Spectre AI

Ben Strack

Banks are gearing up to trial crypto transactions on the Swift network as the industry’s shift toward tokenization accelerates. Financial institutions will soon use Swift’s platform to settle “digital assets and currencies,” with pilots kicking off next year.&nbsp;



Swift — the Society for Worldwide Interbank Financial Telecommunication — was formed in 1973 and offers a messaging network through which international payments are initiated.



With more than 11,000 institutions connected to the network, Swift carries more than 5 billion financial messages each year.



&#8220;For digital assets and currencies to succeed on a global scale, it’s critical that they can seamlessly coexist with traditional forms of money,” Swift Chief Innovation Officer Tom Zschach said in a statement.



<a href="https://blockworks.co/tag/swift">Swift</a> is not new to experimenting in this space.&nbsp;&nbsp;



The organization <a href="https://blockworks.co/news/swift-says-it-can-resolve-a-major-obstacle-to-cbdc-adoption">claimed</a> in 2022 that it had successfully shown that Central Bank Digital Currencies (CBDCs) and tokenized assets can move seamlessly on existing financial rails. When establishing a global CBDC system, it added, familiarity — alongside the infrastructure — is an important facet.



Then last year, Swift sought to link private and public blockchains <a href="https://blockworks.co/news/banks-can-10x-the-blockchain-industry-says-chainlink-co-founder">in a trial collaboration with Chainlink</a> and finance giants such as BNP Paribas and BNY Mellon — tests it ultimately deemed successful.



Read more: <a href="https://blockworks.co/news/swift-tests-chainlink-ccip?utm_source=forward-guidance.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=the-pre-jobs-report-primer&amp;_bhlid=9480eda1bf4cd1651ee170ae17f872d90c639d0a">Swift details findings in tests of Chainlink’s cross-chain interoperability</a>&nbsp;



Swift also has its hand in other efforts related to tokenized assets — a space Standard Chartered <a href="https://www.sc.com/en/press-release/trade-finance-to-play-substantial-role-in-usd-30-1-trillion-tokenised-real-world-assets-market-by-2034/">said</a> could reach $30 trillion by 2034.



It is participating in Project Agora (led by the Bank for International Settlements), which is exploring how <a href="https://blockworks.co/tag/tokenization">tokenization</a> can enhance wholesale cross-border payments. 



Swift is also looking into how its “interlinking capabilities” could integrate the US <a href="https://blockworks.co/news/tradfi-blockchain-trials-mass-adoption">Regulated Settlement Network</a>, for example, with traditional financial systems. Visa and Mastercard said in May they would join banks like JPMorgan and Citigroup to test this network&nbsp;



Colin Butler, Polygon’s global head of institutional capital, previously told Blockworks that such entities getting closer to aligning on a standard represents “the five-yard-line for mass institutional adoption.”



Swift’s announcement came the same day that Visa <a href="https://blockworks.co/news/visa-to-help-banks-test-tokenized-assets-smart-contracts?utm_source=forward-guidance.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=the-pre-jobs-report-primer&amp;_bhlid=e33af5294e963eb96c509b5096cfbdbd2ab07dc5">created a platform</a> in a bid to help financial institutions issue fiat-backed tokens and test out their use cases.&nbsp;



Spain-based BBVA has been working within the Visa Tokenized Asset Platform (VTAP) sandbox this year and looks to launch a pilot with certain customers in 2025 on the Ethereum blockchain.



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



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Banks to use Swift network for crypto transaction trials

With spot crypto ETFs gaining momentum, many expect the upcoming US election to influence their approval.



The Securities and Exchange Commission’s recent appeal of the court ruling in its case against Ripple Labs could also hinder those types of funds getting the regulatory green light.&nbsp;&nbsp;



Investment firm Bitwise on Tuesday filed for an ETF that would hold Ripple (XRP) directly. Canary Capital appeared to file for a similar product, according to the Delaware corporation website.&nbsp;&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/bitwise-files-for-spot-xrp-etf">Bitwise files SEC paperwork to launch spot XRP ETF</a>



The digital asset that powers the XRP Ledger public blockchain, XRP helps facilitate cross-border payments and remittances, Bitwise mentioned in a Tuesday press release. XRP’s market capitalization of roughly $33 billion means it ranks seventh among crypto tokens.



“<a href="https://blockworks.co/tag/bitwise">Bitwise</a>, well known for its crypto expertise, will likely launch this product in the future,” said Neena Mishra, director of ETF research at Zacks Investment Research. “Politics will determine whether this happens soon or in a few years.”



Mishra argued that Bitwise is prepping the product in case Donald Trump wins the presidency. The Republican nominee noted in July that <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">he would, if elected, fire SEC Chair Gary Gensler</a>.



“If Harris wins and Gensler remains SEC chair, the filing has no chance of approval, despite her recent comments about supporting digital assets,” Mishra told Blockworks.&nbsp;



Mishra’s thoughts are similar to those expressed by VanEck’s Matthew Sigel after his firm <a href="https://blockworks.co/news/how-us-canada-solana-fund-filings-differ">filed for a solana ETF</a> in June. He had noted that filing was essentially <a href="https://x.com/matthew_sigel/status/1807775290396942559?lang=en">a bet on a Trump victory</a> in November.



Sigel did not want to comment on the latest Bitwise S-1, noting only: &#8220;We like SOL a lot more than XRP.&#8221;&nbsp;



<h2 class="wp-block-heading">SEC appeal as potential hurdle</h2>



Bitwise’s filing came just before the SEC decided to appeal Judge Analisa Torres’s decision in its case against Ripple Labs.



Read more: <a href="https://blockworks.co/news/sec-files-ripple-appeal-precedent">SEC files Ripple appeal, cites ‘conflicts’ with Supreme Court precedent</a>



Torres <a href="https://link.mail.beehiiv.com/ss/c/u001.VIz4fB9RgLaqgT0Ji6lSIMhLGx1BG6y6FX8v5LSXYwgZ_W5tvYvea-IfSqLr3nJXpIA3vIAFGNst1MaNWJOYVkNgYFh81sJdpEepU8W-I_OZwBwGUC-1-9q_P2y493vqQ3OdXBaaUWBc9LssQjC2MlR7X2kJas9vwmje0jyemnzy65BoiCO7pcP2PftUDH0clDhOlJWJtLCgQHUMydHJ6pLOWhtWtPudg6pEvM9AcW9H5Jrk3uKodPgwKeJgnu_9gWY81aK542ZEnbx-u7g93Q/48q/qapqBNfASl6k7V9un5nfmQ/h20/h001.aOT8BasaR3Hqz_avf7sKTdYMeSn2lSojohVHULKrCw8">ruled</a> last year that while <a href="https://blockworks.co/tag/ripple">Ripple</a>’s institutional sales of XRP counted as an unregistered securities offering, programmatic sales did not. Then, in August, the court <a href="https://blockworks.co/news/ripple-fined-civil-penalty-sec-lawsuit">ordered</a> Ripple to pay a $125 million penalty — <a href="https://blockworks.co/news/empire-newsletter-ripple-sec-legal-battle">far below</a> the $2 billion the SEC had sought.



While we know the <a href="https://blockworks.co/tag/sec">SEC</a> has 240 days to approve or deny the Bitwise XRP ETF from the date it publishes the plans in the federal register, the timeline around the steps following the regulator’s appeal remain unclear.&nbsp;



Either way, industry watchers have signaled the agency’s action would delay clarity on XRP’s status, possibly impacting planned ETFs that hold the asset.&nbsp;



Alex Thorn, head of research at Galaxy Digital noted in a Tuesday <a href="https://x.com/intangiblecoins/status/1841214766607384582">X post</a> that the likelihood of Bitwise’s XRP ETF “succeeding” would drop to “near zero” if the SEC chose to appeal.&nbsp;



Bitwise’s planned XRP ETF is the latest planned US fund that would hold a crypto asset directly.&nbsp;&nbsp;



Spot bitcoin and ether ETFs hit US exchanges in January and July, respectively. VanEck and 21Shares have also <a href="https://blockworks.co/news/how-us-canada-solana-fund-filings-differ">revealed plans to launch spot solana funds</a>.&nbsp;



Some segment observers previously told Blockworks that spot crypto ETF approvals by the SEC — outside of BTC and ETH — might be tough given the precedent of the regulator wanting to first see a regulated futures market. None exist for XRP or solana.



But the plans laid out from Bitwise and Canary seem to advance the growing perception that the US crypto regulatory winds are changing.&nbsp;



While Bitwise declined to comment on that, a Canary Capital spokesperson said there are “encouraging signs of a more flexible regulatory environment.” The representative added: “This year&#8217;s approval of the spot Ethereum ETFs, following the earlier spot bitcoin ETF approvals, signals positive momentum, especially considering how long it took for ETH futures products to be approved. We&#8217;re optimistic about the next phase of developments in the space.&#8221;



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



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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>.



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Election outcome and SEC appeal to decide XRP ETF future

Felix Jauvin

Casey Wagner

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<h2 class="wp-block-heading">Digging into the data ahead of tomorrow’s big jobs report</h2>



In recent months, the balance of risks has shifted from fears about getting a handle on inflation to concerns around whether the Fed is late to the game, and how this ongoing growth slowdown may evolve into an outright recession.&nbsp;



Paired with that comes the market’s shift from caring about CPI prints to caring about employment data prints. With tomorrow’s important jobs report being a key macro driver at this stage of the business cycle, let’s dig into some of the data.



<h3 class="wp-block-heading">Labor market data signals resilience</h3>



After falling for multiple months, the job vacancy rate ticked up from 4.6% to 4.8%. This implies there were more jobs available than the previous month. And when considering a classic Beveridge curve type of analysis that compares job vacancy to unemployment rate, there is effectively a lower risk of an accelerating unemployment rate compared to the month before.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc5wXtSKdyP3LIFJCYdCPZ4trPB2v1abGwL4rQIq9gq37mwL0oaIHCPbfW3u-BLV9rF-B2qGdHqP4KYVCDNUvfs8T2FNupdbrVaC4G_pDwGo86KXdfFrettW5mHREyg8XLkrBmvt0y0iJAvTTgGdFQ3LdE?key=hG3C0lldV5B70LcDHroRWg" alt=""/></figure>



But despite a solid JOLTS report in terms of the job openings, the quit rate headed lower — implying employees are not as confident as they were to leave their current job in the hopes of finding something better-paying. This provides a key cap on the amount of wage growth the labor market is experiencing, as it’s typically through job-switching that the largest wage growth impulses occur.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeaETMGFfY-1_RFQdB32XWkrPjYLAYkl9EfL5EaNoHBx7x2bE5ZHa47A7LVlhQpl0NPDYDle01W3-P2aoJes-TgphObKswkjcwXCaVmYItfwVXdu_B8dtV25ccW4r8fUIwqcZlVOImR079Ydu6jjswx2nM3?key=hG3C0lldV5B70LcDHroRWg" alt=""/></figure>



Despite an upside surprise today in initial jobless claims of 225,000 (vs. the forecasted 220,000), the four-week average of jobless claims has been in a steady downtrend and hit its lowest level since June.



The previous three weeks were also downside surprises on jobless claims, which paints a high-frequency picture of a somewhat neutral labor market.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdXM7Mk6OdwWTaR1wU5SjMwm0krUPAjzdsJ4yoSr1g0VlpreoZE2nxHfQ2fJA-gHNXz2MyMlExAuPQ8_qdHye9LGFp2jvkE2l7ndu_EtGy8VIUf8Hu-30IwQIkjphsGH0x3fCUdKVntffZcJrpeaKPPXnc?key=hG3C0lldV5B70LcDHroRWg" alt=""/></figure>



Finally, the ADP employment change blew past expectations of 120,000 and printed at 143,000 — up from the prior month’s 103,000.



The ADP print is a solid gauge of what to expect in the upcoming jobs report. With such a huge upside surprise, it removes a lot of the tail risk behind potential negative outcomes tomorrow.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdbcEFwNG1_fWRpYIf71jDM4Gt093Ou-UPEcgMNmOGKvWH4IeLSfF_vtIq-xPYWFi_hzatl6Ot1I7utYMQpEGf8wZUqzPRt4gUXkOnSAVPzbLzwY9obh899fPLRVtV2XaCQa3tsJ6QOrQxB5ketY0UVtdnU?key=hG3C0lldV5B70LcDHroRWg" alt=""/></figure>



<h3 class="wp-block-heading">Growth outlook looks decent</h3>



This morning, we received the ISM Services PMI. That came in significantly above expectations of 51.7, printing a 54.9. This is the highest print in over a year and an incredibly prescient indication that growth in the economy remains solid.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcBYxCYRU-ca9VlvkH8HzJnq8592aW_J2W1e9w8wc6EMsj8pLV6ULNBm29vWkID0Fv16Htw8wuaD2YXfTECFk5WB51EI2oMT_BwwfqWLGPIcHhWMoqiDgVmd9KMlw-jhPWjk7RvPRvZ-0OwHDCg1nY_DQ5n?key=hG3C0lldV5B70LcDHroRWg" alt=""/></figure>



Bringing all these data points together, let’s now look at the economic surprise index:<img loading="lazy" decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcbdHBjsEYtc6iBvc8VQmv8gS0vEF_04npoaVNKehHjD4j7PyFmSdvuyJTfWEDYPoRoi6Z89_JkDMcdk1lm0BV5tJz_O7RcWy2s77Q0T5PelYPrdoMHAHGfnctEMBYIGD7NV-uBVYB6AfkObd6G8V3y62kG?key=hG3C0lldV5B70LcDHroRWg" width="624" height="351">



After a huge move downward — implying worse-than-forecasted economic data prints — we have now reversed back into positive territory. What that leaves us with on the eve of the most important jobs report of our lifetime (until the next one comes out, of course), is that the economy is surprisingly resilient. Based on the higher frequency labor market data that’s come out this week, the jobs report tomorrow will probably be fine.&nbsp;



— Felix Jauvin



<h3 class="wp-block-heading">1&nbsp;</h3>



The number of equal-weight S&amp;P 500 sectors that outperformed their market cap-weighted counterparts during the first three quarters of the year. The sector in question was real estate.&nbsp;



Why does this matter? It shows us it&#8217;s not just tech leading the market cap S&amp;P to new heights this year.&nbsp;



The equal weight S&amp;P 500 index is up just over 12% in 2024, while the market cap-weighted version has gained close to 20% since the start of the year.&nbsp;



<h2 class="wp-block-heading">Did Grewal sell out?&nbsp;</h2>



The head of the SEC’s enforcement division will be <a href="https://blockworks.co/news/sec-enforcement-director-departure">departing the agency</a> next week.&nbsp;



Gurbir Grewal, who has led the US securities regulator’s enforcement operations since July 2021, joined the agency just months after Gary Gensler was sworn in as chair.&nbsp;



Crypto-related enforcement actions, which had been on the rise before Grewal and Gensler took over, were a significant part of Grewal’s tenure.&nbsp;



Under Grewal’s leadership, the agency issued 35 crypto enforcement actions in 2022 and 40 in 2023. Plus, the division of enforcement almost <a href="https://www.sec.gov/newsroom/press-releases/2022-78">doubled</a> its crypto assets and cyber unit in May 2022, bringing the team’s headcount to 50.&nbsp;



In 2024 (as of Sept. 6), the agency had brought 18 crypto enforcement <a href="https://www.sec.gov/securities-topics/crypto-assets#account">actions</a>.



Most notably, the agency’s cases against <a href="https://blockworks.co/news/judge-rules-against-coinbase-sec-dismissal">Coinbase</a>, <a href="https://www.sec.gov/newsroom/press-releases/2023-101">Binance</a>, <a href="https://www.sec.gov/newsroom/press-releases/2023-237">Kraken</a> and <a href="https://www.sec.gov/newsroom/press-releases/2024-79">Consensys</a> were all brought under Grewal. Each suit has, in part, addressed token classification — a major theme under the Gensler/Grewal regime. The SEC also launched and closed its so-called <a href="https://blockworks.co/news/consensys-files-lawsuit-against-sec">“Ethereum 2.0”</a> investigation under Grewal.&nbsp;



The agency, during Grewal’s tenure, has also shown significant increase in <a href="https://www.sec.gov/enforcement-litigation/administrative-proceedings/33-11305-s">NFTs</a>, which the SEC generally considers to <a href="https://blockworks.co/news/flyfish-settlement-sec-nfts">be securities</a>.&nbsp;



Gensler has plenty of time left in his term, so I don’t expect we’ll see a huge change in enforcement patterns under the next director. The current deputy director of the division, Sanjay Wadhwa, will step in as acting director starting Oct. 11. The SEC declined to comment on who will take over the role permanently.&nbsp;



If I had to bet, I’d say Grewal’s headed to the private sector, but we will just have to wait and see.&nbsp;



— Casey Wagner



<h2 class="wp-block-heading">Banks get set to use Swift for new transaction trials&nbsp;</h2>



It looks like we could see another big step forward on the crypto transaction front as banks get set for trials on a system powering billions of money transfers.



Financial institutions will be able to soon use Swift’s platform to test out the settlement of “digital assets and currencies,” the organization said Thursday.&nbsp;



These pilot transactions are set to start next year.&nbsp;



A quick reminder for those in need: Swift — the Society for Worldwide Interbank Financial Telecommunication — was formed in 1973 and offers a messaging network through which international payments are initiated.



With more than 11,000 institutions connected to the network, Swift carries more than 5 billion financial messages each year.



Swift Chief Innovation Officer Tom Zschach put it simply in a statement: &#8220;For digital assets and currencies to succeed on a global scale, it’s critical that they can seamlessly coexist with traditional forms of money.”



The upcoming pilots were born from ample prior experimentation.&nbsp;



Swift <a href="https://blockworks.co/news/swift-says-it-can-resolve-a-major-obstacle-to-cbdc-adoption">claimed</a> in 2022 it had successfully shown that CBDCs and tokenized assets can move seamlessly on existing financial rails. When establishing a global CBDC system, it added, familiarity (alongside the infrastructure) is an important facet.



Then last year, Swift sought to link private and public blockchains <a href="https://blockworks.co/news/banks-can-10x-the-blockchain-industry-says-chainlink-co-founder">in a trial collaboration</a> with Chainlink and finance giants such as BNP Paribas and BNY Mellon (tests it ultimately deemed <a href="https://blockworks.co/news/swift-tests-chainlink-ccip">successful</a>).



Swift also has its hand in other efforts related to tokenized assets — a space Standard Chartered <a href="https://www.sc.com/en/press-release/trade-finance-to-play-substantial-role-in-usd-30-1-trillion-tokenised-real-world-assets-market-by-2034/">said</a> could reach $30 trillion by 2034.



It is participating in Project Agora (led by the Bank for International Settlements), which is exploring how tokenization can enhance wholesale cross-border payments. Swift is also looking into how its “interlinking capabilities” could integrate the US <a href="https://blockworks.co/news/tradfi-blockchain-trials-mass-adoption">Regulated Settlement Network</a>, for example, with TradFi systems.



Visa and Mastercard said in May they would join banks like JPMorgan and Citigroup to test this so-called Regulated Settlement Network. Colin Butler, Polygon’s global head of institutional capital, said these entities getting closer to aligning on a standard represents “the 5-yard line for mass institutional adoption.”



While only time will tell what exactly we learn from these future trials, the prospect of financial institutions having a single point of access to digital asset classes and tokens appears bullish.&nbsp;



— Ben Strack&nbsp;



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



<ul class="wp-block-list">
<li>Payments giant Visa has <a href="https://blockworks.co/news/visa-to-help-banks-test-tokenized-assets-smart-contracts">created a platform</a> to try to help financial institutions issue fiat-backed tokens and test out their use cases. Spain-based BBVA has been working within the Visa Tokenized Asset Platform (VTAP) sandbox this year and looks to launch an initial pilot with select customers in 2025 on the Ethereum blockchain.</li>



<li>A CFTC subcommittee voted to pass recommendations related to policies to support the use of blockchain for non-cash collateral, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-10-02/use-of-blackrock-tokens-as-collateral-moves-closer-to-mainstream">reported</a>, citing unnamed sources “familiar with the matter.” The Global Markets Advisory Committee will now consider the recommendations and is expected to vote later this year. Such approval could make it easier for institutions to accept tokenized assets as collateral.</li>



<li>Grayscale Investments launched an Aave trust Thursday after introducing an XRP trust last month. The crypto-focused asset manager has been on a product-launching kick this year, also debuting trusts holding bittensor (TAO), sui (SUI), maker (MKR) and avalanche (AVAX) in August.</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>.



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What is the labor market signaling? Checking the data before tomorrow’s jobs report

Jack Kubinec

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Whenever a big name in the financial world saunters into blockchain, a healthy dose of skepticism is warranted. Institutional blockchain initiatives can oftentimes be more about firms saying they’re doing something than about actually doing something.



One initiative that I’ve been trying to tease apart the seriousness of is the “finternet,” a forward-looking financial system being championed by some of the contributors to India’s UPI digital money system.



The Bank for International Settlements penned a <a href="https://www.bis.org/publ/work1178.htm">paper</a> with the financial magnate Nandan Nilekani, who co-founded India’s sixth-largest company by market cap, about the finternet in April of this year. Since then, the team has been on the talk circuit.&nbsp;



In late August, Nilekani and Siddharth Shetty, who was formerly an advisor to the Indian Ministry of Finance, <a href="https://x.com/solana/status/1828779943880433806">demoed</a> the finternet in a talk at Global Fintech Fest. In the demo, the Indian businessman shows off the finternet sending 2,000 rupees and settling the transaction on Solana.



Then last month at Solana Breakpoint, Shetty gave a talk about the finternet which admittedly was a bit of crypto word salad, but he did get into the idea of assets being tokenized on multiple interoperable financial ledgers — that is, building the economy on blockchain rails instead of traditional financial rails.



The finternet is in its very early stages, one person who helped work on the demo told me. And the finternet team, obviously, is not the first to have the idea of moving economic activity onchain. But what interests me is the names involved — and what they imply about the potential stakes for a project that’s integrated itself with Solana.



Nilekani’s Infosys IT company is worth $94 billion, and he and Shetty were involved in building India’s Unified Payments Interface, or UPI, the Solana Foundation and Shetty have said. The Indian government rolled out UPI in 2016 as part of a broader digitization movement in the country. It’s a quite ambitious, albeit offchain, digital payments program that <a href="https://economictimes.indiatimes.com/tech/technology/total-upi-transactions-cross-100-billion-mark-in-2023/articleshow/106492917.cms?from=mdr">processed</a> over 100 billion transactions between Indians in 2023.&nbsp;



The finternet is wholly distinct from UPI, according to multiple people I spoke to. It’s more about unifying the financial system across asset types and geographies.



The Solana Foundation and Superteam India — a Solana community organization — are both listed as contributors to the finternet sandbox.&nbsp;



At the end of the day, maybe the finternet project won’t turn out to be much. But when we talk about large institutional projects involving Solana — the Visas, PayPals, and Stripes of the world — perhaps it’s worth throwing the finternet in there as well.



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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>.



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Indian tech magnate teases Solana-built ‘finternet’ for an economy onchain

Donovan Choy

Macauley Peterson

Today, enjoy the 0xResearch newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/research">Subscribe to the 0xResearch newsletter</a>. 



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



<h2 class="wp-block-heading">New tech for cross-chain interoperability</h2>



Several teams are making strides to enhance the crypto developer experience, offering advanced tech stacks with the ultimate goal of simplifying the onboarding experience for new users.



OKX has launched <a href="https://www.okx.com/web3/build/docs/waas/okx-waas-what-is-waas">OKX OS</a>, an open-source infrastructure suite of tools, SDKs and APIs needed to build applications across a wide range of blockchains, including Ethereum, Bitcoin and Solana.



This new stack allows developers to leverage the same technology that powers the OKX Wallet, and aims to simplify and scale development for 100+ chains, the company announced Monday.



Another new path toward an omnichain user experience is Axelar’s Mobius Development Stack (MDS).



The tech stack, unveiled today, is offered as vendor-agnostic architecture integrated into popular OpenZeppelin libraries.



Axelar’s MDS also marks the mainnet debut of its <a href="https://blockworks.co/news/axelar-interchain-amplifier-liquidity-flow">Interchain Amplifier</a> for permissionless cross-chain connections at the smart-contract layer. The Interchain Amplifier is secured by staked AXL, or restaked assets like ether and bitcoin.



This approach places cross-chain interoperability front and center, spanning diverse L1s including Solana, Stellar and XRP Ledger — without requiring bridges. But it also offers a way to connect off-chain resources, like zk or AI co-processors.



Features such as the Interchain Token Service (ITS) facilitate native cross-chain tokens, with use cases such as tokenizing real-world assets, enhancing liquidity and enabling fractional ownership across different chains.



According to Axelar co-founder Georgios Vlachos, MDS is “empowering developers to build decentralized applications that compose resources, logic, value and network effects freely across a truly global internet landscape.”



OKX and Axelar’s recent launches tie into a broader trend in the Web3 space around improving developer experiences and user onboarding through enhanced infrastructure.&nbsp;



W3.io, launched in September, is building the Orchestration Cloud, an industry utility that aims to bring the benefits of an orchestration layer — long proven in Web2 environments — into Web3.



Backed by an impressive cadre of crypto builders, W3 functions like an advanced oracle and is designed to string together multiple services to support complex transactions across Web3.



Similar to Axelar’s MDS, W3 also looks to enable developers to build applications that not only function efficiently across blockchains but also integrate off-chain resources.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcToQY7_SakDzRyUKygy3d_AQijjwiL6esFBGyQJ57Xkq5oiN36qtvXxjZwiTAJEmPNpgy_1NEtclysGh4TvyQQZNXDD0vyNON_W1qNLYE77lAv4i38DZvER8o8z8Y8aT1PVIN83oA9TAXyHguKu0W1WJo?key=Fg21ruo8oQ1_UB1OqbE92Q" alt=""/></figure>



W3.io can simplify the process of coordinating multiple actions, according to Scott Dykstra, co-founder and CTO at Space and Time.



“The challenge that developers have right now is stringing together a bunch of different services to accomplish very complex onchain tasks,” Dykstra told Blockworks.



For example, it could help a game manage steps such as tracking player achievements, minting NFTs and updating the game server with new data. W3.io acts as middleware that connects off-chain and onchain actions seamlessly.



Together, these technologies point to the creation of a holistic ecosystem where developers can build decentralized applications that are interoperable, scalable and easier to use across the entire Web3 space.



— Macauley Peterson



<h2 class="wp-block-heading">Chart of the Day</h2>



Base increases gas limits:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXea8tr69lP15mz3TFA5mEbokMlkeyL2I98nJadL-FUGz8gKZ_aDW-Pxx0d2Q0RPp6HujPaCMkVjW9JrUUvav16lFCnp0bCsKTSjoSipY6UbhY8fHrP3IBOprgzaTqonOaT_Rzaoa7gkz5lss1-VsfHxE7c?key=Fg21ruo8oQ1_UB1OqbE92Q" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://x.com/base/status/1838639094995521831">Base</a></figcaption></figure>



In pursuit of scalability, Base continues to ramp up gas limits per block. 1 Megagas/s per block will be added weekly, with this week’s increment going from 11 to 12 Megagas/s. Base’s stated goal is to reach 1 Gigagas/s capacity eventually.



L2s drastically increasing gas limits have some subtle, but far-reaching implications for Ethereum’s grand roadmap. As explained on <a href="https://youtu.be/yvP39-EOADU">The Rollup podcast</a> by Justin Drake, raising gas limits reduces the baseline profitability accrued from priority transaction fees paid by users, which in turn increases the dependency on centralized sequencer profits (MEV).



Since MEV profits for L2s outweigh transaction fee profits, this may ultimately reduce the incentive for L2s to decentralize its sequencer and enter into a multichain-like shared sequencer arrangement, sometimes referred to in Ethereum research circles as “synchronized composability.”



— Donovan Choy



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OKX and Axelar launch tech development stacks

Katherine Ross

Hold your horses, the battle between the Securities and Exchange Commission and Ripple isn’t quite over yet.



Yesterday, the SEC filed to appeal the <a href="https://blockworks.co/news/ripple-fined-civil-penalty-sec-lawsuit">$125 million judgment</a> in its case against Ripple.&nbsp;



The case, which is now as old as a human toddler — with its four-year anniversary coming up in December — has been a long and hard-fought court case between the two parties.



Both the SEC and Ripple had until Oct. 7 to decide if they were going to pursue an appeal.&nbsp;



An SEC spokesperson told Blockworks that it filed the appeal because it believes the decision “conflicts with decades of Supreme Court precedent and securities laws.”&nbsp;



Read more: <a href="https://blockworks.co/news/sec-enforcement-director-departure">SEC’s enforcement director announces departure&nbsp;</a>



While there are a lot of unknowns about what the appeal will look like, one thing’s for certain: The appeal will not only draw out the process, but also could have some implications beyond just <a href="https://blockworks.co/tag/ripple">Ripple</a> and the <a href="http://v">SEC</a>.



It could, for example, dampen the hopes for a potential Bitwise XRP ETF. The <a href="https://blockworks.co/news/bitwise-files-for-spot-xrp-etf">firm filed its registration statement</a> for a potential ETF on Wednesday. Galaxy Digital’s Alex Thorn warned that the likelihood of success from <a href="https://blockworks.co/tag/bitwise">Bitwise</a> “drops to near zero” with an appeal.



<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">SEC has until next week (Oct. 7) to appeal Judge Torres’ July 2023 ruling (which held that secondary sales of XRP through exchanges were not securities) likelihood of this ETF filing succeeding drops to near zero if they do appeal (i’ll be very surprised if they don’t appeal) <a href="https://t.co/FBGVZPNvwV">https://t.co/FBGVZPNvwV</a>&mdash; Alex Thorn (@intangiblecoins) <a href="https://twitter.com/intangiblecoins/status/1841214766607384582?ref_src=twsrc%5Etfw">October 1, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Ripple and the SEC both notched wins and suffered some losses throughout the years.&nbsp;



In July of last year, Judge Torres <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security">handed the two parties</a> the biggest decision yet: Ripple’s programmatic sales of XRP didn’t constitute investment contracts. However, the double-edged sword was that Torres ruled the institutional sales did.



“The vast majority of individuals who purchased XRP from digital asset exchanges did not invest their money in Ripple at all. An Institutional Buyer knowingly purchased XRP directly from Ripple pursuant to a contract, but the economic reality is that a Programmatic Buyer stood in the same shoes as a secondary market purchaser who did not know to whom or what it was paying its money,” she wrote at the time.&nbsp;



At the time, the SEC sought to file an interlocutory appeal on the decision but was later denied.&nbsp;



And now we’re here. It’s not a huge surprise that the SEC would appeal. After all, they didn’t necessarily win on the final judgment. Though, one could also argue that Ripple didn’t either. And <a href="https://blockworks.co/news/empire-newsletter-ripple-sec-legal-battle">lawyers we spoke to after the decision</a> said they wouldn’t be surprised if an appeal was filed.



Basically, the SEC sought an <a href="https://blockworks.co/news/sec-wants-multi-billion-sum-from-ripple">eye-watering sum of $2 billion</a> in the final judgment. Ripple, on the other hand, wanted a <a href="https://blockworks.co/news/ripple-counters-sec-penalties">far lower sum of $10 million</a>. In the end, Torres announced that Ripple would pay $125 million. It’s fair to say the sum falls closer to what Ripple wanted rather than the multi-billion dollar sum the SEC wanted.



Ripple’s Chief Legal Officer Stuart Alderoty was also not surprised, calling the appeal filing “disappointing.”&nbsp;



“The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course, there were no victims or losses,” he added.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">(1) The SEC&#39;s decision to appeal is disappointing, but not surprising. This just prolongs what&#39;s already a complete embarrassment for the agency. The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course,… <a href="https://t.co/PQozMMtthf">https://t.co/PQozMMtthf</a>&mdash; Stuart Alderoty (@s_alderoty) <a href="https://twitter.com/s_alderoty/status/1841596012588114116?ref_src=twsrc%5Etfw">October 2, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



CEO Brad Garlinghouse <a href="https://x.com/bgarlinghouse">reiterated</a> that Ripple will continue to fight. He didn’t mince words about the appeal.&nbsp;



“If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC,” Garlinghouse said. “Somehow, they still haven&#8217;t gotten the message: They lost on everything that matters. Ripple, the crypto industry, and the rule of law have already prevailed.”



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SEC files Ripple appeal, cites ‘conflicts’ with Supreme Court precedent

Kristin Smith

<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;Instead of attacking industries of the future, we will embrace them, including making America the world capital for crypto.” – Former President Donald Trump&nbsp;
</blockquote>
</blockquote>
</blockquote>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“We’re going to…remain dominant in AI and quantum computing, blockchain, and other emerging technologies.” – Vice President Kamala Harris&nbsp;
</blockquote>
</blockquote>
</blockquote>



Following the collapse of FTX, the crypto industry’s reputation was at its lowest in the eyes of our country’s elected officials, hampering efforts in Washington. Yet, as we approach the 2024 election, this tide is shifting. With the crypto voter now emerging as a political force — especially among younger, tech-savvy generations — candidates face a clear choice: embrace the industry or risk alienating a critical voting bloc in an election expected to be fiercely competitive.



It’s common knowledge that the industry went through a challenging past few years in Washington. And even in the more recent “good” times, a hostile, marauding Securities and Exchange Commission under the leadership of Chair Gary Gensler has continued to “regulate through enforcement,” bogging down the industry’s most successful companies in a mire of legal challenges and court battles.



Read more: <a href="https://blockworks.co/news/empire-newsletter-robinhood-europe-expansion">Robinhood expanding in Europe while US landscape remains uncertain</a>



At times, the industry — and its users — have felt backed into a corner, desperately asking for <a href="http://v">clear rules of the road</a>, but instead have been met with disparaging rhetoric, misleading news headlines and, in Gensler’s case, vaguely condescending “Office Hours” — social media videos explaining crypto’s many dangers. Despite this array of challenges, industry champions held firm in Washington, and tireless engagement by trade groups and individual companies is finally bearing positive results.



From my view as head of Blockchain Association, the leading trade association for the digital asset industry in Washington, I see four vectors that point to crypto’s near-term political future:&nbsp; the perspective of the voter, the work of advocacy organizations, industry coordination and collaboration, and shifting political winds at the highest levels.&nbsp;



<h3 class="wp-block-heading">1. The crypto voter is real</h3>



This year, <a href="https://blockworks.co/news/forward-guidance-newsletter-crypto-survey-data">the crypto voter emerged as a force</a>, helping to shape the platforms of each presidential candidate. A year ago, this wouldn’t have been possible. According to polling from DCG and The Harris Poll, one in five swing state voters consider crypto to be an important issue in the upcoming election. And now, both the Republican and Democratic candidates for president include pro-crypto messaging in their campaign platforms. Importantly, digital assets are popular with voters of all political stripes, supporting the fact that crypto is an inherently nonpartisan technology.



In a race where razor-thin margins matter, candidates realize they can no longer ignore this critical voting bloc. Importantly, campaigns are realizing there’s no political advantage to being anti-crypto.



<h3 class="wp-block-heading">2. The crypto advocate is active</h3>



The grassroots organization <a href="https://blockworks.co/news/stand-with-crypto-pac-us-elections">Stand With Crypto</a> counts more than 1.5 million advocates across the country who are actively engaged in conversation in Washington DC, and who are pushing their elected representatives for common sense legislation.



It’s working.



This week, <a href="https://blockworks.co/news/sec-wrong-bitcoin-etf-elizabeth-warren">crypto’s harshest critic</a>, Senator Elizabeth Warren, softened her tone on the industry, stating, “I have no problem with people buying and selling crypto.” Similarly, Representative Maxine Waters called crypto “inevitable,” and earlier this week called for comprehensive stablecoin legislation during a House Financial Services Committee hearing.



<h3 class="wp-block-heading">3. The crypto industry is mature, organized and effective</h3>



Despite the industry’s relatively short time in Washington, the policy infrastructure we have in place is well-organized and creating an impact. Crypto advocacy is the natural evolution of a growing industry — we need to be able to make the case for crypto as other industries have traditionally done for their respective technologies and businesses.



In addition to groups such as Blockchain Association, individual company CEOs are engaging with policymakers to encourage clear rules for the crypto industry and consumer protection for crypto users.



The industry is now a sophisticated, mature — and effective — force in Washington.



<h3 class="wp-block-heading">4. Momentum is on our side</h3>



This moment is what the industry has been working so hard to achieve — and momentum is in our favor. Indeed, this week marks one of those key turning points. Both presidential candidates are publicly voicing support for digital assets. Both the House and Senate have pro-crypto blocs. Vocal dissenting voices are now the minority.



The industry has emerged from a low point in late 2022 — it’s been a long path traveled — but the resiliency of the industry is clear. The crypto voter is mobilized, active and vocal. Candidates up and down the ballot would be wise to listen.



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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 Forward Guidance newsletter</a>.



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Political candidates can no longer ignore crypto voters

Michael McSweeney

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



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



<h2 class="wp-block-heading">It’s been four years…</h2>



It ain’t over ‘til the fat lady sings — or until an appeals court says it’s siding with Judge Analisa Torres’ decision in the SEC&#8217;s case against Ripple.



If you haven’t a clue what I’m referencing, the SEC filed yesterday to appeal the <a href="https://blockworks.co/news/ripple-fined-civil-penalty-sec-lawsuit">$125 million judgment</a> in its case against Ripple. The case, which is now as old as a human toddler (and will celebrate its fourth birthday in December if it’s still going on by then), has been a long and hard-fought battle for both the SEC and Ripple.



The two sides had until Oct. 7 to decide if they were going to pursue an appeal. An SEC spokesperson told me that it filed the appeal because it believes the decision “conflicts with decades of Supreme Court precedent and securities laws.”&nbsp;



Right now, we don’t really know what the appeal will look like, though the statement gives us some clues.&nbsp;



What we do know, however, is that this appeal isn’t what some others in crypto — specifically looking at Bitwise — wanted to see from the SEC. <a href="https://blockworks.co/news/bitwise-files-for-spot-xrp-etf">Bitwise just filed yesterday</a> for an XRP ETF. And Galaxy Digital’s Alex Thorn warned that the likelihood of success from Bitwise “drops to near zero” with an appeal.



<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">SEC has until next week (Oct. 7) to appeal Judge Torres’ July 2023 ruling (which held that secondary sales of XRP through exchanges were not securities) likelihood of this ETF filing succeeding drops to near zero if they do appeal (i’ll be very surprised if they don’t appeal) <a href="https://t.co/FBGVZPNvwV">https://t.co/FBGVZPNvwV</a>&mdash; Alex Thorn (@intangiblecoins) <a href="https://twitter.com/intangiblecoins/status/1841214766607384582?ref_src=twsrc%5Etfw">October 1, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Ripple and the SEC both notched wins and suffered some losses throughout the years. In July of last year, Judge Torres <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security">handed the two parties</a> the biggest decision yet: Ripple’s programmatic sales of XRP didn’t constitute investment contracts. However, the double-edged sword was that Torres ruled that the institutional sales did.



“The vast majority of individuals who purchased XRP from digital asset exchanges did not invest their money in Ripple at all. An Institutional Buyer knowingly purchased XRP directly from Ripple pursuant to a contract, but the economic reality is that a Programmatic Buyer stood in the same shoes as a secondary market purchaser who did not know to whom or what it was paying its money,” she wrote at the time.&nbsp;



At the time, the SEC sought to file an interlocutory appeal on the decision but was later denied.&nbsp;



And now we’re here. It’s not a huge surprise that the SEC would appeal, after all they didn’t necessarily win on the final judgment either. Though, one could also argue that Ripple didn’t either.&nbsp;



Basically, the SEC sought an eye-watering sum of $2 billion in the final judgment. Ripple, on the other hand, wanted a far lower sum of $10 million. In the end, Torres announced that Ripple would pay $125 million. When looking at the wide range, it falls closer to Ripple’s ask than the SEC’s request.



Following the decision, <a href="https://blockworks.co/news/empire-newsletter-ripple-sec-legal-battle">I was told by lawyers</a> that it wouldn’t be surprising if the SEC sought an appeal.&nbsp;



Ripple’s chief legal officer Stuard Alderoty agreed with that assessment, calling the appeal filing “disappointing.”&nbsp;



“The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course, there were no victims or losses,” he added.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">(1) The SEC&#39;s decision to appeal is disappointing, but not surprising. This just prolongs what&#39;s already a complete embarrassment for the agency. The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course,… <a href="https://t.co/PQozMMtthf">https://t.co/PQozMMtthf</a>&mdash; Stuart Alderoty (@s_alderoty) <a href="https://twitter.com/s_alderoty/status/1841596012588114116?ref_src=twsrc%5Etfw">October 2, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



CEO Brad Garlinghouse <a href="https://x.com/bgarlinghouse">reiterated</a> that Ripple will continue to fight and didn’t mince words about the appeal.&nbsp;



“If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC,” he said. “Somehow, they still haven&#8217;t gotten the message: they lost on everything that matters. Ripple, the crypto industry, and the rule of law have already prevailed.”



Now we’ll just have to see if the Court of Appeals agrees with him.&nbsp;



— Katherine Ross



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



<ul class="wp-block-list">
<li>XRP’s down 11% after the SEC filed its appeal Wednesday.</li>



<li>Bitcoin is at $60,758 early Thursday, down slightly from yesterday, as tension in the Middle East continues to weigh on it.</li>



<li>Ether, however, is down 4% to $2,351.</li>



<li>Long liquidations totaled $218 million in the past 24 hours and $56 million of shorts were liquidated.</li>



<li>EIGEN is down nearly 25% from an all-time high of $4.53 earlier this week to $3.42 after it unlocked. </li>



<li>PYUSD’s market cap sits at $702 million, down over 21% in the past 30 days. It’s ranked ninth on <a href="https://app.rwa.xyz/stablecoins">rwa.xyz’s</a> stablecoins list.</li>
</ul>



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



<ul class="wp-block-list">
<li>Banks in Europe and North America will <a href="https://www.swift.com/news-events/news/live-trials-digital-asset-transactions-swift-start-2025#:~:text=The%20ability%20to%20execute%20digital,of%20digital%20assets%20and%20currencies.">test</a> live digital asset transactions on the Swift network next year, the company said Thursday.</li>



<li>A US citizen has <a href="https://www.justice.gov/usao-sd/pr/indiana-man-pleads-guilty-conspiracies-involving-cyber-intrusion-and-37-million">pleaded guilty</a> to stealing some $37 million in crypto in 2022, according to a DOJ statement. </li>



<li>OpenAI <a href="https://www.axios.com/2024/10/02/openai-new-funding-round-restructuring">raised</a> $6.6 billion in a VC funding round led by Thrive Capital. </li>



<li>Metaplanet <a href="https://x.com/Metaplanet_JP/status/1841718887689187627">boosted</a> its BTC hoard via an options sale, according to its X account.</li>



<li>Gurbir Grewal, the SEC’s enforcement director, will <a href="https://blockworks.co/news/sec-enforcement-director-departure">depart</a> next week.</li>
</ul>



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



Q: The SEC’s head of enforcement Gurbir Grewal announced he is leaving the agency this month. What does the departure signal?



I’ll go out on a limb and call it —&nbsp;potentially —&nbsp;quite significant.



I’ve never bought the theory that the SEC is so monolithically opposed to crypto or that all decisions flow down from crypto’s favorite bugbear, Gary Gensler.&nbsp;



Rather, I’ve held the view that agencies like the SEC are composed of people with different ideas, different incentives and, yes, different views on crypto.&nbsp;



Yesterday’s statement made particular hay about Grewal’s crypto bonafides, including the “more than 100 enforcement actions addressing widespread noncompliance in the quickly growing crypto space” he oversaw.



Grewal’s deputy, Sanjay Wadhwa, will take over on an acting basis. But whoever is slotted into the spot more permanently could take a decidedly different tack, especially amid a shifting political climate. Gensler’s bitcoin ETF step-down earlier this year was an acknowledgment, good or bad, that the agency isn’t immune from outside forces.



So let’s wait and see, as we often do here in crypto.&nbsp;



— Michael McSweeney



The fish rots from the head, right?&nbsp;



If we’re assuming that the SEC is taking an opposition to crypto because Gensler’s leading the charge, then the resignation of one of his top dogs is not going to rock the ship too much.



Gurbir Grewal has certainly left his mark on the SEC, but that’s not to say that his replacement won’t go after the same types of cases.&nbsp;



I hesitate to read too much into his decision to resign. We don’t know the facts, for one, and while he played an important role in the agency I believe that his position is one that’s fairly replaceable. Sorry, Grewal, but it’s true.&nbsp;



For all we know, he’s seen so many crypto cases that he’s gone and started his own project (this is a joke) or perhaps he’s gone the way of some former SEC officials and joined companies with crypto exposure (see Robinhood’s Dan Gallagher or a16z advisor Bill Hinman).&nbsp;



Bottom line is this: If Gensler’s the one paving the way forward for an anti-crypto SEC, Grewal’s departure won’t change a thing.&nbsp;



— Katherine Ross



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The court battle between Ripple and the SEC isn’t over yet

Visa has created a new platform in a bid to help financial institutions issue fiat-backed tokens and test out their use cases.&nbsp;&nbsp;



The payments giant’s guidance to banks exploring this space is part of a broader effort to create global standards that ease interactions between such entities, Visa executives noted.&nbsp;&nbsp;&nbsp;&nbsp;



As more real-world assets — from real estate to debt securities — come onto blockchains, there’s a growing need to bring more forms of cash onto those rails to trade them, said Visa crypto head Cuy Sheffield.



“We think that creates a significant opportunity for banks to issue their own fiat-backed tokens on blockchains, do it in a regulated way and enable their customers to access and participate in these on-chain capital markets,” he told Blockworks.&nbsp;



<a href="https://blockworks.co/tag/visa">Visa</a> has watched first hand as central banks explore the potential of <a href="https://blockworks.co/tag/tokenization">tokenization</a> and how it can modernize financial infrastructure, Sheffield noted.&nbsp;



The company last year did a pilot with HSBC and Hang Seng Bank, for example, as part of the Hong Kong Monetary Authority’s <a href="https://blockworks.co/news/hong-kong-cbdc-pilot-testing">Digital Hong Kong Dollar program</a>. The test simulated interbank business-to-business payments, including property payment and settlement between collection institutions and merchants.



Also last year, the Central Bank of Brazil picked Visa to participate in a CBDC pilot of the digital real.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/digital-dollar-visa-brazil-cbdc">‘Learning by doing’ is critical to digital dollar development, Visa exec says</a>



“And then we started to see more interest from many commercial banks and our existing partners starting to tiptoe in and say, ‘What are fiat-backed tokens and tokenized deposits?’” Sheffield told Blockworks earlier this year. “‘Should we create one?’”



Spain-based Banco Bilbao Vizcaya Argentaria (BBVA) has been working in the new Visa Tokenized Asset Platform (VTAP) sandbox this year, Visa said Wednesday.&nbsp;



The bank was testing the issuance, transfer and redemption of a bank token on a testnet blockchain. It seeks to launch an initial pilot with select customers in 2025 on the Ethereum blockchain.&nbsp;



“From our experience working with banks, it’s [a slow process] for a reason,” Sheffield said. “You have to be careful and make sure that you understand the technology and that you’re educating both internal stakeholders as well as regulators.”&nbsp;



Fintechs, <a href="https://blockworks.co/news/paypal-launches-stablecoin">like PayPal, have made innovative strides with stablecoins</a> in recent years. Large asset managers have started to embrace blockchain technology more meaningfully, with BlackRock launching its USD Institutional Digital Liquidity Fund in March.



Franklin Templeton, which launched its OnChain US Government Money Fund in 2021, started allowing institutional investors to transfer shares of the fund to other shareholders earlier this year.



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



“We think the next phase is the banks coming in, starting to experiment and creating their own products,” Sheffield told Blockworks. “I think that will open up a lot of opportunities when you can have more liquidity.”



<h2 class="wp-block-heading">What are the use cases?</h2>



Among the lowest hanging fruit for banks is allowing real-time money movement between their own clients, Visa executives said.&nbsp;



The JPM Coin System, a permissioned payment rail and deposit account ledger, allows for this, for example.&nbsp;



Read more: <a href="https://blockworks.co/news/jpmorgan-blockchain-payments">JPMorgan adds ‘holy grail’ payments feature as part of blockchain push</a>



In markets where central banks are actively creating wholesale <a href="https://blockworks.co/tag/cbdc">CBDC</a>s, financial institutions are also interested in inter-bank transfers.&nbsp;



Catherine Gu, Visa’s head of CBDC and tokenized assets, told Blockworks that offering clients cross-border transfers is an area of focus for banks.&nbsp;&nbsp;



“For especially multinational corporates moving money 24/7, right now the rails are very limited for them to do so,” she said. “So a lot of these major tier-one banks — as they’re looking at the blockchain use cases — are really coming from that perspective.”



Interacting with tokenized real-world assets may end up driving the most demand, Sheffield said.



Read more: <a href="http://v">How the latest TradFi blockchain trial could mark the ‘five-yard-line’ for mass adoption</a>



A bank could let customers use a fiat-backed token to buy tokenized commodities or Treasurys with instant settlement, for example.&nbsp;



Using <a href="https://blockworks.co/tag/smart-contracts">smart contracts</a> to create structured financial products is another area banks are exploring.&nbsp;



“You can have collateral that represents a commodity,” Sheffield explained. “And then you [will] be able to lend in a tokenized version of fiat against that commodity, and that can happen all automatically through a smart contract.”



Banks will likely utilize and create products on a range of public and private blockchains based on the use cases and regulatory environments they are operating in.



Read more: <a href="https://blockworks.co/news/goldman-sachs-future-public-blockchains">Goldman Sachs head of digital assets: The future is on public blockchains</a>&nbsp;



Fragmentation remains a key hurdle to overcome, Gu said — noting there is not a uniform approach to tokenization and smart contracts.&nbsp;



Visa could seek to help create standards to ensure interoperability between financial institutions that wade into this segment.&nbsp;



“It would be nice to think about a uniform platform, which is the blockchain, that you can facilitate both the cash-flow leg as well as whatever you’re trying to trade and transact,” Gu noted. “To really think about how tokenization can become mainstream, you’ve got to think about a way to do so.”



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Visa to help banks test tokenized assets, smart contracts

Robinhood is expanding its European offerings, allowing customers to transfer crypto in and out of its app.&nbsp;



Robinhood’s Johann Kerbrat told Blockworks that the company will continue to roll out new features. He added that right now Robinhood is limiting its marketing to a few countries over in the EU as it awaits its MiCA license.&nbsp;



Once Robinhood has that in hand, the company plans to scale all “across the EU.”



The reason for Robinhood’s EU focus is simple, Kerbrat explained.&nbsp;



“You have a lot <a href="https://blockworks.co/news/ireland-crypto-vasps-coinbase">more companies in the EU</a> working on crypto than in the US. We have a bit more of a clear framework, and so we are able to launch the product…in a fast way, because we know how to adapt to the regulatory framework, and because we&#8217;re getting this constant feedback loop from customers, we&#8217;re able to…add what&#8217;s missing or what they are looking for,” he said.



Read more: <a href="https://blockworks.co/news/uk-crypto-regulation-panel-das">The UK is at a turning point in crypto regulation, policymakers say&nbsp;</a>



Unfortunately, to no one’s surprise, the US market isn’t so easy. Obviously there isn’t a crypto license that’ll allow <a href="https://blockworks.co/tag/robinhood">Robinhood</a> to safely offer the same types of features to US residents. And then there’s the pesky matter of the <a href="https://blockworks.co/news/robinhood-wells-notice-sec">Securities and Exchange Commission’s Wells Notice</a>.&nbsp;



Kerbrat said the company hasn’t heard anything back from the <a href="https://blockworks.co/tag/sec">SEC</a> “at this point.”&nbsp;



“We were disappointed. I think we&#8217;ve been really focusing on establishing a safe business. We didn&#8217;t list a ton of assets like some of our competitors. We never offered staking in the US. So, you know, we&#8217;ve felt like we&#8217;ve done our work to work with the SEC and get to a good position, but we were obviously disappointed with the Wells notice,” Kerbrat said.&nbsp;



It’s unclear, at this stage, what the SEC is planning. The regulatory agency had a spree of crypto-related enforcement actions last month to round out its fiscal year.



<a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">In May we wrote</a> that, based on how the SEC has approached other lawsuits, it was likely that it would file its lawsuits (if it chooses to do so, because Wells notices don’t always mean that a lawsuit is incoming) last summer. And it did…with Consensys, after the company received a Wells notice last spring. But we haven’t seen actual lawsuits against either Robinhood or Uniswap yet.



But despite the will they or won’t they situation playing out with the SEC, Kerbrat says nothing’s really changed for Robinhood when it comes to its US business.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-must-work-closely-with-regulators">Crypto needs ‘to work closely with the regulators:’ Gemini deputy general counsel</a>



Though, he noted, they’re not super focused on adding more assets to the platform.&nbsp;



“Our focus at this point is more about making sure that the features we have are working for our customers,” he noted.&nbsp;



Robinhood, due to its customer base, is a good gauge of how the retail crowd is doing.&nbsp;



“I think we still see a lot of engagement off-chain and onchain. And I think the onchain part is important because it really shows that people are not just buying the crypto somewhere and holding it there, but we actually see them transacting and using a self-custody wallet, engaging with steps and all these kinds of things. So we haven&#8217;t seen too much of that changing. We do see volume cycling, and that&#8217;s something that we are used to. We see it almost every year,” he said.



Kerbrat also addressed the stablecoin <a href="https://www.bloomberg.com/news/articles/2024-09-26/robinhood-revolut-explore-entering-the-burgeoning-stablecoin-sector">rumors</a>. While he noted that stablecoins are a “very interesting business,” he clarified that “at this point we don&#8217;t have anything that we are preparing.”&nbsp;



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



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Robinhood is seeing ‘a lot of engagement’ from retail users

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<h2 class="wp-block-heading">New US spot crypto ETF plans take shape</h2>



The spot bitcoin ETFs hitting US exchanges was the talk of the town in January (not to mention the months of anticipation after BlackRock jumped into that race).&nbsp;



Though ether ETFs haven’t seen as much investor interest (and weren’t expected to) since their July launches, that was deemed another milestone. Not to mention the iShares Ethereum Trust fairly quickly gathered $1 billion in assets.



As institutions wade deeper into crypto, ETFs have proven to be a gateway into the space. All this to say: New crypto ETF filings are pretty significant, particularly ones that would directly hold an asset not yet available in such a wrapper.



But for them to really change the game, of course, they need to be approved.



That preamble sets up what we saw today: Crypto-focused asset manager <a href="https://blockworks.co/news/bitwise-files-for-spot-xrp-etf">Bitwise filed for an XRP ETF</a>. Canary Capital also appeared to file for a similar product, the Delaware Division of Corporation website shows.



Bitwise decided to put out a press release — not exactly common after an <a href="https://www.sec.gov/Archives/edgar/data/2039525/000121390024084334/ea0216197-s1_bitwise.htm">S-1 filing</a>. In it, the firm mentions XRP’s role in facilitating cross-border payments and remittances — adding that the XRP Ledger public blockchain typically processes transactions in seconds, with fees under a cent.



XRP’s market capitalization of roughly $33 billion means it ranks seventh among crypto tokens.



“We believe blockchains will usher in new, apolitical monetary assets and permissionless applications for the 21st century,” Bitwise CEO Hunter Horsley said in a statement.&nbsp;



Last month <a href="https://blockworks.co/news/on-the-margin-newsletter-bear-market-vibes">I wrote</a> about how Grayscale’s XRP Trust launch didn’t necessarily mean such an ETF was coming. Sure, Grayscale has an intended product lifecycle that ends in an ETF listing; but the SEC has to allow such a conversion for that to be fulfilled.



Some have previously told Blockworks that spot crypto ETF approvals in the SEC (outside of BTC and ETH) might be tough given the precedent of the regulator wanting to <a href="https://blockworks.co/news/us-spot-crypto-etf-approvals-outlook">first see a regulated futures market</a>. None exist for XRP (or solana).



But the plans laid out from Bitwise and Canary seem to advance the growing perception that the US crypto regulatory winds are changing. Then again, it could just be wishful thinking.



While Bitwise declined to comment on that, a Canary Capital spokesperson told me there are indeed “encouraging signs of a more flexible regulatory environment.” The representative added: “This year&#8217;s approval of the spot Ethereum ETFs, following the earlier spot bitcoin ETF approvals, signals positive momentum, especially considering how long it took for ETH futures products to be approved. We&#8217;re optimistic about the next phase of developments in the space.&#8221;



Neena Mishra, director of ETF research at Zacks Investment Research, said Bitwise is preparing for an XRP ETF in case Trump wins the presidency. The former president did, after all, <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">promise to “fire” SEC Chair Gary Gensler</a> if elected.&nbsp; “If Harris wins and Gensler remains SEC chair, the filing has no chance of approval, despite [Harris’s] <a href="https://blockworks.co/news/on-the-margin-newsletter-china-stimulus-stagnation">recent comments</a> about supporting digital assets,” Mishra argued.



Mishra’s thoughts are similar to ones expressed by VanEck’s Matthew Sigel after his firm <a href="https://blockworks.co/news/how-us-canada-solana-fund-filings-differ">filed for a solana ETF</a> in June. He had noted that filing was essentially <a href="https://x.com/matthew_sigel/status/1807775290396942559?lang=en">a bet on a Trump victory</a> in November, given the Republican nominee’s rhetoric in recent months.



Sigel did not want to comment on the latest Bitwise S-1 today, noting only: &#8220;We like SOL a lot more than XRP.&#8221;&nbsp;



Bitwise’s filing also comes as crypto enthusiasts monitor whether the SEC will appeal the ruling in the regulator’s legal battle with Ripple Labs. The court <a href="https://blockworks.co/news/ripple-fined-civil-penalty-sec-lawsuit">ordered Ripple to pay</a> a $125 million penalty — far below the $2 billion <a href="https://blockworks.co/news/empire-newsletter-ripple-sec-legal-battle">the SEC had sought</a>.



Judge Analisa Torres <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security?utm_source=on-the-margin.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=new-day-sahm-rule&amp;_bhlid=e486fbf0e817113df4c1fb8a41cfff47c7497df6">last year ruled</a> that while Ripple’s institutional sales of XRP counted as an unregistered securities offering, programmatic sales did not. An appeal could delay clarity on XRP’s status, possibly impacting planned ETFs that hold the asset.



Ultimately, ETF issuers want to be ready for any scenario — particularly given the edge asset managers often gain from launching a product first, Mishra noted.



“Bitwise, well known for its crypto expertise, will likely launch this product in the future,” she explained to me. “Politics will determine whether this happens soon or in a few years.”&nbsp;



— Ben Strack&nbsp;



<h3 class="wp-block-heading">0 </h3>



The number of times crypto was mentioned during last night’s vice presidential debate.&nbsp;



We can’t say we were terribly surprised, but given Kamala Harris and Donald Trump do not have any more debates scheduled before Nov. 5, last night appeared to be a final pre-election opportunity to hear digital asset regulation discussed on a national stage.&nbsp;



Still, there is plenty of time left for Trump and/or Harris — plus their running mates — to share more information about their respective crypto platforms (or <a href="https://blockworks.co/news/on-the-margin-newsletter-fomc-meeting-takeaways">stop into an NYC bar and pay with bitcoin</a>).&nbsp;



<h2 class="wp-block-heading">More employment data boosts odds of a 25bps cut&nbsp;</h2>



Private sector employers added 143,000 jobs in September, up from 103,000 in August, ADP reported Wednesday. This beat the forecast of 128,000 new positions.&nbsp;



Hospitality led with 34,000 new jobs. Construction and education and health services posted 26,000 and 24,000 new positions, respectively.&nbsp;



The report noted too that wage growth is slowing, which we also saw in yesterday’s JOLTS report. ADP said the 12-month pay increase for employees who had not left their position was 4.7%, compared to 4.8% in August.&nbsp;



The JOLTS report showed that layoffs and discharges are leading quits on a percentage basis, but job openings are still up. Job openings — as a percentage of the overall US labor force — now sit at 4.77%, similar to where we were prior to the pandemic.&nbsp;



This data comes after Fed Chair Jerome Powell on Monday said the committee is not looking to rush interest rate cuts. The lowering cycle will continue, he added, “over time.”&nbsp;



Labor market health, as we’ve discussed in this newsletter before, is a top concern for Powell as he attempts a soft landing.&nbsp;



“We do not believe that we need to see further cooling in labor market conditions to achieve 2% inflation,” he said Monday.&nbsp;



Federal funds futures markets now show a 63% chance of a 25-basis point cut in November, according to CME Group <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">data</a>.&nbsp;



Powell is going to want to see annual wage growth closer to the 3% to 3.5% level, which he’s said in the past is consistent with a 2% inflation rate. Still, I’d tend to agree with the futures markets here; these latest two reports are not convincing me that we’ll see another aggressive cut next month.&nbsp;



— Casey Wagner



<h2 class="wp-block-heading">Latest CME Group launch surpasses prior crypto product debuts&nbsp;&nbsp;</h2>



CME Group’s new Bitcoin Friday futures (BFF) are so far a smash hit — at least when considering day-one reception compared to its previously launched crypto derivatives offerings.



Sized at one-fiftieth of a bitcoin, the new contracts are cash-settled to the CME CF Bitcoin Reference Rate (New York Variant) at 4 pm ET every Friday. New contracts are listed every Thursday at 6 pm ET, and market participants can trade the nearest two Fridays at any given point.



CME Group noted Tuesday that 31,498 BFF contracts traded across two different contract weeks during the Sept. 30 debut.



A company spokesperson put this number into perspective. The highest-volume CME crypto launch prior to yesterday was micro bitcoin futures, which traded about 7,400 contracts when introduced in May 2021.



A majority of the volume — at 69% — came from investors in the Europe, Middle East and Africa regions, CME data shows. Those in North America and the Asia Pacific regions made up 19% and 12% of the volume, respectively.



The derivatives marketplace publicly plotted out the launch of these futures contracts in August. The concept was simple: to offer smaller-sized contracts in an effort to attract participation from more types of investors.



Institutions and retail traders alike “will be able to more accurately fine-tune their bitcoin exposure on a regulated exchange,” CME crypto products head Giovanni Vicioso said in a statement at the time.&nbsp;



Galaxy and Marex made the first trade of such contracts on Sept. 29, CME noted on Tuesday.



Marex’s co-head of derivatives engine, Harry Benchimol, said the weekly contracts are an efficient hedging tool and are closer to the perpetuals offered on crypto platforms.&nbsp;&nbsp;&nbsp;



Thus, he noted, “CME Group is closing the gap between traditional financial and crypto markets.”



Interest is coming “both on screen and in the block market,” Vicioso told Blockworks Wednesday.&nbsp;&nbsp;



This seems to give CME Group plenty of incentive to continue building out its crypto product lineup. It’ll be interesting to see what it comes up with next.&nbsp;



— Ben Strack&nbsp;



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



<ul class="wp-block-list">
<li>A federal appeals court has cleared prediction market platform Kalshi to reopen its US Congressional election betting markets. The ruling comes three weeks after a different appellate judge <a href="https://apnews.com/article/betting-on-elections-kalshi-gambling-c060aad4d12f9622d36f83e525088dcc">sided with the CFTC</a> and issued a temporary freeze on the markets. </li>



<li>Dockworkers from 36 ports on the East Coast continued their strike Wednesday as <a href="https://nam.org/manufacturers-call-on-president-to-invoke-taft-hartley-act-to-stop-port-strike-32188/?stream=series-press-releases">pressure mounts</a> for President Biden to invoke the Taft-Hartley Act and intervene. Biden has said he will not step in. </li>



<li>We are a week away from <a href="https://blockworks.co/event/permissionless-iii">Permissionless III</a>! Get your tickets now to hear Felix host  Forward Guidance live. (Word to the wise, we hear prices are increasing soon!)</li>
</ul>



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The XRP ETF filing: A sign of regulatory progress or wishful thinking?

Gurbir Grewal, who has served as the US Securities and Exchange Commission’s director of the division of enforcement since July 2021, will leave the agency this month.&nbsp;



The current deputy director of the division, Sanjay Wadhwa, will step in as acting director starting on Oct. 11, the SEC <a href="https://www.sec.gov/newsroom/press-releases/2024-162">announced</a> Wednesday.&nbsp;



“From recalibrating penalties and remedies to confronting emerging risks to holding issuers, insiders and gatekeepers accountable, I am incredibly proud of all that we’ve accomplished as a division during my tenure,” Grewal said in a statement. “I am grateful to Chair Gensler not just for the opportunity to lead the division, but also for his unwavering commitment to investor protection and support of a robust enforcement program.”



Read more: <a href="https://blockworks.co/news/on-the-margin-newsletter-sec-leader-departs">SEC crypto enforcement leader departs</a>



Grewal joined the agency just months after SEC Chair <a href="https://blockworks.co/tag/gary-gensler">Gary Gensler</a> was sworn into his position in April 2021. Cryptocurrency-related enforcement actions, which had been on the rise before Grewal and Gensler took over, were a significant part of Grewal’s tenure.&nbsp;



Under Grewal’s leadership, the agency issued 35 crypto enforcement actions in 2022 and a total of 40 in 2023. The division of enforcement almost <a href="https://www.sec.gov/newsroom/press-releases/2022-78">doubled</a> its crypto assets and cyber unit in May 2022, bringing the team’s total to 50.&nbsp;



As of Sept. 6, 2024 the agency had brought 18 crypto enforcement <a href="https://www.sec.gov/securities-topics/crypto-assets#account">actions</a> since the start of the year.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-sec-crypto-settlements">SEC settlements are becoming the cost of doing crypto business</a>



“Every day, [Grewal] has thought about how to best protect investors and help ensure market participants comply with our time-tested securities laws,” Gensler said in a statement. “He has led a division that has acted without fear or favor, following the facts and the law wherever they may lead. I greatly enjoyed working with him and wish him well.”



Wadhwa started at the <a href="https://blockworks.co/tag/sec">SEC</a> in 2003 as a staff attorney in the New York office’s enforcement division. He served as the senior associate director of the New York enforcement division for eight years before he became the deputy director for the entire division.&nbsp;



A representative from the SEC declined to comment.



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SEC’s enforcement director announces departure 

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Roughly a month and a half after its PYUSD supply vaulted past Ethereum’s, Solana’s stash of PayPal’s stablecoin has fallen back to Earth.



The stablecoin’s supply, once in excess of $660 million, has fallen to around $320 million, a decline of roughly 50% in about a month. Ethereum currently has a supply of $377 million PYUSD.



The drawdown comes as Kamino and other DeFi protocols slowly wind down once-lucrative liquidity incentive programs that juiced yields for the stablecoin’s holders. Now, those yield farmers appear to have gone in search of greener pastures, raising questions about how worthwhile those incentives investments will prove to be in hindsight.



PayPal’s PYUSD is issued by a firm called Paxos, which has tried to peel away liquidity from the USDT-USDC stablecoin duopoly by contracting with a <a href="https://blockworks.co/news/paypal-stablecoin-aave-deployment">firm called Trident Digital</a> for liquidity programs. After PYUSD launched on Solana earlier this year, Trident Digital facilitated liquidity incentives programs <a href="https://blockworks.co/news/kamino-seeing-benefits-from-liquidity-incentives-on-pyusd">on multiple Solana DeFi platforms</a>, where it would temporarily raise yields in an attempt to capture liquidity.



To do so, Trident Digital would dole out funds for DeFi protocols to pass on to users as a fraction of the various platforms’ PYUSD supply, which were subject to caps, according to a person with knowledge of the matter. These caps gradually lifted over time, and yields also declined over time.&nbsp;



At around the peak of Solana PYUSD, $350 million in the stablecoin was <a href="https://x.com/y2kappa/status/1825979796930834635">earning</a> 18% yield on Kamino. Today, the APY is at 9.24%, still nothing to sneeze at but seemingly less than some investors are willing to take. It’s unclear whether those incentives ultimately came from PayPal or the Solana Foundation’s coffers, and both organizations did not return requests for comment.&nbsp;



There’s a version of this story where the funds for liquidity incentives were akin to wasted funds.



“Mercenary capital sucked up the $pyUSD incentives on Solana and left,” Kilian Boshoff, chief commercial officer of Swell, <a href="https://x.com/Fundi_Crypto/status/1841220882145980793">wrote</a> on X.



But at the same time, PYUSD was never meant to be primarily used for things like DeFi lending. PayPal is a payments company, and its <a href="https://blockworks.co/news/paypal-pyusd-stablecoin-live-on-solana?utm_source=lightspeed-4bed7b.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=are-we-there-yet">public messaging around PYUSD</a> has centered around the usefulness of the stablecoin for things like remittances and payments. Being able to avoid banks certainly seems useful for a company that has to deal with the fees and headaches of moving funds into and out of bank accounts around the world.



So, whether the PYUSD liquidity incentives were a worthwhile or ill-advised investment is definitely an open question, particularly given the recent supply decline. But it’s also premature to judge the deployment, which still represents a big step into Solana from one of the world’s largest fintechs.



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PayPal’s stablecoin flows out of Solana as incentives wane

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<h2 class="wp-block-heading">The FUD around EigenLayer tokenomics</h2>



Here’s how private investor allocations into pre-launch tokens generally work:



<ol class="wp-block-list">
<li>You are a reputable name or a KOL with many Twitter followers, and projects want your clout.</li>



<li>A project offers you a percentage of locked tokens at a favorable price, so you agree to invest.</li>



<li>On the day the project launches its “token generation event” (TGE) and tokens become tradable, your locked allocation of tokens enter a “cliff” period.</li>



<li>That cliff is typically about a year (though in bull markets has been known to drop to six or even three months), during which your tokens are effectively locked up.</li>



<li>Once that cliff is up, your tokens enter a “vesting” period — typically two to four years — during which your locked tokens begin to slowly unlock and become liquid and tradable.</li>
</ol>



Things are set up this way to create long-term incentive alignment between investors and projects to build a successful product, and ultimately deter predatory dumping on retail investors.



EigenLayer finally made its native EIGEN token transferable yesterday, amid a barrage of criticism around the opaqueness of EIGEN’s true float (circulating supply).&nbsp;



That is pretty important to know because low-float tokens are more volatile and subject to less market price discovery, and are therefore <a href="https://cobie.substack.com/p/new-launches-part-1-private-capture">predatory</a> for the unsuspecting retail investor eyeing them hungrily on the Binance mobile app.



After accounting for unclaimed EIGEN and the 73 million EIGEN already restaked on EigenLayer, Kairos Research estimated that the real float of EIGEN was about 2.42% — a float even shockingly lower than Worldcoin’s (WLD) ~4.9% — though EigenLayer <a href="https://x.com/Ian_Unsworth/status/1840753494560587859">disputed</a> that number.



And it gets more complicated.



The “locked” EIGEN tokens by EigenLayer investors are apparently not entirely locked.



During the so-called locked cliff period, EigenLayer investors can already stake their “locked” tokens, receive rewards, and begin selling those rewards on the open market. As noted in their <a href="https://docs.eigenlayer.xyz/eigenlayer/information-and-transparency/disclosures">just-updated docs</a>:



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
<figure class="wp-block-pullquote"><blockquote>“*EIGEN staking: Eigen Labs Investors are not restricted from staking EIGEN on EigenLayer. As such, investors may choose to stake their EIGEN and receive staking rewards the same as any other user. EIGEN provided by Eigen Labs to investors is subject to the Lockup Schedule, but EIGEN investors receive from staking will not be subject to the Lockup Schedule.”</blockquote></figure>
</blockquote>



But if locked tokens are accruing a yield, then that is arguably not a “locked” token.



I was under the impression that this was a rare and frowned upon practice that <a href="https://x.com/karl_0x/status/1841325496266596791">Celestia</a> <a href="https://x.com/TardFiWhale/status/1841307976134484264">started</a>, but it’s apparently becoming a standard playbook with several L1 projects including Sui, Sei and Aptos.



Yield-generating “locked” tokens defeats the whole purpose of locking up private investor tokens for “incentive alignment,” and it’s also effectively a form of double-dipping. Worse still, it double-dips from a reward pool that could have been allocated to actual productive capital, e.g. restaking and securing an EigenLayer AVS.



In EigenLayer’s defense, there is at least a cap on those emitted rewards. Based on its <a href="https://x.com/eigenlayer/status/1841313990401548434">docs</a>, 1% of the total EIGEN supply ($60 million) is emitted as rewards annually, and 25% of that is reserved for EIGEN stakers, while the other 75% goes to ETH stakers on EigenLayer.



I guess when EigenLayer was talking about “restaking,” it had in mind its investors too.



— Donovan Choy



<h2 class="wp-block-heading">Chart of the Day</h2>



USDS heads skyward:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdI4Kr1Y-epxHWTIOpfVB80gqO9IEpA9yL1zYcWNZpnHOIbrkFTWOqMSt0wP_qzxJUCobJW1iFgpaQwQExp1xBLyRdn6OKDHRRVKN2TT3ex2zY64izRlfEYtIWrPLqD90--DysPi8N4kdQETB99pe6UXlvl?key=w8qNfYNiNHCY4XnEWz3pZQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://info.sky.money/tokens/0xdc035d45d973e3ec169d2276ddab16f1e407384f">Sky.money</a></figcaption></figure>



Sky’s USDS stablecoin has hit $1.1 billion since its inception exactly one month ago. In Maker’s <a href="https://blockworks.co/news/maker-rebrands-as-sky-dai-will-be-changed-to-usds">rebrand to Sky</a>, existing DAI holders have the option to convert DAI to the rebranded USDS.



The joint market cap of both USDS and DAI is now nearly $5.9 billion, the <a href="https://makerburn.com/#/charts">highest</a> it’s been on a year-to-date basis.



— Donovan Choy&nbsp;



<h2 class="wp-block-heading">Degen Corner</h2>



<h3 class="wp-block-heading">Simple bitcoin staking</h3>



We previously looked at <a href="https://blockworks.co/newsletter/research/issue/post_339ee473-ace9-402e-a5cb-2419f96a403e">BOB Stake</a> for the Bitcoin/Ethereum “hybrid L2” BOB, and <a href="https://blockworks.co/newsletter/research/issue/post_9f505f0e-c0a8-4fde-a27a-375e53a10ab0">Stroom</a>, a liquid staking provider for the Lightning Network. To further the theme of safe bitcoin staking for noobs, leading staking-as-a-service provider P2P.org today introduced a <a href="https://blockworks.co/news/institutions-get-in-line-for-staking-bitcoin-with-babylon">Babylon</a> staking API to offer exchanges, custodians and wallet providers a way to integrate bitcoin staking directly into their platforms.



Instead of switching to a third-party interface, individual users and institutional investors can use the service to access bitcoin staking rewards through a familiar platform. Candidates include exchanges, wallets and LRT providers.



The API is designed to simplify the complex tasks of creating, signing and broadcasting bitcoin transactions, for instance by handling the <a href="https://app.blockworksresearch.com/glossary/#remote-procedure-call-rpc">RPC connection</a>.



In terms of future updates, P2P plans to add features like batch staking — allowing users to generate multiple staking transactions from a single address. This will help institutions stake bitcoin efficiently before the Babylon BTC cap is reached.



— Macauley Peterson



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Critics question the transparency and true float of EIGEN tokens

Bitwise officially filed a registration statement with the Securities and Exchange Commission for a spot XRP ETF.



According to the filing, Bitwise would hold XRP in the ETF, similar to the way it offers its ether and bitcoin ETFs.&nbsp;



“The Trust will hold XRP and establish its net asset value by reference to the CME CF Ripple – Dollar Reference Rate – New York Variant. The Pricing Benchmark is calculated by CF Benchmarks Ltd. based on an aggregation of executed trade flow of major XRP trading platforms,” the filing said.



The filing is the first step in a potential ETF, though SEC Chair Gary Gensler hasn’t signaled support for crypto ETFs beyond bitcoin and ether.&nbsp;



Back in January, after the bitcoin ETFs were approved Gensler warned that the approval didn’t signal anything “about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.”



The Wednesday filing is light on details, with Bitwise saying that the “Trust provides investors with the opportunity to access the market for XRP through a traditional brokerage account without the potential barriers to entry or risks involved with acquiring and holding XRP directly. The Trust will not use derivatives that could subject the Trust to additional counterparty and credit risks.”



“At Bitwise, we believe blockchains will usher in new, apolitical monetary assets and permissionless applications for the 21st century,” said Bitwise CEO Hunter Horsley. “It’s why for the past seven years we’ve helped investors access the opportunities in the space, and we’re excited to continue that work with our filing for a Bitwise XRP ETP.”



Bitwise marks the first asset manager to try for an XRP ETF, though fellow asset manager <a href="https://blockworks.co/news/vaneck-files-for-solana-etf">VanEck filed for a solana ETF</a> in the US earlier this year.



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Bitwise files SEC paperwork to launch spot XRP ETF

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<h2 class="wp-block-heading">Can’t stop, won’t stop</h2>



Robinhood continues to expand its European offerings, announcing yesterday that it was rolling out transfers that will allow users to move crypto in and out of its app.



Robinhood’s Johann Kerbrat told me that the company will continue to develop new features. He added that Robinhood is currently limiting its marketing to a few countries in the EU as it awaits its MiCA license. Once it has that in hand, it plans to scale to all “across the EU.”



Unfortunately, to no one’s surprise, the US market isn’t so easy.&nbsp;



Obviously there isn’t a crypto license that’ll allow Robinhood to safely offer the same types of features to US residents. And then there’s the pesky matter of the SEC’s Wells notice.&nbsp;



Kerbrat said that the company hasn’t heard anything back from the SEC “at this point.”&nbsp;



“We were disappointed. I think we&#8217;ve been really focusing on establishing a safe business. We didn&#8217;t list a ton of assets like some of our competitors. We never offered staking in the US. So, we&#8217;ve felt like we&#8217;ve done our work to work with the SEC and get to a good position, but we were obviously disappointed with the Wells Notice,” Kerbrat said.&nbsp;



It’s unclear, at this stage, what the SEC is planning. The regulatory agency had a spree of crypto-related enforcement actions last month (45 to be exact, but who’s counting?) to round out its fiscal year. And yet it bucked the pattern that I, personally, thought we’d see if they were to file a lawsuit against Robinhood.&nbsp;



<a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">In May I wrote</a> that, based on how the SEC has approached other lawsuits, it was likely that it would file its court actions (if it chooses to do so, because Wells notices don’t always mean that a lawsuit is incoming) last summer. And it did… with Consensys after the company received a Wells notice last spring. But we haven’t seen actual lawsuits against either Robinhood or Uniswap yet.



But despite the will-they-won’t-they situation playing out with the SEC, Kerbrat says nothing’s really changed for Robinhood when it comes to its US business. Though, he noted, they’re not super focused on adding more assets to the platform.&nbsp;



“Our focus at this point is more about making sure that the features we have are working for our customers,” he noted.&nbsp;



So is retail bouncing back?&nbsp;



“I think we still see a lot of engagement off-chain and on-chain. And I think the on-chain part is important because it really shows that people are not just buying the crypto somewhere and holding it there, but we actually see them transacting and using a self-custody wallet, engaging with steps and all these kind of things. So we haven&#8217;t seen too much of that changing. We do see volume cycling, and that&#8217;s something that we are used to. We see it almost every year,” he said.



And, finally, I asked Kerbrat about the stablecoin <a href="https://www.bloomberg.com/news/articles/2024-09-26/robinhood-revolut-explore-entering-the-burgeoning-stablecoin-sector">rumors</a>. While he noted that stablecoins are a “very interesting business,” he clarified that “at this point we don&#8217;t have anything that we are preparing.”&nbsp;



Robinhood’s close to closing its Bitstamp acquisition — which will happen in the first half of 2025 and for Robinhood, that’s going to be a focus this quarter… which is the final one of 2024.&nbsp;



Time flies when you’re having fun, right?



— Katherine Ross



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



<ul class="wp-block-list">
<li>Bitcoin fell to $60,953 (down 4.4%) as the conflict in the Middle East intensified Tuesday.</li>



<li>Ether dropped 7% to $2,446 on the news. </li>



<li>SOL fell under $150 to $146, also dropping 7%. SOL and ether saw the biggest drops.</li>



<li>$557 million was liquidated from traders in the past 24 hours with $484 million in long liquidations, according to data from Coinglass.</li>



<li>Spot bitcoin ETFs notched outflows of $243 million on Tuesday, the biggest outflows in nearly a month.</li>
</ul>



<h2 class="wp-block-heading">Opinion: No ‘crypto elections’ here</h2>



Another election season debate — this time featuring would-be VPs JD Vance and Tim Walz —&nbsp;has come and gone, with nary a whisper about crypto.



I suppose it was to be expected. Despite efforts within the industry to characterize crypto as an election-year issue, I don’t think it actually worked. There was one moment when the debate shifted into the topic of inflation, and I half expected Vance — whose campaign has focused on crypto more deeply than the Democrats — to throw in a mention. Alas not.



Perhaps the tradition of crypto journalists eagerly awaiting something to write about on debate nights should be quietly put aside, at least until Gen Z candidates begin taking the stage.&nbsp;



Some recent <a href="https://www.coindesk.com/policy/2024/09/30/crypto-poll-us-voters-more-serious-about-demanding-candidates-with-know-how/">industry-backed polling</a> has once again pushed the idea that vast swaths of Americans are focused on crypto issues and, in turn, want their candidates to be better informed and more focused on said issues.&nbsp;



Admittedly, this has always been a difficult narrative to swallow. Far more likely in my view is that folks, rather than wanting their candidates to “know about crypto,” simply want candidates who are, well, informed about things beyond their own fundraising numbers. You don’t have to travel far in America to find folks who see the US government as out of touch with their daily lives.&nbsp;



Trump’s apparent transformation from bitcoin hero to DeFi platform hype man gives away the game. It wasn’t ever about any kind of ideological alignment — to put it bluntly, it’s the art of playing to the room in order to get campaign cash. It <a href="https://www.washingtonpost.com/politics/2024/07/14/trump-cryptocurrency-donors/">seems like it succeeded</a>. Along the way, the US crypto sector transformed into another American special interest, with a political funding apparatus that must be maintained in perpetuity. What happens when the money stops? Inquiring minds wish to know.



Somewhere between World Liberty Financial and Kamala Harris’ <a href="https://www.washingtonpost.com/business/2024/09/26/crypto-kamala-harris-bitcoin/">more-or-less restatement</a> of Biden White House crypto policy is a simple truth: this election isn’t about crypto. Yes, Americans hold crypto. Perhaps quite a few of them. But does this also make them gold voters? ETF voters? World Liberty Financial governance token voters?&nbsp;



The crypto world can and should invest money to push and promote its ideas in the public square. Effective PR can work. But I would caution about reading the crypto poll tea leaves too deeply —&nbsp;there simply isn’t much there for now.&nbsp;



— Michael McSweeney



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



<ul class="wp-block-list">
<li>CoinDesk published <a href="https://www.coindesk.com/tech/2024/10/02/how-north-korea-infiltrated-the-crypto-industry/">an investigative report</a> into the inadvertent hiring of North Korean developers by numerous crypto startups. </li>



<li>Bitwise has filed to register a trust entity in Delaware for a spot XRP ETF.</li>



<li>Australian officials <a href="https://www.abc.net.au/news/2024-10-02/ghost-app-creator-cryptocurrency-millions-restrained-by-afp/104419224">seized</a> millions of dollars in crypto from the alleged creator of a dark web messaging app. </li>



<li>World Liberty Financial <a href="https://x.com/worldlibertyfi/status/1841183761041436744">says</a> “thousands” of users have signed up to its whitelist. </li>



<li>Solana startups are <a href="https://blockworks.co/news/lightspeed-newsletter-solana-restaking-startups">beginning to bet</a> on a yet-to-be-built staking ecosystem. </li>
</ul>



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



Q: Are we in for a ‘Downtober’?&nbsp;



The best I can muster here as an answer is another question: where are the positive catalysts?&nbsp;



Softening inflation (by some metrics), war in the Middle East, a spicy presidential election in the US…do these lend themselves well to number-go-up? It doesn’t exactly feel like it.&nbsp;



There seems to be a belief among some that a Trump win would be a boon for crypto prices. Maybe, at least, for holders of World Liberty Financial tokens.



It’s hard to shake the feeling that things might just continue to meander along for a while. A market in search of a narrative or a scrap of good news. Mehtobert? Yawntober? Stay tuned.&nbsp;



— Michael McSweeney&nbsp;



Pain before gains, amirite?



While yesterday’s escalation of Middle Eastern conflict is a risky sign for bitcoin, the long-held belief is that the fourth quarter is when crypto will start to ramp up once more.



Now whether that means that spooky vibes settle in for the next month before the cobwebs are shaken off at the end of the year or if this conflict is serious enough to throw off the price predictions we’ve talked about (bitcoin at $75,000 or more by the end of the year), I’m not sure yet.&nbsp;



And, unfortunately, I’ve misplaced my crystal ball.&nbsp;



One thing’s for sure: Uptober or Downtober (or Mehtober, as McSweeney suggested) doesn’t matter if there are enough catalysts for a bull market next year.&nbsp;



— Katherine Ross



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