Worldcoin

Ben Strack

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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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

Casey Wagner

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



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



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



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



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



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



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



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



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



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



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



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



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



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



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Biden backs Gensler as House advances resolution to power-check SEC 

Jack Kubinec

Jeff Albus

Howdy!&nbsp;



Welcome to Lightspeed, the newest addition to the Blockworks Newsletter suite. We are Solana news, analysis and culture, all the time. If that sounds like you, we&#8217;re psyched to have you on board. Let&#8217;s get into it!



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Most traders are unlikely to strike it rich off of memecoins, but it won’t be for a lack of trying.



In the past 24 hours, the memecoin trading platform Pump.fun has <a href="https://defillama.com/">brought</a> in around $500,000 in revenue, per DeFiLlama. For context, that’s nearly double Ethereum’s dominant decentralized exchange, Uniswap, and the second highest for protocols writ large — trailing only Ethereum.



Pump.fun lets so-called developers launch tokens without seed liquidity for around $2 in fees. It earns revenue via a 1% swap fee from users buying and selling tokens, and it also nabs 2 SOL when a token draws enough liquidity to be listed on the decentralized exchange Raydium. Pump.fun is closed-source and has closed APIs, a Pump.fun Telegram admin told Blockworks.&nbsp;



The platform says it prevents rug pulls — or exit scams where founders quietly shut down projects while absconding with investor funds — by keeping all launches under a strict no-presale, no-insider allocation regime.&nbsp;



But that hasn’t kept traders from losing a whole bunch of money on the platform. After token creators spin up a coin, they’re able to purchase a large allocation before other traders come in. If the token sees a whiff of interest, there’s nothing stopping the “developer” from dumping their supply, crashing the price, and walking away with (let’s be realistic) dozens of dollars in profit.&nbsp;



Of note however, Pump.fun tokens that reach market caps of $69,000 can be listed on the decentralized exchange Raydium, which has become a rallying cry for users of the platform (let’s send this coin to Raydium!). But even then, there’s no reason a well-stocked developer couldn’t just take the liquidity and run.&nbsp;



In other words, the average user has the deck stacked against them on Pump.fun, which begs the question of what makes Pump.fun so fun — because clearly, people are using the platform.



People go to casinos where they know they’ll lose to the house, and I suppose the guesswork in trying to identify a winning memecoin could be a good time.&nbsp;



And sometimes, the grift is itself entertainment.



One developer created a token called “NoHandsNoRug” and live <a href="https://x.com/koolk123456/status/1787350631549714581">streamed</a> himself several steps away from his computer with his hands behind his back. As the price surged, he ran up to his computer, sold a bunch of tokens, then ran back to his post.&nbsp;



Never change, crypto.



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



<img loading="lazy" decoding="async" src="https://lh7-us.googleusercontent.com/bdlespV_5HmumdURvJeHRxxBHk89gaQCJHBMvLOk3NrDt7Wfpbq5elN4xrYk7cbz4sTxRE39j6j_CY6lLPXw2OU6Wmj5rBu09r2NgaMwh3RCyUFWs2rdq8cCa33fkrYMwcKwhe4P17jZ3MDcSq6-93w" width="624" height="391">



Solana’s transaction success rate has gotten better but it’s still … not great. More than 60% of non-vote transactions are failing, per Blockworks Research. But this figure might not be as bad as it seems. As Blockworks Research’s Dan Smith <a href="https://x.com/smyyguy/status/1781148253284929589">laid out</a>, the high fail rate is likely more indicative of spam than of poor user experience. Accounts that make over 5,000 transactions a day — either bots or people who really should touch grass — experience a fail rate of 79%. For people making fewer than 50 transactions in a day, the fail rate is closer to 8%.



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



Ready to have your mind blown?&nbsp;



Solana&#8217;s validators now outpace Ethereum in earning maximal extractible value (MEV), pulling in nearly $7 million last week, largely thanks to Jito. The protocol — which supports 78% of Solana&#8217;s validators — enables transaction bundling and tip inclusion for quicker processing.&nbsp; However, issues like spam, bot activity, and predatory practices like “sandwich attacks” continue to pose challenges for the Solana ecosystem.



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



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



Jack Kubinec:



What&#8217;s the biggest factor preventing crypto payments from catching on more broadly?



Stijn Paumen, founder and CEO of Helio, which runs Shopify&#8217;s Solana Pay plugin:



The benchmark is Apple Pay. For crypto payments to go mainstream, they need to match its convenience. While we’re still a few years away from that, the growing adoption of crypto and integration of hidden wallets into mainstream apps bring us closer than ever. With lower costs, enhanced privacy, and faster transactions, crypto payments will ultimately surpass Apple Pay and other traditional payments.



Updated May 9, 2024 at 3:30 pm: Removed a section discussing rug pulls in the Solana ecosystem.



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Is anyone having fun on Pump.fun?

Katherine Ross

FTX’s latest plan to pay back its creditors is another step in a process that could require plenty more negotiation…and time.



In other words, the saga is not over.&nbsp;&nbsp;&nbsp;



Creditors will have a chance to weigh in on the bankrupt crypto exchange’s joint reorganization plan — filed late Tuesday — before it gets presented before a court in June.&nbsp;



The new plan could fully reimburse creditors — <a href="https://blockworks.co/news/ftx-former-customers-oppose-bankruptcy-plan">at November 2022 prices</a> — with some receiving interest. The FTX estate owes creditors roughly $11 billion, though it has managed to cobble together between $14.5 and $16.3 billion in cash.&nbsp;



The returns are “really unheard of,” Jonathan Groth, partner at DGIM Law, told Blockworks.&nbsp;



A crypto bull run and the potential subordination of big government claims have spurred the estates projecting better-than-expected returns, noted Erin Broderick, a partner at Eversheds Sutherland and lead counsel for the FTX.com customer claim holders.&nbsp;



“But to deliver the prospective recoveries, the debtors need stakeholder support,” she told Blockworks. “Delays in achieving that support are a threat to the value to ultimately be given back to customers.”



<a href="https://blockworks.co/tag/ftx">FTX</a> said in a Wednesday press release that its plan would end disputes “without costly and protracted litigation.”



Matthew Gold, a partner at Kleinberg Kaplan, said FTX could be referring to several potential legal actions — including ongoing mediation regarding priority tax claims.



The FTX proposal would resolve the $24 billion claim by the Internal Revenue Service for periods prior to the Chapter 11 proceedings. This resolution would be in return for $200 million in cash and a $685 million subordinated claim that would rank below all other claims.



“Also, the plan is in essence a proposed settlement of disputes regarding the relative priority of creditors of the various silos,” Gold added. “If those allocations are challenged, the litigation could be costly and protracted.”



Groth noted that while some creditors pushed for the estate to pay back claims at current prices (bitcoin, for example, was trading under $20,000 when FTX declared bankruptcy, but is now over $60,000) the FTX estate just didn’t have the crypto.&nbsp;



“<a href="https://blockworks.co/news/ftx-meltdown-timeline">When FTX went into bankruptcy</a>, they were holding a fraction of the percent of the coins that they were claiming to have,” he said. “The fund they amassed to repay creditors is really based more on liquidation of securities holdings…and other recoveries from third-party claims and selling off other assets.”



Even if some creditors are unhappy with the plan, Groth said “it’ll be really difficult for a court to look at this and say, ‘How unhappy can you be?…You’re being made whole.’”&nbsp;



Overall, Broderick said she believes the plan is “a good outcome for customers” that came as a result of “<a href="https://blockworks.co/news/new-ftx-ceo-on-government-claims">hard-fought negotiations</a>” concerning the interest of all stakeholders.



“We will continue to be closely involved in plan developments, including with the governmental agencies, and have been focused on assisting the estates with distribution mechanics and potential issues to ensure that customers get the largest initial distribution possible as soon as possible,” Broderick noted



While the FTX debtors have proposed a “confirmation timeline,” bankruptcy code procedural requirements take time. The court must first hold a disclosure statement hearing — currently scheduled for June 25 — at which point it can pencil in a confirmation hearing date.&nbsp;



Those hearings could be 60 days apart in a large case like this, Gold said.



According to the current court docket, there are other hearings planned for July and August as well.



The plan also contains what Gold called “controversial elements,” like release and injunction provisions that would shield many non-debtor entities from lawsuits.&nbsp;



The question of whether a bankruptcy court can impose releases of claims against non-debtors in this way, and to what extent, is before the Supreme Court in a case involving Purdue Pharma.



Whether the releases in the FTX plan are lawful will depend on how the court rules, Gold said.



“This plan and disclosure statement are best understood as negotiation documents,” he added. “They are signed as draft versions, and have many blanks in them. Further negotiations will likely be required before they are finalized.”



Though the plan could be the final one filed with the bankruptcy court, Groth said, that’ll depend on factors including the creditor vote and the government negotiations.&nbsp;



Such details will be up for discussion at the upcoming hearing to decide whether the current iteration should be “rejected or needs to be modified in some significant way.”



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What’s next for FTX after the creditor payback proposal?

Bessie Liu

Shared sequencer solution Espresso will partner with Ethereum layer-2 scaling solution Polygon Labs to develop AggLayer (aggregation layer) in order to solve rollup interoperability.



AggLayer was first introduced in January. It is designed to solve the fragmented liquidity problem in the blockchain space by centering scaling UX on one single, unified aggregation layer. AggLayer is similar to Risc Zero’s <a href="https://blockworks.co/news/risc-zero-zkevm">“Type 0” zkEVM, Zeth</a>, a general-purpose programming language that can be EVM equivalent.



Both solutions are designed to enable transaction verification across multiple chains. In the case of AggLayer, the protocol uses a process called “proof aggregation” to ensure that transactions across its ecosystems are valid.&nbsp;



Read more: <a href="https://blockworks.co/news/polygon-zkevm-type-1-prover">Polygon zkEVM prover reaches Type 1 status</a>



According to Polygon Labs documents, all transactions will be <a href="https://polygon.technology/blog/aggregated-blockchains-a-new-thesis">guaranteed</a> on AggLayer without having to depend on a third-party bridging solution.&nbsp;



In the long term, <a href="https://blockworks.co/tag/polygon">Polygon</a> hopes that when a rollup creates a message for a destination chain, it will also create a validity proof that verifies its accuracy instantaneously.



That’s one problem that Anurag Arjun, the founder of Avail, and his team are hoping to resolve.&nbsp;



Arjun notes that although cross-chain communication is great for users who belong to the same ecosystem, once they leave the ecosystem, they are likely to receive a “subpar experience.”&nbsp;



Read more: <a href="https://blockworks.co/news/avail-fundraise-addressing-interoperability">Avail raises $27M, readies entrance into modular narrative</a>



“If you want to really bring these <a href="https://blockworks.co/tag/rollups">rollups</a> together, you need two things primarily,” Arjun told Blockworks. “You need a proof of ordering — the transaction data ordering — in the sense that if a rollup has committed to a certain order of the transactions, you need some guarantees for that. That is what Avail validity proof [data availability sampling] provides. And then you need the execution proofs, which are provided by the rollup themselves.”



The distinction that needs to be made is that proof aggregation itself is not enough, and transaction ordering of these rollups is equally important, Arjun said.&nbsp;



“So when you combine ordering guarantees with the actual execution proof, then that is why we are able to do this orchestration — connecting these rollups,” he explained.



However, the state of proving at this point in time is not yet at the speed of real-time verification, and all interdependent rollups must be created, aggregated and verified jointly before they are settled on <a href="https://blockworks.co/tag/ethereum">Ethereum</a>.



This is where Espresso comes in. Espresso will be the coordinator that unifies the interdependent rollups before they are settled onto Ethereum.&nbsp;



Ben Fisch, the CEO of Espresso Labs described the collaboration efforts between <a href="https://blockworks.co/tag/espresso-systems">Espresso</a> and Polygon as pivotal for both ecosystems.



“Our respective teams have been thinking deeply about layer-2 interoperability over the last year — it’s amazing to see our solutions converge in such a synergistic way. Polygon’s AggLayer and Espresso’s coordination layer are perfect complements,” Fisch told Blockworks.



Marc Boiron, CEO of Polygon Labs, shares this sentiment. He told Blockworks he believes this new partnership will synergistically elevate interoperability within Ethereum&#8217;s layer-2 environment.



&#8220;While the AggLayer guarantees the integrity of data exchange among Ethereum <a href="https://blockworks.co/tag/layer-2-2">layer-2s</a>, Espresso&#8217;s sequencing marketplace optimizes this process by enabling efficient coordination and fast transaction finalization across multiple Ethereum layer-2s,” Boiron said. “This integrated approach markedly enhances the fluidity and user experience of transactions within Ethereum&#8217;s layer-2 network.”



Espresso&#8217;s latest partnership with Polygon on AggLayer shows the progress of the modular approach to scaling Ethereum, one that stands in contrast to what, for instance, the Nil Foundation is working to achieve with sharded layer-2s.



Misha Komarov, the founder of Nil Foundation, previously told Blockworks that it aims to take a protocol-level approach to interoperability by embedding the sequencer into the protocol to make it capable of sending transactions between different shards.&nbsp;



Read more: <a href="https://blockworks.co/news/ethereum-rollup-zksharding-nil-mainnet">New Ethereum rollup takes a zero-knowledge approach to sharding</a>



“So basically, that means it keeps them all composable, it keeps them all together, it keeps the liquidity unified. It&#8217;s like no separation, no Balkanization of ETH is happening, in fact,” Komarov said.



In simpler terms, the two approaches can be viewed as vertical versus horizontal scaling, though they combined features of both to varying degrees.



“ZkSync and Polygon pursue vertical scaling — layer-2s and layer-3s — [while] on our side, we pursue horizontal scaling,” he said. “We kind of say, okay, modularity can be done in a better way. It might be not even the modularity anymore.”



Whichever approach ultimately prevails, there is a widespread recognition that the fragmentation of UX and liquidity that currently prevails across many Ethereum scaling efforts is an impediment to adoption.



“This whole industry is a competition of ideas,” Komarov adds. “A competition of who gets the better idea and the first one who gets there — the implementation of it — captures the market.”



Macauley Peterson contributed reporting.



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Espresso partners with Polygon Labs to solve rollup interoperability 

Sean (Xiang) Ren

Many Americans got their first glimpse behind the machine learning curtain when details of Amazon’s “Just Walk Out” technology <a href="https://www.businessinsider.com/amazons-just-walk-out-actually-1-000-people-in-india-2024-4">went public</a>. Instead of pure technology tallying up customers’ purchases and charging them when they left the store, the sales were manually checked by about 1,000 real people working in India.



But these workers were the human-half of what most AI really is — a collaboration between reinforcement learning and human intelligence.&nbsp;



The human element tends to be ignored in discussions of AI safety, which is a little disturbing given how much of an impact AI will likely have on our job markets and ultimately our individual lives. This is where decentralization, the inherent trustlessness and security of blockchain technology can play a major role.



The Center for Safe AI <a href="https://www.safe.ai/ai-risk">identifies</a> four broad categories of AI risk. As a start, there’s malicious use, in which users might “intentionally harness powerful AIs to cause widespread harm” by engineering “new pandemics or [using them] for propaganda, censorship and surveillance, or [releasing AIs] to autonomously pursue harmful goals.”&nbsp;



A more subtle concern is the risk of an AI race, where corporations or nation states compete to quickly build more powerful systems and take unacceptable risks in the process. Unchecked cyberwarfare is a potential outcome, another is allowing systems to evolve on their own, potentially slipping out of human control; or a more prosaic, but no less disruptive outcome, could be mass unemployment from unchecked competition.&nbsp;



Organizational risks with AI are similar to any other industry. AI could cause serious industrial accidents, or powerful programs could be stolen or copied by malicious actors. Finally, there’s the risk that the AIs themselves could go rogue, “optimizing flawed objectives, drifting from their original goals, becoming power-seeking, resisting shutdown or engaging in deception.”&nbsp;



Regulation and good governance can contain many of these risks. Malicious use is addressed by restricting queries and access to various features, and the court system could be used to hold developers accountable. Risks of rogue AI or and organizational issues can be mitigated by common sense and fostering a safety-conscious approach to using AI.&nbsp;



But these approaches don’t address some of the second-order effects of AI. Namely, centralization and the perverse incentives remaining from legacy Web2 companies. For too long, we’ve traded our private information for access to tools. You can opt out, but it’s a pain for most users.



AI is no different than any other algorithm, in that what you get out of it is the direct result of what you put in — and there are already massive amounts of resources devoted to cleaning up and preparing data to be used for AI. A good example is OpenAI’s ChatGPT, which is trained on hundreds of billions of lines of text taken from books, blogs and communities like Reddit and Wikipedia, but also relies on people and smaller, more customized databases to fine-tune the output. 



Read more from our opinion section: <a href="https://blockworks.co/news/blockchain-ai-misleading-narrative">What can blockchain do for AI? Not what you’ve heard.</a>



This brings up a number of issues. Mark Cuban has recently pointed out that AI will eventually need to be trained on data that companies and individuals might not want to share, in order to become more commercially useful beyond coding and copywriting. And, as more jobs are impacted by AI — particularly as AI agents make custom AI applications accessible — the labor market as we know it could eventually implode.&nbsp;



Creating a blockchain layer in a decentralized AI network could mitigate these problems.&nbsp;



We can build AI that can track the provenance of data, maintain privacy and allow individuals and enterprises to charge for access to their specialized data if we use decentralized identities, validation staking, consensus and roll-up technologies like optimistic and zero-knowledge proofs. This could shift the balance away from large, opaque, centralized institutions and provide individuals and enterprises with an entirely new economic system.



On the technological front, you need a way to confirm the integrity of data, the ownership of data and its legitimacy (model auditing).&nbsp;



Then, you would need a method of provenance, (to borrow a phrase from the art world), which means being able to see any piece of data’s audit trail in order to properly compensate whoever’s data is being used.



Privacy is also important — a user must be able to secure their data on their own electronics and be able to control access to their data, including being able to revoke that access. Doing so involves cryptography and a security protection certification system.



This is an advancement from the existing system, where valuable information is merely collected and sold to centralized AI companies. Instead, it enables broad participation in AI development.&nbsp;



Individuals can engage in various roles, such as creating AI agents, supplying specialized data or offering intermediary services like data labeling. Others might contribute by managing infrastructure, operating nodes or providing validation services. This inclusive approach allows for a more diversified and collaborative AI ecosystem.



We could create a system that benefits everyone in the system, from the digital clerics a continent away to the shoppers whose cart contents provide them raw data to developers behind the scenes. Crypto can provide a safer, fairer, more human-centric collaboration between AI and the rest of us.



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


<div class="wp-block-post-author-biography">Sean is the CEO and co-founder of Sahara, a platform building blockchain-powered infrastructure that is trustless, permissionless, and privacy-preserving to enable the development of customized autonomous AI tools by individuals and businesses. Additionally, Sean is an Associate Professor in Computer Science and the Andrew and Erna Viterbi Early Career Chair at the University of Southern California, where he is the Principal Investigator (PI) of the Intelligence and Knowledge Discovery (INK) Research Lab. At Allen Institute for AI, Sean contributes to machine common sense research. Prior, Sean was a data science advisor at Snapchat. He completed his PhD work in computer science at University of Illinois Urbana-Champaign and was a postdoctoral researcher at Stanford University Department of Computer Science. Sean has received several awards recognizing his research and innovation in the AI space including Samsung AI Researcher of the Year, MIT TR Innovators Under 35, Forbes Asia 30 Under 3, and more. </div>


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AI has a monopoly on power and privacy. Blockchain fixes this.

Michael McSweeney

<h2 class="wp-block-heading">Crypto gets political</h2>



In a new interview, Gary Gensler made no bones about his special focus on the crypto space, bristling at what he decried as excessive questions about his plans.&nbsp;



Those comments, as expected, drew widespread criticism across the crypto space. But there was also some dissent from inside the proverbial building, in the form of SEC Commissioner Mark Uyeda.



According to Fox Business’ Eleanor Terrett, Uyeda took issue with Gensler’s tack when it comes to crypto regulation.



“While the easiest regulatory response to crypto and digital asset innovation is to use bad actors as an excuse to ‘shut it all down,’ regulators should be creating a pathway to compliance for legitimate efforts,” Uyeda told Terrett. “The SEC has yet to develop that pathway.”



Sound familiar? Uyeda has been a consistent voice of dissent on what we might call the Gensler approach.&nbsp;



Uyeda was a <a href="https://blockworks.co/news/commissioner-etf-statements-signals-contention">supporter of spot bitcoin ETFs</a>. He <a href="https://blockworks.co/news/sec-commissioners-disagree-with-coinbase-decision">objected to the SEC’s denial</a> of Coinbase’s request for rulemaking. He, alongside fellow Commissioner Hester Peirce in these instances, <a href="https://blockworks.co/news/sec-nfts-dissenting-hester-peirce">questioned the SEC’s approach</a> to NFTs and called on the agency to answer questions of jurisdiction when it comes to tokenized digital art.&nbsp;



This is all to say that there appears to be a deep split within the SEC leadership. What’s more, it’s a split that comes as the agency wages legal war —&nbsp;or prepares to potentially do so —&nbsp;with some of the biggest names in the industry: Coinbase, Binance, Uniswap, Consensys and Kraken.



<a href="https://blockworks.co/tag/gary-gensler">Gensler</a>’s strategy has taken on more <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">explicitly political dimensions</a> in recent days — during a critical election season, no less.&nbsp;



The expression of dissent over Gensler’s crypto strategy reached the floor of Congress last night with the passage of a <a href="https://www.congress.gov/bill/118th-congress/house-joint-resolution/109/cosponsors">resolution</a> that objects to SEC’s controversial crypto accounting guidance.&nbsp;



That joint resolution was the <a href="https://blockworks.co/news/house-hearing-democrats-republicans-clash">subject</a> of a contentious House hearing one day earlier, as Blockworks’ Casey Wagner previously reported. The measure faces an uncertain future in the Senate and, more critically, President Joe Biden has promised to veto it should it reach his desk.



At least as far as Crypto Twitter is to be believed, opposition to the SEC —&nbsp;as well as Democrats like Sen. Elizabeth Warren, D-Mass., and Biden himself —&nbsp;has fueled support for former US president Donald Trump, who is seeking a second term this fall. The thinking seems to be that a Trump win means Gensler’s ejection from office and perhaps the ascent of more industry-friendly leadership.



Trump, for example, won <a href="https://twitter.com/CoinDesk/status/1786083216270516253">an X poll</a> hosted by CoinDesk that drew about 8,800 participants last week.



Trump <a href="https://twitter.com/twobitidiot/status/1788389754502856707">appeared</a> to throw his support behind crypto —&nbsp;or the American crypto industry, at least —&nbsp;during an event for holders of one of his NFT collections last night. Trump also touted his <a href="https://blockworks.co/news/cash-grab-trump-nfts-political-cultism">branded NFT products</a> and said “I don’t like that investment” when asked about a Joe Biden-themed memecoin.



How serious Trump actually is — given that his business and political careers were defined by a propensity for telling people exactly what they want to hear —&nbsp;remains to be seen, as does the question of how crypto might factor into his <a href="https://time.com/6972021/donald-trump-2024-election-interview/">second-term plans</a>.&nbsp;



— Michael McSweeney



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



<ul>
<li>BODEN is up 14%, according to <a href="https://www.coingecko.com/en/coins/jeo-boden">CoinGecko</a>, after former president Donald Trump was asked about it last night.</li>



<li>Meanwhile, the Doland Tremp memecoin is up 119% in the past 24 hours, per <a href="https://www.coingecko.com/en/coins/doland-tremp">CoinGecko</a>.</li>



<li>Bitcoin ETFs mostly reported flat flows on Wednesday (with the exception of Bitwise’s BITB, which brought in $11.5 million of inflows), per <a href="https://twitter.com/FarsideUK/status/1788414492029657595">Farside</a> data.&nbsp;</li>



<li>Bitcoin’s down to $61,000, though it bounced back after hitting $60,000 early Thursday morning.</li>



<li>Robinhood’s up 5% to nearly $19 a share in pre-market trading.</li>
</ul>



<h2 class="wp-block-heading">To the moon</h2>



I’m bringing Robinhood up again. But don’t worry, it’s not about the Wells notice this time.&nbsp;



An earnings report naturally sets the tone for the follow-up analyst call, which tends to occur a bit after the report itself is released.&nbsp;



When it’s a good report, the call’s tone tends to be more positive —&nbsp;that much was evident with <a href="https://blockworks.co/tag/robinhood">Robinhood</a> yesterday.&nbsp;



But Robinhood’s leaders struck a pretty bullish tone on the crypto side of the business, all things considered.&nbsp;



They definitely had a right to that bullishness, <a href="https://blockworks.co/news/robinhood-trading-volume-february">based on the numbers</a>.&nbsp;



Robinhood’s crypto business helped to drive the company’s massive earnings beat that left Wall Street impressed. Crypto transactions made up $126 million in revenue last quarter, an increase of over 230%. Transaction-based revenue itself weighed in at $329 million.&nbsp;



Net revenues jumped to $618 million. To put the number in perspective, analysts expected $549 million.&nbsp;



Finally, the company reported that it held custody of $26 billion in customer crypto at the end of March —&nbsp;a 78% increase from the end of 2023.&nbsp;



Pretty impressive numbers, right?



Keep in mind that these figures were recorded after a massive bull run in the first quarter. We’re set to get April data from Robinhood next week, which’ll provide a better picture on how the current market is reflected in the business side of things.&nbsp;



Based on CFO Jason Warnick’s comments, I wouldn’t be surprised if the strength continued last month with maybe a slight dip.&nbsp;



One analyst asked if Robinhood would reconsider the coins it offers <a href="https://blockworks.co/news/robinhood-wells-notice-sec">because of the Wells notice </a>—&nbsp;yes, I know, we have to talk about it for a moment —&nbsp;due to Robinhood’s previous attempts to avoid the SEC’s ire.&nbsp;



The executives unsurprisingly didn’t address that directly, though Warnick reiterated that the company is “confident” it listed coins that met its standards.&nbsp;



CEO Vlad Tenev, in response to a question about volumes in March, noted: “But if our market share is growing throughout all conditions, then over the long run, we’ll do very, very well on that side of the business.”



Sounds pretty bullish to me.&nbsp;



— Katherine Ross



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



<ul>
<li>Binance, in late 2023, fired an investigator who uncovered a client manipulating markets, the Wall Street Journal <a href="https://www.wsj.com/finance/currencies/binance-investigation-suspicious-trading-dwf-5f481f9d">reports</a>.</li>



<li>VanEck <a href="https://www.marketvector.com/indexes/digital-assets/marketvector-meme-coin">launched</a> its memecoin index on MarketVector, which tracks the top six memecoins.</li>



<li>JPMorgan analysts believe the SEC could establish a “middle category” for ETH, declaring that it’s neither a security or commodity, The Block <a href="https://www.theblock.co/post/293417/jpmorgan-sec-wells-notice-robinhood-crypto-spot-ethereum-etf-approval">reports</a>.</li>



<li>The US House of Representatives <a href="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=409250">voted</a> to overturn the SEC’s Staff Accounting Bulletin 121.&nbsp;</li>



<li>Speaking of SAB 121, President Biden <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">said</a> he’ll veto the joint resolution if it hits his desk.</li>
</ul>



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



The back-and-forth between <a href="https://blockworks.co/tag/binance">Binance</a> and Nigeria took another turn this week after Binance CEO Richard Teng penned a blog post essentially accusing Nigeria of bribery.



Teng also called the country out for setting a “dangerous new precedent” by detaining an executive who visited the country with the intention of discussing the relationship between Binance and Nigeria (both the executive, Tigran Gambaryan, and Binance face tax evasion and money laundering charges now).&nbsp;



Yesterday, <a href="https://blockworks.co/tag/nigeria">Nigeria</a> denied the bribery allegation and called it an “act of blackmail” by Binance.&nbsp;



Meanwhile, Gambaryan <a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">sits in the Kuje correctional facility</a>.&nbsp;



Binance has been notably quiet when asked by yours truly about updates to the Nigeria situation. But the blog post sheds some light on the lead-up to the executive detentions.&nbsp;



It’s undoubtedly a <a href="https://blockworks.co/news/binance-comments-on-exec-nigeria-detention">concerning situation</a>. While the court proceedings appear to be moving along on paper, there’ve been so many changes at this point that it’s hard to keep the trials and hearings straight.&nbsp;



<a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">Keep an eye on May 17</a>, at least until the next postponement is announced — currently, there are two trials and a hearing set to take place on the same day.



— Katherine Ross



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Empire Newsletter: The SEC’s internal rift

Macauley Peterson

Ethereum co-founder Vitalik Buterin published a new Ethereum Improvement Proposal (EIP) on Tuesday that aims to reconcile core developers’ disparate approaches to account abstraction in upcoming hard forks.



The proposal, EIP-7702, is a <a href="https://github.com/ethereum/EIPs/blob/9e04cf1094eae64172ce04e0a04ec40f1edbdc5d/EIPS/eip-7702.md">successor</a> to EIP-3074 which was considered a Candidate For Inclusion (CFI) in Ethereum’s next upgrade known as Prague-Electra — or “Pectra.”



But 3074’s road to CFI status was bumpy, with substantial time spent debating the EIP across multiple All-Core Dev calls since January.



Read more: <a href="https://blockworks.co/news/gnosis-chain-ethereum-dencun-hard-fork">Gnosis Chain premieres Ethereum’s Dencun hard fork</a>



Developers have sought to provide tangible improvements to end users in the next hard fork, while keeping open various paths towards the “endgame” of account abstraction.



When looking at what could conceivably be moved into production first, 3074 was judged as most realistic.



But it wasn’t without its critics. For instance, Ansgar Dietrichs at the Ethereum Foundation called it “relatively heavy-handed” on the Jan. 18 ACD call, and more recently <a href="https://x.com/adietrichs/status/1778442942115377277">expressed</a> reservations as well.



<a href="https://blockworks.co/tag/vitalik-buterin">Buterin</a> wrote the new proposal in 22 minutes, <a href="https://twitter.com/decentrek/status/1788188707595403554">according to</a> ZeroDev wallet CEO Derek Chiang, although the published proposal also credits Dietrichs alongside Sam Wilson and Matt Garnett.



A new transaction type allows EOAs to operate as smart contract wallets temporarily. At the end of a transaction, they revert to a normal account.



This approach promises to simplify the developers’ tasks by allowing the use of existing contract code and interaction patterns.



<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">Very much in favor of EIP 7702, it is SO good. It makes transactions composable (bundles!), addresses 3074 concerns nicely, isolates user-ops as top-level EVM calls, yet also supports side-effects of the bundle without hitting state/disk permanently.&mdash; proto.eth (@protolambda) <a href="https://twitter.com/protolambda/status/1787891701920542932?ref_src=twsrc%5Etfw">May 7, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“This EIP is designed to be very forward-compatible with endgame account abstraction, without over-enshrining any fine-grained details of ERC-4337 or RIP-7560,” the authors <a href="https://github.com/ethereum/EIPs/blob/9e04cf1094eae64172ce04e0a04ec40f1edbdc5d/EIPS/eip-7702.md">wrote</a>.



Read more: <a href="https://blockworks.co/news/ethereum-devs-debate-account-abstraction">Ethereum devs debate future of account abstraction</a>



Unlike 3074, the new proposal aims to replicate its functionalities without adding new opcodes. By assuming a smart contract&#8217;s code temporarily, EOA can perform complex operations like batch transactions, making use of transaction sponsorship, and constrained sub-key operations — a security feature employing secondary keys (sub-keys) that have limited or specific permissions — within a single transaction.



Further down the <a href="https://notes.ethereum.org/@yoav/AA-roadmap-May-2024">roadmap</a>, a wallet-centric approach to account abstraction is expected to become the norm. The new EIP is designed to be quite compatible with EIP-4337, rolled out in March 2023, making use of existing wallet code and transaction frameworks to minimize disruption and duplication of effort.



Read more: <a href="https://blockworks.co/news/ethereum-improvement-proposals-2024">Ethereum Improvement Proposals to watch in 2024</a>



7702 has rallied support from 3074 proponents like core developers Garnett and Andrew Ashkhmin, as well as important dapp developers <a href="https://twitter.com/haydenzadams/status/1787881356631871631">including</a> Uniswap’s Hayden Adams.



Opposition to the previously included improvement had grown in recent months, as more developers became aware it was on a path to become part of the next <a href="https://blockworks.co/tag/ethereum">Ethereum</a> upgrade.



Ethereum’s governance operates on principles of consensus-building, where points of contention are meticulously debated in public, both on group calls and online forums, until a clear course of action emerges.



Independent development teams then agree on shared specifications, which are coded into new versions of their respective Ethereum <a href="https://app.blockworksresearch.com/glossary#C">clients</a>.



Ultimately, operators of thousands of <a href="https://app.blockworksresearch.com/glossary#V">validators</a> must concur to install the new software versions at sufficient scale to successfully initiate a <a href="https://blockworks.co/tag/hard-fork">hard fork</a> at an agreed upon date.



The next such upgrade, Pectra, is tentatively scheduled for Q4 2024.



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Vitalik rallies support for temporary smart wallets on Ethereum

Activity on the Bitcoin network has evolved over the span of a billion transactions, with the latest usage starting to resemble that of Ethereum in 2020.



Bitcoin transaction number 1,000,000,000 occurred at the start of the week, giving an excuse to take a closer look at how a network once used mostly for payments is starting to sport broader utility.



The Runes protocol is a recent driver of Bitcoin blockchain activity, satisfying “a surge of interest in the purchase of memecoins and NFTs,” according to Bitget research analyst Ryan Lee.



Read more: <a href="https://blockworks.co/news/runes-bitcoin-token-standard-ordinals">A look into Runes, a new Bitcoin token standard for issuing fungible tokens</a>



The protocol is a fungible token standard designed by Ordinals creator Casey Rodarmor. It was <a href="https://blockworks.co/news/bitcoin-ordinals-brc-20-standard">created as an alternative to BRC-20</a>.&nbsp;



<a href="https://blockworks.co/tag/ordinals">Ordinals</a>, which debuted in January 2023, is a protocol used to inscribe individual units of BTC with unique data to create digital collectibles.



Unlike BRC-20, Runes do not depend on the Ordinals mechanism of inscription, Rodarmor <a href="https://x.com/rodarmor/status/1774613900119699701">said</a> on X.



Runes has accounted for between 10% and 70% of daily Bitcoin transactions in recent weeks, according to Dune Analytics <a href="https://dune.com/cryptokoryo/runes">data</a> — reaching as high as 81.3% on April 23.



The majority of activity on the <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> blockchain has historically been payment transactions — a fact that is poised to change as more gets built on top of it.



“Current activity on the Bitcoin network is very similar to the state of the Ethereum blockchain during the boom of dapp projects,” Lee said. “I think it will continue to varying degrees as the number of new projects and add-ons based on Bitcoin grows.”



Bitcoin’s total value locked (<a href="https://blockworks.co/tag/tvl">TVL</a>) stands at roughly $1.2 billion, according to DeFiLlama <a href="https://defillama.com/chains">data</a> — about what Ethereum’s TVL was four years ago, Lee noted.&nbsp;



That was a time that preceded a “DeFi boom” that spurred a rise in yield farming, algorithmic stablecoins and new liquidity models, Lee said. Ethereum’s TVL is $53 billion today, making up nearly 60% of the TVL across all blockchains.&nbsp;



“As DeFi increasingly adopts BRC-20 tokens, which have a potential to displace competitors, Bitcoin may react to these shifts positively due to increased demand,” Lee added.



Compass Point Research &amp; Trading analyst Joe Flynn said in an April 30 note that, unlike prior bitcoin cycles, the addition of protocols built on top of the layer-1 are indeed set to up demand for blockspace. This could lead to periods of congestion “that users will pay up for to be included in the next block,” he added.



Read more: <a href="https://blockworks.co/news/ordinals-impact-on-bitcoin-network">Ordinals are driving up Bitcoin fees — but that may be good for the network</a>



The Bitcoin network’s advanced functionality — like the innovation in standards like BRC-20 — are converging with broader factors set to drive BTC adoption, according to Neo founder Da Hongfei.



One of the most influential was the launch of <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">US spot bitcoin ETFs in January</a>, he noted. Such funds have given retail and institutional investors alike exposure to the crypto asset via a familiar investment vehicle.



The 11-fund category has tallied net inflows of nearly $11.8 billion during the four months they have traded, Farside Investors <a href="https://farside.co.uk/?p=997'">data</a> shows. “The impact of such an initiative will continue to encourage heightened trading activity, as these new financial instruments become embedded in the traditional financial infrastructure,” Hongfei said.



Not to mention the recent Bitcoin halving — reducing per-block mining rewards from 6.25 BTC to 3.125 BTC — <a href="https://blockworks.co/news/bitcoin-halving-2024-occurs">occurred on April 19</a>.&nbsp;



Bitcoin&#8217;s “immutable monetary policy” and a receptive macro backdrop could spark the crypto market&#8217;s “most violent supply squeeze yet,” Hongfei explained — pushing BTC price up.&nbsp;



That said, industry watchers have argued the current environment could hold back BTC in the coming months before the expected post-<a href="https://blockworks.co/tag/bitcoin-halving">halving</a> rally plays out.&nbsp;



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



Either way, Bitcoin’s DeFi and Web3 capabilities appear poised to help it challenge smart contract networks.



“We anticipate critical mass adoption of Web3 settlement on Bitcoin&#8217;s ecosystem within this decade,” Hongfei told Blockworks. “As Bitcoin&#8217;s utility and reliability become apparent for global trade and contracts, network effects and technical advantages could propel a mass migration from 2028 to 2030.”



Ethereum is likely to remain a place to test gadgets and “tinkering without jeopardizing critical applications,” the Neo founder added.&nbsp;&nbsp;



“Both networks would then assume complementary roles,” Hongfei said. “Bitcoin as the supreme base settlement layer and Ethereum pioneering less mission-critical use cases as a secondary chain.”



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After billionth Bitcoin transaction, a look at the network’s evolution

One of the final battles between the Securities and Exchange Commission and Ripple continues.&nbsp;



The case, initially launched in 2020, still faces a final judgment. The SEC is seeking nearly $2 billion in a final judgment. A sum, Ripple argued, that is too high. The firm asked the court to lower the penalty to “no more than $10 million” in a filing late last month.&nbsp;



The SEC, in its newest filing, disagrees with Ripple unsurprisingly.&nbsp;



Ripple, the regulator said, failed to argue how “that negligible ‘low’ penalty would meaningfully punish its violations or deter it or others from future large-scale capital raises without required registration.”



The regulator is arguing that the <a href="https://blockworks.co/news/sec-wants-multi-billion-sum-from-ripple">$1.9 billion it’s seeking</a> pales in comparison to the $1 billion that <a href="https://blockworks.co/tag/ripple">Ripple</a> made in violating Section 5 of the Securities Act and “the multi-billion-dollar business it built selling XRP.”



Read more: <a href="https://blockworks.co/news/ripple-counters-sec-penalties">Ripple proposes ‘no more than $10M’ in penalties after SEC seeks $1.9B</a>



Ripple, on the other hand, argues that the multi-million sum is fair when looking at other crypto cases like BlockFi, Genesis Global and Block.one. The <a href="https://blockworks.co/tag/sec">SEC</a> disagreed with the argument, saying the listed cases were just settlements.&nbsp;



“Ripple has failed to meet its burden of showing that the SEC’s calculation is not a reasonable approximation of Ripple’s ill-gotten gains,” the SEC wrote.&nbsp;



On X, Ripple’s Chief Legal Officer Stuart Alderoty <a href="https://twitter.com/s_alderoty/status/1787985041043386531">said</a> that the filing was “more of the same from the SEC.”



“The good news is that we are closer than ever to putting this lawsuit behind us, though unfortunately, <a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">many are just starting the journey</a>. We trust the Court will approach the remedies phase fairly,” he continued.



The filings suggest that the final judgment is looming, though it’s unclear what the court will decide with two radically different proposals.



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Ripple and the SEC’s legal fight continues ahead of final judgment

Mike Mallazzo

In the craziest highs of ZIRP mania, there was a popular internet adage that Coinbase and DraftKings were the same product, but just didn’t know it. Well, it sure as hell seems like they know it now. Crypto is currently tumbling off its high water mark precisely as sports betting seems to have reached its fathomable peak. With the number of gambling platforms ads and live in-game betting lines, watching an NBA playoff game in 2024 is essentially staring at a roulette wheel with a sideshow of world-class athleticism. The best player in baseball is <a href="https://sports.yahoo.com/new-details-emerge-in-alleged-gambling-ring-behind-shohei-ohtani-ippei-mizuhara-scandal-004930035.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAAJu6pYq4wJZqcOrD0lxMqWBpSu7WCZeUR_0yjilgc2LKzrswA9P0NzrK2RygQ9cb6Q9RJDfUyA-chLgCAgadUMbKNnIJmrU-gaLJTwLhdGp13L4sIFO2sHNIFYwRuMLVZyPbNLrsJzxG198C3oE4RMt92TyMYyDcucqjpuzwDqL">embroiled</a> in a <a href="https://sports.yahoo.com/new-details-emerge-in-alleged-gambling-ring-behind-shohei-ohtani-ippei-mizuhara-scandal-004930035.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAAJu6pYq4wJZqcOrD0lxMqWBpSu7WCZeUR_0yjilgc2LKzrswA9P0NzrK2RygQ9cb6Q9RJDfUyA-chLgCAgadUMbKNnIJmrU-gaLJTwLhdGp13L4sIFO2sHNIFYwRuMLVZyPbNLrsJzxG198C3oE4RMt92TyMYyDcucqjpuzwDqL">gambling scandal</a> that defies any semblance of reason and reminds us all that the richest among us have no idea how much money is in their checking account.  Zooming out, we’re currently experiencing the ultra financialization of every aspect of American society. You can now ruin lifelong friendships<a href="https://www.nytimes.com/2024/05/02/business/dave-busters-arcade-betting.html"> betting on Hungry Hungry Hippos at Dave and Busters</a>. One of the largest private equity firms is making futures bets on life insurance policies. Brown computer science students are making more than the median American salary <a href="https://www.businessinsider.com/brown-sophomore-sold-105000-dollars-in-restaurant-reservations-2024-4">reselling</a> Carbone reservations on the secondary market. As the always eloquent Neeraj Agrawal at Coin Center <a href="https://twitter.com/NeerajKA/status/1783142965956825133">said</a> on Twitter, “let’s tokenize that shit.” 



More than ever before, crypto is unabashedly embracing its most reductionist and obvious purpose — turning everything into a game where you can seamlessly buy low and sell high.&nbsp;



<h2 class="wp-block-heading">What came before</h2>



In previous crypto boom cycles, there was a subtle pretense that utilitarian, normie use cases beyond vibes-based speculation were a prerequisite for any crypto technology to hold true value.&nbsp;



In the ICO era, every coin was trying to convince buyers that there were super legit, world-changing companies behind the tokens.&nbsp;



NFTs had an even wilder grifter-industrial complex, trying to shill themselves as the future of personal identity. Or art? Or was it entertainment?&nbsp;



Mercifully, tokens like Jeo Boden have no such delusions of grandeur. The memecoin is — quite literally — just the President’s name spelled differently. With sincere apologies to Marshall McLuhan, it appears that the memecoin is now the message.&nbsp;&nbsp;



When the powers that be pivot and start talking about world-changing use cases again, know that they need exit liquidity. When the grand utopian promises of reimagining the concept of currency rear their heads again, the fat cats are looking for a new generation of retail suckers to offload their bag on. In related news, Stripe just <a href="https://decrypt.co/228152/stripe-stablecoin-payments-usdc-ethereum-solana">announced they are re-entering crypto after a six-year hiatus.</a> To the lifeboats, lads!&nbsp;



There’s a certain midwit approach to crypto that suggests that anything less than the full reform of the global financial system is an unworthy and cynical goal. At its best, crypto is a fun way to make money and vibe with good people.&nbsp;



The real egalitarian appeal to crypto is not that it will democratize payments — but that a wintergreen ZYN-fueled degenerate in his mom’s basement can outperform an MIT trained quant who spent a decade at Goldman. If even a single hedge fund trader quits over the shame of being shown up by a degen to pursue a career in theoretical mathematics or civic analytics, we should give Satoshi the Presidential Medal of Freedom.&nbsp;



The counterpoint to this logic, of course, is that sophisticated institutional investors often prey on the naivete of everyday retail traders. In a sense, the powers that be amplify the stories of the underdogs who beat the system so that others are naive enough to buy at the top.&nbsp;



But here too, the macro brand of crypto is evolving in a positive direction. One of the sneaky benefits of this current crypto run being less ideologically driven is that retail investors are simply more willing to take profits. When crypto is less identity politics and more a means to an end of securing a bag, people will take the money and run. This is a good thing.&nbsp; None of this is to say that the initial promise of a peer-to-peer electronic cash system or a next generation smart contract is unworthy. But bifurcating the grand ideological notion of permissionless currency from the broad appeal of “number go higher” will be good for both causes.&nbsp;



To date, crypto has been two different value propositions with two different customer profiles bundled under one abstract idea.&nbsp;



There are still plenty of zealots who care a lot about a 1/4 inch drill. But the hundreds of millions of regular people still to be onboarded into Web3 just want a 1/4 inch hole. And that hole is basically a fairer playing field for speculating on how to make money.&nbsp;



Depending on where you sit ideologically, this is either the perfect embodiment of late capitalism or the wheels of an unfettered free market dripping in grease and pumping out incremental equity value.&nbsp;



But one thing is for damn sure — everything is a market that can be tokenized.&nbsp;



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


<div class="wp-block-post-author-biography"> Mike Mallazzo is a revenue leader, writer and red sauce aficionado. By night, he drinks Dorothy Parker gin and writes United States of Amazon, a newsletter covering the nexus of commerce, technology and democracy. His words have appeared in Bloomberg, Adweek, The Drum, AdExchanger, QZ, The Next Web, Entrepreneur, Chicago Tribune and many more. He lives in Brooklyn with his wife, daughter and English bulldog and was once mistaken for Justin Bieber in a South Africa&#8217;s largest karaoke bar.</div>


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Everything in crypto is becoming a game — and that’s good

Michael Ippolito

Jason Yanowitz

I am excited to announce that Blockworks has acquired The Breakdown, a podcast and newsletter network founded by Nathaniel Whittemore (NLW).



The Breakdown’s offerings, including its influential The Breakdown podcast, YouTube channel, dedicated newsletter, and the Bitcoin Builders podcast, are now integral parts of the Blockworks family.&nbsp;



Mike and I first met Nathaniel in 2018. We had just launched Blockworks, and he had just launched one of the early crypto newsletters. In 2020, when we decided to start building our editorial division, Nathaniel became a pivotal advisor, helping us shape our vision for a crypto-native media brand.



Over the years, we&#8217;ve seen Nathaniel elevate The Breakdown into the most trusted daily podcast in the industry. What sets The Breakdown apart is not just its frequency — published six times a week — but its depth. It delves into macroeconomics, geopolitics, and major power shifts, always framing these discussions within their implications for the crypto world.



This acquisition marks a significant expansion of our podcast network, enhances our advertising capabilities, and broadens our distribution channels. It also strengthens our ability to cross-promote our events and research, furthering our commitment to delivering top-tier information to crypto professionals and investors.



Looking ahead, our plan is to establish The Breakdown as the flagship daily podcast of Blockworks. We are also thrilled to share that NLW will continue to lead The Breakdown podcast as its host.&nbsp;



The Bitcoin Builders podcast will become our flagship Bitcoin podcast – more on that soon.&nbsp;



This is a momentous step for Blockworks, and we are excited about the opportunities this collaboration unlocks for our community.



 — Jason and Mike



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Blockworks expands ‘House of Brands’ model with acquisition of The Breakdown

<h2 class="wp-block-heading">End in sight</h2>



There’s some good news for creditors in the joint reorganization plan filed late Tuesday by FTX’s bankruptcy overseers.



FTX says it has collected between $14.5 billion and $16.3 billion in cash, and it’s ready to distribute those funds to creditors. It owes customers and other creditors around $11 billion. FTX says that 98% of its non-government creditors will receive “at least” 118% of claims in cash within two months of the plan being approved.&nbsp;



Some, including crypto loan creditors, could see up to 142% of their claims paid back, according to a court filing.&nbsp;



Others can expect to be paid in full and receive interest on their claims.&nbsp;



But don’t get too excited just yet. The plan still needs to be approved by the bankruptcy court. While it seems to check all of the boxes on paper, one should expect this process to take a while to play out.&nbsp;



Further, creditors shouldn’t expect to see their claims benefit from the recent crypto boom. Instead, the claims will be <a href="https://blockworks.co/news/ftx-former-customers-oppose-bankruptcy-plan">paid out according to November 2022 prices</a>. Bitcoin hovered around $20,000 back then —&nbsp; a far cry from its current level of $62,000.&nbsp;



But that shouldn’t be a surprise after the judge <a href="https://blockworks.co/news/ftx-bankruptcy-victim-compensation">said</a> earlier this year that the bankruptcy code is “very clear” and that FTX doesn’t meet the criteria for an exception.



A press release about the new plan explained that debtors reached a series of settlements, including the IRS claims, an agreement with the CFTC, and a separate agreement with the DOJ.



The hope, according to the estate, is to resolve disputes “without costly and protracted litigation.” That’s something, I think, everyone can agree on.&nbsp;



Much of the funds came from the sales of Alameda and FTX Ventures investments, including the firm’s stake in Anthropic, which was <a href="https://blockworks.co/news/ftx-to-sell-anthropic-shares">approved for sale</a> earlier this year. The estate also sold out of its position in Grayscale’s bitcoin ETF.&nbsp;



CEO John J. Ray, who took over from the now incarcerated Sam Bankman-Fried, expressed his <a href="https://blockworks.co/news/new-ftx-ceo-on-government-claims">optimism about the proposed plan</a>, saying that the firm was “pleased” to be able to pay back creditors.&nbsp;



While there’s no denying that this plan is good news for creditors, the debtors previously teased that they had enough to pay people back. FTX lawyer Andrew Dietderich said in January that it expected to repay creditors in full “eventually.”



According to the bankruptcy docket, the court scheduled two hearings for later this summer.&nbsp;



Approval of the plan could represent one of the final steps in the closure of the FTX saga since Bankman-Fried was sentenced earlier this year after being found guilty of fraud.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/sbf-blew-it-final-defense-trial">Given one more chance to defend himself, SBF blew it&nbsp;</a>



It’s been a long journey since Ray took over nearly two years ago and said the bankruptcy represented an “unprecedented” mess. (That, coming from the guy who took over Enron’s bankruptcy, says a lot.)&nbsp;



Soon we can officially put <a href="https://blockworks.co/tag/ftx">FTX</a> in the rearview mirror.



— Katherine Ross



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



<ul>
<li>Grayscale’s bitcoin ETF once again saw outflows Tuesday, with $28 million departing the fund.</li>



<li>ARK <a href="https://ark-funds.com/?utm_campaign=idt_fund_homepage&amp;utm_medium=email&amp;_hsenc=p2ANqtz-9W1OZVa2mBS-SXb2AZPyM8TOcqFU9mQSVW2LCamh3qiakQEbgXlV3O74tvKuIK_iQnr-Wh234rIInQgydD7ZPJW1EMFA&amp;_hsmi=306060191&amp;utm_content=idt_0572024&amp;utm_source=IDT">offloaded</a> $15 million worth of Coinbase shares from three funds.</li>



<li>Over the past 24 hours, $27 million of shorts have been liquidated, per CoinGlass <a href="https://www.coinglass.com/LiquidationData">data</a>.</li>



<li>Bitcoin continues to slip from its local Monday highs, <a href="https://www.tradingview.com/chart/?symbol=COINBASE%3ABTCUSD">trading</a> around $62,250 as of press time.</li>



<li>Ether, too, is showcasing some near-term weakness as well, <a href="https://www.tradingview.com/chart/?symbol=COINBASE%3AETHUSD">trading</a> just below $3,000 this morning, or about 2.4% off in the past day.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">Where in the world is Binance?</h2>



<a href="https://blockworks.co/tag/binance">Binance</a> has a checkered past when it comes to getting along with countries and regulators.&nbsp;



The exchange still struggles with this today, as countries like Nigeria and the Philippines either move to <a href="https://www.sec.gov.ph/pr-2024/sec-proceeds-with-blocking-of-binance/#gsc.tab=0">block</a> the exchange from operating or — <a href="https://blockworks.co/news/nigerian-government-binance-fine">in Nigeria’s case</a> — detain executives and charge them with the same crimes as their employer.&nbsp;



Speaking of Nigeria, Binance stopped support for the naira as it continues to <a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">fight for the country to release</a> Tigran Gambaryan, one of <a href="https://blockworks.co/news/binance-executive-escapes-nigerian-custody">the aforementioned detained</a> executives.



Binance’s own website claims that it’s available in over 100 countries. However, it only lists 44 countries. Binance didn’t return my multiple requests for comment on the discrepancy.&nbsp;



Here’s a fun little note: Binance’s site says it supports 19 European countries but lists Europe as one of those countries, alongside others like the Czech Republic and France.&nbsp;



Despite the <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">multibillion-dollar settlement</a> Binance agreed to pay the US government last year, operations in the US remain a sticky situation. Investors in the States — well, really, just certain states — can use the platform. Unfortunately, if you’re based in a handful of states, including my home state of Texas, you’re unable to use the US platform.&nbsp;



The exchange exited the Canadian market last year, citing regulatory concerns. Those worries didn’t seem to faze Coinbase, though, which received registration as a restricted dealer last month.



Binance is also <a href="https://www.reuters.com/technology/binance-did-monthly-transactions-worth-90-bln-banned-china-market-wsj-2023-08-02/">blocked</a> in China after the country took action against crypto a few years back. It ceased operations in South Korea back in 2020, citing low usage and volume.&nbsp;



Over in Europe, Binance left the Netherlands last year and withdrew its application for a crypto license in Germany. But the firm still operates in France and is available in other European countries including Spain.&nbsp;



The exchange did admit that French authorities made an on-site visit in June of last year, <a href="https://blockworks.co/news/binance-france-on-site-visit">claiming</a> that it was “fully collaborative” with said authorities.



According to a February report from Bloomberg, Binance is still trying to re-enter the UK market, but the company continues to face regulatory hurdles.



Oh, and did I mention that the company still doesn’t have a headquarters? Though new CEO Richard Teng did <a href="https://www.theblock.co/post/287168/binance-ceo-says-exchange-is-weighing-up-a-few-jurisdictions-for-selecting-its-headquarters">say</a> — at Paris Blockchain Week — that the company was mulling a “few jurisdictions.”



Stay tuned.&nbsp;



— Katherine Ross



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



<ul>
<li>The US filed <a href="https://www.justice.gov/opa/pr/us-charges-russian-national-developing-and-operating-lockbit-ransomware">charges</a> against the creator of the ransomware program LockBit, offering a $10 million reward for information that would lead to their arrest.&nbsp;&nbsp;</li>



<li>Mastercard and a group of banks including Citi and JPMorgan <a href="https://www.bloomberg.com/news/articles/2024-05-08/mastercard-citi-jpmorgan-test-ledger-for-settling-bank-money?embedded-checkout=true">tested</a> new blockchain-based tools for in-bank settlement, Bloomberg reports.&nbsp;&nbsp;</li>



<li>Tom Brady’s troubled history in the crypto space <a href="https://www.tiktok.com/@netflix/video/7365942757124361515">came up</a> during a new Netflix-hosted roast.&nbsp;</li>



<li>Consensus continues its tradition of hosting US presidential hopefuls with an <a href="https://www.coindesk.com/policy/2024/05/07/robert-f-kennedy-jr-a-pro-crypto-presidential-candidiate-to-appear-at-consensus-2024/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">appearance</a> by independent candidate Robert F. Kennedy.&nbsp;</li>



<li>Microsoft built an “air gapped” artificial intelligence tool for <a href="https://qz.com/microsoft-offline-ai-service-chatgpt-gpt4-us-spies-1851462266">US spy agencies</a>, according to Quartz.</li>
</ul>



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



Turns out Gary Gensler’s not the biggest fan of crypto journalism.



The SEC Chair <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">grew a bit frustrated</a> yesterday during an interview with CNBC’s Andrew Ross Sorkin over the latter’s questioning on crypto.&nbsp;



Crypto, Gensler stressed, is “a small piece of our overall markets” but “an outsized piece of the scams and frauds and problems in our markets.” As a result, “you end up with, like, an outsized ratio of journalist questions and crypto journalists to market cap.”



Gensler basically accused Sorkin (and other journalists, I guess?) of focusing too much on crypto.&nbsp;



Okay, fair point, I suppose. But perhaps it’s equally fair to say that the SEC is <a href="https://www.coindesk.com/policy/2024/03/22/us-sec-asking-for-more-millions-dozens-of-lawyers-to-beef-up-crypto-oversight/#:~:text=The%20Treasury%20Department's%202025%20budget,and%20around%20%242.5%20billion%20for">seeking</a> a budgetary bump thanks to its strong focus on crypto. And Gensler has made it pretty clear that he thinks the SEC ought to have <a href="https://www.wsj.com/articles/secs-gensler-supports-commodities-regulator-having-bitcoin-oversight-11662641115">a bigger</a>, not smaller, role in overseeing an industry that has attracted billions of dollars of capital over a relatively short period.&nbsp;



There ought to be an equal trade off. Want more power? Prepare to answer more questions. Seems pretty fair to me.&nbsp;



— Michael McSweeney



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Empire Newsletter: FTX bankruptcy almost across the finish line

Solana’s validators are a bit like baristas flipping around an iPad — they’re nicer to you when you include a tip. And as traders keep cramming into Solana’s metaphorical coffee shop, the validator tip jar looks increasingly stuffed with money.&nbsp;



Validators are a group of 1,728 computers that run software to produce blocks on the Solana blockchain. Coinbase Cloud <a href="https://www.jito.network/stakenet/">is</a> a prominent Solana validator, as is Google Cloud. One revenue stream that validators earn is called maximal extractible value (MEV), which refers partly to tips paid by searchers to be included in Solana blocks.&nbsp;



This MEV revenue has been growing quickly since mid-March. Notably, Solana validators are earning more from MEV overall than Ethereum validators, <a href="https://app.blockworksresearch.com/analytics/l1?interval=daily&amp;dashboard=l1-sector-comparison-financial">according</a> to Blockworks Research. Just a few months ago, Solana’s MEV revenue was a rounding error compared to Ethereum’s.



Read more: <a href="https://blockworks.co/news/draft-mev-dydx-chorus-one">MEV doesn’t have to be a zero-sum game, research suggests</a>



Broadly defined, <a href="https://blockworks.co/tag/mev">MEV</a> refers to the largest amount of value that validators can create by packing transactions into blockchain blocks. Blockworks Research’s dashboard suggests Solana validators raked in a hair under $7 million from MEV last week.



At the moment, <a href="https://blockworks.co/tag/solana">Solana</a> MEV is almost entirely the product of a protocol named Jito. Jito offers a fork of the Solana validator called Jito-Solana, and 78% of Solana’s validators use this client, according to Jito’s website. The client lets searchers, or traders, arrange transactions in bundles. Searchers can include a tip to try getting validators to send their particular bundle to the blockchain.



Whether all this is good for Solana is something of a matter of perspective. Some forms of MEV can be predatory. Jito recently suspended its mempool, a kind of waiting area for transactions, due to “sandwich attacks” that let opportunists create MEV by trading right before and after a transaction to manipulate the price and take profit from the trader.&nbsp;



Read more: <a href="https://blockworks.co/news/jito-labs-suspends-mempool-functionality">Jito Labs ends mempool functionality citing impact on Solana users</a>



In Jito’s <a href="https://jito-labs.gitbook.io/mev">telling</a>, the protocol is making Solana more efficient while also minimizing negative forms of MEV like sandwich attacking. If it can pull that off, Solana could see a lot of benefit.&nbsp;



Continued long-term growth in Solana’s MEV would likely imply that less spam is being included in blocks, and Solana would have more available blockspace, Blockworks Research analyst Hayden Tsutsui said. In a best case scenario, more blockspace could free up room for more on-chain activity, which could also bring along more liquidity, Tsutsui said.



But it bears mentioning that as things currently stand, Solana is still staggering under a mountain of spam. More than 60% of non-vote transactions fail on Solana, according to Blockworks Research, largely due to bots <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">taking advantage of Solana’s cheap fees</a> by inundating the network in hopes of getting transactions to land.&nbsp;



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MEV collected by validators is now higher on Solana than on Ethereum

Bitcoin is no longer merely that taboo thing your techie uncle awkwardly brings up at family gatherings.



Well, maybe the asset is only that for you —&nbsp;but if so, you’re in the minority at this point.&nbsp;



Whether you believe in bitcoin or not, it has increasingly perforated traditional finance in recent years and months. Institutions can gain exposure to crypto through a regulated liquid derivatives market, and more recently via bitcoin ETFs.



While some traditional finance bigwigs still criticize the asset (at least publicly), large financial companies are waking up to the potential of BTC, as well as <a href="https://blockworks.co/news/blackrock-tokenization-investment">blockchain tech more broadly</a>.



“Before, people had to buy coins,” said Lucas Kiely, chief investment officer at Yield App. “Now they can trade on [traditional finance] markets which means big market players can get involved.”



The increased market participation around bitcoin is one reason the asset has become more correlated to global markets — a fact that could spur investor concern in an environment like this one.&nbsp;



That’s because a range of macro factors are set to continue tussling with post-halving bitcoin price rally expectations in the coming months, industry watchers say.



Bitcoin halvings — when per-block rewards for mining bitcoin are reduced every four or so years — have historically helped catalyze crypto bull markets.&nbsp;



Read more: <a href="https://blockworks.co/news/post-bitcoin-halving-price-predictions">With halving just hours away, bitcoin price predictions proliferate</a>&nbsp;



Such events prior to the latest one last month have propelled BTC to new highs between 12 months and 18 months after the halving.



Before then, the macro environment this time around may push BTC downward.



<h2 class="wp-block-heading">Macro headwinds lingering</h2>



Though bitcoin has rebounded from its recent stint below $57,000, “investors should be wary of being lulled into a false sense of security,” Kiely noted.



The asset’s price hovered around $63,000 at 4 pm ET Tuesday — down 9% from a month ago, but up nearly 7% in the last five days.&nbsp;&nbsp;



“The macro headwinds that pushed BTC south have not eased,” he said in an email. “If anything, global political uncertainty is only more pronounced, while inflation in the US is still not under control.”



K33 research analysts Anders Helseth and Vetle Lunde said in a Tuesday note that global macro conditions have “re-emerged to become a relevant market mover.” Bitcoin’s 30-day correlation to the S&amp;P 500 has reached a seven-month high, they added. “BTC first followed the market down on increased interest rate expectations on Wednesday, before following the markets up on decreased interest rate expectations on Friday.



The analysts are referring to the “higher for longer” posture from the Federal Reserve last Wednesday, which held interest rates at their current level.&nbsp;



Fed Chair Jerome Powell called the path forward “uncertain,” noting that central bankers will need to see more evidence that inflation is easing before cutting rates.



Two days later, bitcoin’s price rose on news that the economy added 175,000 positions in April — a number closer to the pre-pandemic monthly average of 183,000 job gains.



Read more: <a href="https://blockworks.co/news/bitcoin-back-above-60k">Bitcoin is back above $60K, stocks rally on cooler jobs data</a>



The crypto market has been “consumed” in recent months by the first US spot bitcoin ETF launches and the Bitcoin halving, according to LMAX Group market strategist Joel Kruger.&nbsp;&nbsp;&nbsp;



“As these risks have played out and the market has settled down, attention is shifting to the other side of the equation where there has been more pressing volatility risk around the state of the US dollar, yield differentials and the outlook for fiat monetary policy,” Kruger told Blockworks.&nbsp;



Market participants previously expected the Fed to cut rates by 0.75% or 1% in 2024, Finequia International research analyst Matteo Greco said in a research note.&nbsp;



After Powell’s comments last week, many now anticipate lower cuts amounting to 0.25% or 0.50% — and only if inflation doesn’t worsen.



<h2 class="wp-block-heading">How far down before a possible rally?</h2>



Outside of monetary policy, the war in the Middle East rages on, and the US domestic situation is “increasingly volatile” ahead of the November presidential election, Kiely said.



Oh yeah, and the Securities and Exchange Commission appears to be continuing its regulation-by-enforcement approach, with <a href="https://blockworks.co/news/robinhood-wells-notice-sec">Robinhood most recently receiving a Wells notice</a>.&nbsp;



In other words, tailwinds for bitcoin are few and far between right now, Kiely added.



“Best case scenario, we will see a very boring summer,” he explained. “Worst case scenario, bitcoin will lose some key support and take a long journey back down to recent lows.”



Such a retreat could mean BTC sinking to between $50,000 and $55,000, Kiely predicts.



Aside from central bank policy developments, bitcoin investors should monitor the pace of traditional finance adoption of bitcoin ETFs, Kruger noted. Some institutions and corporations are also considering adding bitcoin to their balance sheet.&nbsp;



“We believe any setbacks should be exceptionally well supported into the $50,000 area, with any dips below to be short-lived,” he said. “As far as the topside goes, we wouldn’t at all be surprised to see bitcoin making fresh record highs towards and through the next major barrier at $100,000.”



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Macro headwinds could spur a ‘boring’ bitcoin summer — or something worse

Democrats and Republicans clashed over how the Securities and Exchange Commission is handling crypto enforcement actions during a House Financial Services subcommittee hearing Tuesday.&nbsp;



Capital Markets Subcommittee Chair Ann Wagner, R-Mo., kicked off the hearing titled “SEC enforcement: balancing deterrence with due process,” with a jab at the securities regulator, mentioning the recent sanctions the SEC received in its case against Debt Box.&nbsp;



“Public trust in the SEC will only decline when its employees are sanctioned and forced to resign for their quote gross abuse of power, as they were in the recent case against the crypto platform known as Debt Box,” Wagner said.&nbsp;



Read more: <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">SEC’s Gensler calls for more crypto disclosures for investors</a>



Rep. Brad Sherman, D-Cali., was quick to counter Wagner’s point, arguing that the agency <a href="https://blockworks.co/news/sec-overreach-failure-debt-box">handled the misconduct appropriately</a>.&nbsp;



“There were two SEC lawyers who acted wrongfully in the Debt Box case,” Sherman said. “They&#8217;ve been fired, and I think that sets an example that will assure that other <a href="https://blockworks.co/tag/sec">SEC</a> lawyers do not act similarly.”&nbsp;



Rep. Maxine Waters, D-Cali., a typical vocal opponent of the crypto industry alongside Sherman, took a partisan stance, asserting that her side of the aisle is the only one looking out for constituents.&nbsp;



“My message to the crypto industry and everyone else: Democrats will always press for compliance, investor protection and market integrity,” Waters said.&nbsp;



The hearing comes a day after the House Committee on Rules moved to advance a joint <a href="https://www.congress.gov/bill/118th-congress/house-joint-resolution/109/all-actions">resolution</a> that would overturn the SEC’s Staff Accounting Bill (SAB) 121, a controversial advisory that states <a href="https://blockworks.co/news/house-committee-resolution-against-sab121">digital asset custodians should report a liability</a> and “corresponding assets” on their balance sheets for all cryptocurrencies under custody.



Committee members Mike Flood, R-Neb., and Wiley Nickel, D-N.C., introduced the resolution earlier this month alongside a similar measure in the Senate spearheaded by Cynthia Lummis, R-Wyom. The legislators cited a report from the Government Accountability Office, which stated in an October 2023 <a href="https://www.gao.gov/products/b-334540?utm_medium=social&amp;utm_source=twitter&amp;utm_campaign=usgao">report</a> that SAB 121 should have been issued as a rule under the official process.&nbsp;



“It is unfortunate that the SEC would attempt to circumvent the rulemaking process while falsely claiming that SAB 121 is simply non-binding staff-level guidance,” Flood said Monday during testimony before the Rules Committee.&nbsp;



The resolution heads to the House floor Wednesday for debate. Waters argued Tuesday that this “attempt to kill SAB 121” is unnecessary and prevents the SEC from carrying out its rightful duties.



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