — though that was during a holiday week, which tends to boost volatility. Hopefully we see the trend continue as a sign the labor market is as strong as the Fed would like. </li>



<li>We’ll also get the minutes from the FOMC’s last meeting on Wednesday. We already have the projections for June, but the minutes will give us even more insight into how individual members are thinking about the rate cut schedule. Markets will be closed by the time the minutes drop.</li>
</ul>



— Casey Wagner



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



<ul>
<li>The IRS late Friday released its final regulations for crypto brokers. So-called “custodial brokers” — those who “take possession of the digital assets being sold by their customers” — must report all sales and exchanges of digital assets. See the updated 1099 form <a href="https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-requiring-broker-reporting-of-sales-and-exchanges-of-digital-assets-that-are-subject-to-tax-under-current-law-additional-guidance-to-provide-penalty-relief-address">here</a>. </li>



<li>After VanEck <a href="https://blockworks.co/news/vaneck-files-for-solana-etf">filed</a> for a Solana ETF last week, SOL’s cumulative volume delta (which measures net buying and selling) hit $29 million, according to a <a href="https://research.kaiko.com/insights/sol-etf-applications-fall-flat">report</a> from crypto research firm Kaiko. The filing’s impact on SOL is still minimal compared to how <a href="https://blockworks.co/news/sec-approves-ether-etf-proposals">19b-4 approval</a> of the impending ETH ETFs impacted ether, but it’s an area to keep your eye on nonetheless. </li>



<li>The US Marshals Service will be using Coinbase Prime to custody and trade <a href="https://blockworks.co/news/usms-coinbase-prime-contract-custody-trade-crypto">forfeited</a> digital assets, the exchange <a href="https://x.com/faryarshirzad/status/1807804641867944343">announced</a> Monday. A new government business agreement in the midst of a <a href="https://blockworks.co/news/coinbase-lawsuit-sec-fdic-foia-dispute">massive legal battle</a> with the SEC is always a fun development.  </li>
</ul>



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



Howdy!



It’s a cold world out there, but the return of fast food meal deals has been giving me joy lately. Over the weekend, I stopped by Taco Bell to get their new $7 meal, which came with a chalupa, taco, burrito, chips, and a drink — what value! McDonalds’ new $5 combo isn’t bad either.



There are always reasons to smile. Anyways:



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



<h2 class="wp-block-heading">One market maker to rule them all</h2>



Stablecoins are like the liquidity lifeblood of crypto — helping assets on- and off-ramp to protocols. They also carry the promise of real-world transactions, from remittances to Coinbase’s USDC Pizza <a href="https://www.instagram.com/coinbase/p/C7Slu3etoXv/?img_index=1">promotion</a> in New York City.



At first glance, Solana’s stablecoin volume appears to have fallen off a cliff during June. In the past two weeks, Solana USDC and USDT transfer volume has been at its lowest point in 2024, according to Blockworks Research.&nbsp;



Weekly volume was around $43 billion after topping $500 billion three different weeks in May.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXeKCub7kjrmbe1rq7kT-8K0WPUuhx1xdy2NzOal-UY73TPwo3K2ieT9uNTMpxUhDmvaF8HBQdn9kVJEFbXO73SjyxI4TsAPp6A3-7B6aaJS3Dph65FFjgTTc_RmpuecbJY-tv1Gsv5BXd278kmZr6eqZMJP?key=TsMvo_kR49ac61S3lOE_pg" alt=""/></figure>



The drop-off was largely caused, it seems, by a single market maker on the Solana DEX Phoenix changing its strategy.



Blockworks Research data shows a single wallet address — carrying out market making activities on Phoenix — accounted for nearly 50% of Solana stablecoin transfer volume in May and part of June. I confirmed with Phoenix Developer Ellipsis Labs that this single Phoenix market maker was responsible for the large transfer volume.&nbsp;



Phoenix is a Solana decentralized exchange and onchain orderbook — which discovers the price of assets onchain as opposed to on offchain venues like Binance, for instance.&nbsp;



This orderbook — which is basically a list of all pending buy and sell orders on the exchange — confirms and settles trades quickly in part because Solana is built to be fast. The exchange is enabled by market makers which place buy and sell orders to ensure the orderbook stays liquid enough to support trading.



As part of high-frequency trading, which is the sort of thing Phoenix hopes to enable, market makers will quickly place and cancel orders to make sure their prices are in line with the rest of the market, an Ellipsis Labs spokesperson said. This one market maker (whose contract address is <a href="https://solscan.io/account/8YwbFQYfoXQfDr9PgnKph6me9jirXdjnEZe6fDnJU4mM">here</a>) appears to have been placing and canceling trades in such a way that they would deposit and withdraw their entire USDC balance repeatedly.



This drove up the USDC transfer volume on the Solana network as a whole and — at first blush — made Solana’s stablecoin usage appear far higher than it actually is.&nbsp;



When this market maker stopped moving so much USDC around, Solana may have lost nearly 50% of its daily stablecoin transfer volume. In an email, Ellipsis said trading volume is a much more useful metric than transfer volume in measuring economic activity.&nbsp;



The inflated numbers were <a href="https://x.com/CarryWorm/status/1751006207521816906">pointed</a> out as early as January, when a video was making the rounds showing Solana’s stablecoin volume dwarfing other blockchains. It was <a href="https://x.com/WazzCrypto/status/1805731528023957778">brought</a> up again last week when the stablecoin transfer volume decreased suddenly.



I asked Sphere Labs’ Arnold Lee about the lower Solana stablecoin figures.



“I&#8217;d say they are used fairly significantly, just overshadowed by the insane activity on Phoenix,” Lee said of stablecoins on Solana.



“That said, we see the majority of stablecoin activity on Tron/BSC because stablecoins are most relevant outside of the West, and Tron/BSC have the most local presence (lindy) and ancillary infrastructure (eg. Huobi, Binance) despite being significantly slower and more expensive,” Lee added.



Following Ethereum, Tron and BSC have the second- and third-largest stablecoin market capitalizations, at 35% and 3% of the total, <a href="https://defillama.com/stablecoins/chains">according</a> to DeFiLlama.&nbsp;



Solana is in sixth, trailing Ethereum layer-2s Arbitrum and Base.



— Jack Kubinec



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



The prospect of spot solana ETFs didn’t do much to close the price gap between SOL and ETH, it turns out.



Kaiko’s weekly data debrief examined market sentiment following SOL ETF filings from VanEck and 21Shares. It largely found that traders were unenthused. The ETH to SOL ratio, which shows how many SOL one ETH is worth, trended relatively flat during the SOL ETF news cycle. In other words, the two assets performed roughly the same.&nbsp;



Solana outpaced ether starting in March, but the script flipped following the SEC’s approval of spot ether ETFs. ETH has slowly widened the gap since.&nbsp;&nbsp;



<img loading="lazy" decoding="async" width="624" height="343" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXdZKGOtvDPq3u2LzJ1QRG41wa3fB1S_R8vLTsho-9dYRuYIYWFS9GVbX6z--IKExJBWrWjFaF4jwRuiyFswt9z0Mxtin8BtTLuE_LCX026Cw8aEIoVIkkvsqx7qzzH-dwjxlEC4owHtqhhdoMjvdswqe_s8?key=TsMvo_kR49ac61S3lOE_pg">



Kaiko chalked up the market’s indifferent reaction over the ETF filings to doubts about the approval of spot SOL ETFs. This likely stems from the asset&#8217;s lack of a sizable futures market, and the SEC’s prior assertion that SOL is a security.



— Jack Kubinec



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



Helius Labs CEO Mert Mumtaz sparked some light debate on Sunday, <a href="https://x.com/0xMert_/status/1807597605649584301">tweeting</a> that the crypto industry should focus on scaling existing apps rather than developing new ones. He argued that scaling these apps to handle 1,000,000x demand is crucial for growth.



Responses varied. @fearthewave_eth skeptically <a href="https://x.com/fearthewave_eth/status/1807601546273669416">remarked</a>, &#8220;if they [are] so useful&#8230; they shouldn&#8217;t have any issue scaling.&#8221; @crackberrypi highlighted concerns about market concentration, <a href="https://x.com/crackberrypi/status/1807599291990487357">adding</a> &#8220;Sounds like a monopoly.&#8221; Some responses were outright dismissive. The ironically named @ProfOptimist <a href="https://x.com/ProfOptimist/status/1807653669011132452">joked</a>, &#8220;Name 1 app&#8221; while the more appropriately titled @timetofud <a href="https://x.com/timetofud/status/1807725459142021309">noted</a>, &#8220;mostly all these apps are for gambling.&#8221; @doompr0ntweets <a href="https://x.com/doompr0ntweets/status/1807601226625814722">asked</a>, &#8220;Aside from video games, what apps in crypto are useful outside of crypto?&#8221;



Others seemed to take the suggestion more seriously. @jayantkrish and @itechnologynet <a href="https://x.com/jayantkrish/status/1807771660449419270">emphasized</a> the importance of user experience in achieving scale, with the latter noting that retail users <a href="https://x.com/itechnologynet/status/1807660610840048116">prioritize</a> UI/UX over fancy features. Others <a href="https://x.com/ElangovanKamesh/status/1807661481615638597">warned</a> against neglecting new, disruptive projects, and <a href="https://x.com/1stCoastCrypto/status/1807601617769726312">raised</a> concerns about potentially missing out on groundbreaking innovations by halting funding for new apps.



Speculative discourse aside, there are ample resources to do both. The crypto industry&#8217;s superpower has long been its funding capability. And anyway, isn&#8217;t it more in line with the crypto ethos to diversify across different approaches, rather than risk a single point of failure?



— Jeffrey Albus



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



A message from Eugene Chen, co-founder of Ellipsis Labs:


<div class="wp-block-image">
<figure class="aligncenter"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXeXIlELhJ1B81Bv96-OxDupV0sVoq_KcomKeRDTdWtm3L-bin0xSRiBxvn9Dlgsf0jqcoWYxDtGqkfCsYLccQlsPerJ58IsWiTQHCIkZo9rjMh1CdEvWve_BvaTzNfv4CvBUMBaYGhhqeSOanwJZmJsmO4?key=TsMvo_kR49ac61S3lOE_pg" alt=""/></figure></div>


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Lightspeed Newsletter: Solana’s stablecoin transfer volume drop-off

Henry Duckworth

Global food supply chains face significant challenges: They&#8217;re often inefficient, costly and lack transparency. This creates an environment where farmers may not always receive fair compensation for their hard work, while consumers can face higher prices.



It&#8217;s a systemic problem that needs a systemic solution, and that solution stares us right in the face: agricultural trade tokenization.&nbsp;



Despite this technology&#8217;s immense potential, adoption in the agricultural industry has been slow. Many organizations hesitate to embrace change, citing concerns about complexity and regulatory uncertainty.



The true value of trade tokenization lies in its ability to solve real, tangible problems that have plagued the agriculture industry for decades. Eliminating intermediaries can increase transparency, reduce settlement times and lower costs.



But while some in the industry argue that the current system, though imperfect, is familiar and predictable, the benefits of <a href="https://blockworks.co/tag/tokenization">tokenization</a> far outweigh the short-term challenges of adoption.



<h2 class="wp-block-heading">Pitfalls of current supply chains</h2>



Right now, our food supply chains are a black box. They&#8217;re opaque, convoluted and rife with inefficiencies. On average, agricultural trade suffers from settlement times <a href="https://www.wto.org/english/tratop_e/agric_e/ag_imp_exp_charts_e.htm">of 3-7 days and fees ranging from 6-10%</a>. That&#8217;s unacceptable.



It&#8217;s not just about numbers. The system&#8217;s lack of transparency breeds mistrust and enables bad actors to manipulate prices and engage in fraudulent activities. Ultimately, it is the farmers and consumers who bear the brunt of this inequitable system.



Tokenizing the trade can change all that. By bringing agricultural trade transactions on-chain, we can create a transparent, efficient and trusted ecosystem that benefits everyone.



Imagine a world where you can trace your food from farm to fork — knowing exactly where it came from and how it was produced. Imagine a world where farmers can get fair prices for their produce — without intermediaries taking a 40% cut. Imagine a world where consumers can trust the food they buy — knowing that it was produced sustainably and ethically.



The benefits of tokenization don&#8217;t stop there. Smart contracts on high-throughput blockchains like Solana can automate transactions, reduce settlement times and minimize fees. This increased efficiency can lead to cost savings that can be passed on to farmers and consumers. Such systems also lower the barriers to entry and create easier access to markets for smaller producers and farmers.&nbsp;



Moreover, tokenization lays the groundwork for future innovations like fractional ownership and investment in agricultural assets. In time, small-scale farmers could tokenize their land or crops, allowing them to access capital and participate in the global food system more equitably.&nbsp;



In the current world, small-scale farmers often face a dilemma: They either have to sell a significant part of their business to a single company to raise capital, or they struggle to secure funding. However, with the possibility of tokenizing their assets, small-scale farmers can sell small portions of their business to interested parties while remaining the majority holders and retaining control over their business.&nbsp;



<h2 class="wp-block-heading">Addressing the skeptics</h2>



Of course, realizing the full potential of trade tokenization in agriculture won&#8217;t be easy.



Many farmers and agricultural organizations feel they lack the technical expertise to navigate this new system. They worry about the resources required to adopt and use these new technologies.



There are also questions about regulation and legal frameworks. The legal status of tokenized assets is still evolving, and some organizations seem wary of investing in a system that lacks clear regulatory guidelines.



However, these concerns should not deter us from pursuing the transformative potential of trade tokenization onchain. The industry doesn&#8217;t have to navigate this transition alone.



By collaborating with blockchain experts, policymakers and educational institutions, we can create a supportive ecosystem that helps agricultural organizations embrace this technology with confidence.



We need to invest in educational initiatives to make the benefits of tokenization accessible to all participants, regardless of their technological background.



We also need a supportive regulatory environment that recognizes the potential of tokenization and provides clarity around its legal and tax implications. Policymakers must strike a balance between fostering innovation and protecting the interests of all stakeholders.



The potential rewards of tokenization are too significant to ignore, and authorities are now <a href="https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=409284">getting onboard</a>. By tokenizing agricultural trade, we can take a significant step towards a food system that is more transparent, efficient and equitable. A system that benefits farmers, consumers and the planet.



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


<div class="wp-block-post-author-biography">Harry Duckworth, a law graduate, embarked on a unique journey that led him to become the youngest trader at global commodities giant Trafigura. He then went on to set up desks for several hedge funds worldwide, accumulating over a decade of experience in trading, hedge funds, and emergent technologies. 

Through his work, he became fascinated by the revolutionary power of blockchain tech soon after the inception of Bitcoin. Years later he founded AgriDex International, to provide digital marketplaces and supply chain information for all participants in the global food chain. </div>


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Agriculture needs blockchain

Circle has received a license to operate in the European Union under the Markets in Crypto-Assets (MiCA) regulation.



This act, which partially went into effect on Monday, is designed to provide a comprehensive legal framework for the crypto industry, enhancing investor protection, promoting innovation, and ensuring financial stability across the EU.



The global stablecoin issuer is the first to fully comply with the new set of regulations, which are based on stablecoins. 



According to Circle, it was able to become compliant under its Electronic Money Institution License, which it obtained from the French banking authority.&nbsp;



Under the license, <a href="https://blockworks.co/tag/circle">Circle</a> can issue USDC and EURC in the <a href="https://blockworks.co/tag/eu">EU</a>. Additionally, Circle can offer Circle Mint, which allows users to directly access Circle’s stablecoins.&nbsp;



“Since our founding, Circle has sought to build durable, compliant, and well-regulated infrastructure for <a href="https://blockworks.co/tag/stablecoins">stablecoins</a>, and our adherence to MiCA, which represents one of the most comprehensive crypto regulatory regimes in the world, is a huge milestone in bringing digital currency into mainstream scale and acceptance,” said Circle CEO Jeremy Allaire.



Read more: <a href="https://blockworks.co/news/privacy-coins-sacrificed-so-crypto-could-run">Privacy coins sacrificed so crypto could run</a>



The new rules have posed some challenges to stablecoin issuers, which have to now seek compliance with regulators. Last month, <a href="https://blockworks.co/tag/binance">Binance</a> said that it would start cracking down on “unauthorized” stablecoins as the new set of rules took effect.&nbsp;



Tether CEO Paolo Ardoino’s previously spoken out about his concerns regarding the new regulations.&nbsp;



&#8220;These requirements could not only render the job of a stablecoin issuer extremely complex but also make EU-licensed stablecoins extremely vulnerable and riskier to operate. As with any regulatory framework of this scale, further discussions on the technical implementation standards are crucial to providing clarity to the market over certain provisions,&#8221; Ardoino <a href="https://www.theblock.co/post/302764/eu-crypto-traders-urged-to-convert-non-compliant-stablecoins-to-regulated-ones-as-mica-framework-takes-effect">told</a> The Block.



Tether did not immediately return a request for comment on the Circle announcement.&nbsp;



Following the Circle announcement, Binance CEO Richard Teng said that Circle’s compliance “marks a positive step forward.”



<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">Happy to share that USDC is now a Regulated Stablecoin in the EEA! USDC will continue to be available within <a href="https://twitter.com/hashtag/Binance?src=hash&amp;ref_src=twsrc%5Etfw">#Binance</a> product offerings for our EEA users. USDC becoming a MiCA-compliant e-money token (EMT) marks a positive step forward for the crypto ecosystem in the EEA… <a href="https://t.co/MSdRfW3yBG">https://t.co/MSdRfW3yBG</a>&mdash; Richard Teng (@_RichardTeng) <a href="https://twitter.com/_RichardTeng/status/1807794746859102340?ref_src=twsrc%5Etfw">July 1, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



&#8220;Achieving <a href="https://blockworks.co/tag/mica">MiCA</a> compliance through our French EMI license is a significant step forward, not just for Circle, but for the entire digital financial ecosystem in Europe and beyond,&#8221; said Dante Disparte, chief strategy officer at Circle.



Updated July 1, 2024 at 12:49 pm ET: Modified headline to clarify that Circle is the first global stablecoin issuer to become compliant.



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