Tether Gold

Ben Strack

The first ether futures ETFs went live today —&nbsp;and the overall performance was, unsurprisingly to some, rather muted.



Volumes today were nowhere near the volumes the inaugural bitcoin futures offering saw two years ago. Six ether futures ETFs launched by ProShares, Bitwise and VanEck saw trading volumes of roughly $2 million, according to an analysis of Yahoo Finance data.



The ProShares Ether Strategy ETF (EETH) led the way with nearly $900,000 in daily volume, while VanEck’s Ethereum Strategy ETF (EFUT) eclipsed the $400,000 mark. 



Read more: <a href="https://blockworks.co/news/ether-futures-etfs-vaneck-proshares-bitwise-offerings">Fight for assets begins as ETH futures ETFs debut</a>



The Valkyrie Bitcoin Strategy ETF (BTF), which is <a href="https://blockworks.co/news/valkyrie-etf-ether-futures-unwind">set to change its investment strategy to add ether futures exposure</a> to the fund starting Tuesday, saw roughly $4.5 million in volumes Monday, Yahoo Finance data shows.&nbsp;



Bloomberg Intelligence Eric Balchunas called initial Monday volumes of the funds “pretty meh” in an X <a href="https://twitter.com/EricBalchunas/status/1708865693481836849">post</a>, noting that the first bitcoin futures ETF did about $200 million in its first 15 minutes.&nbsp;



That fund, the ProShares Bitcoin Strategy ETF (BITO), launched in October 2021. It<a href="https://blockworks.co/news/first-bitcoin-futures-etf-nears-1b-on-first-day-of-trading"> saw roughly $950 million in trading volume</a> overall on its first day and <a href="https://blockworks.co/news/bito-on-track-to-be-first-fund-in-history-to-hit-1b-in-aum-in-two-days">reached $1 billion in assets under management</a> in two days.&nbsp;&nbsp;



“This is pretty average day one volume for most ETFs, but arguably disappointing considering how much BITO did,” Balchunas told Blockworks. “That said, it is futures and it is ether — very different than a spot bitcoin ETF, which we expect to fare much better out of the gate.”



Simeon Hyman, global investment strategist at ProShares, said it isn’t fair to compare the first ether futures ETFs to BITO.&nbsp;



“The bar can’t be BITO; that is a historic, once-in-a-generation type of thing,” Hyman told Blockworks. “We know that the futures solution in an ETF is an efficacious one, as BITO proved that. We know that ether is an important number two cryptocurrency…and we’re optimistic that the three ETFs will grow nicely over time.”&nbsp;



Bitwise chief investment officer Matt Hougan noted during a Monday webinar that BITO launched at the height of the last bull market. Bitcoin’s price hit its all-time high of roughly $69,000 in the month after the ProShares fund launched.&nbsp;&nbsp;



“During bull market peaks there’s a huge amount of pent-up demand, and I think that was a major factor,” Hougan said.



Bitcoin is a larger asset than ether, the chief investment officer added. Bitcoin’s (<a href="https://blockworks.co/price/btc">BTC</a>) market capitalization stood at $543 billion on Monday afternoon, while ether’s (<a href="https://blockworks.co/price/eth">ETH</a>) was about $200 billion.



“I’m feeling fairly good about the current state of volume in this space,” Hougan said. “I suspect we’ll see these ETH futures ETFs grow substantially over time.”



Neena Mishra, director of ETF research at Zacks Investment Research, is not so sure about the long-term demand for such products.&nbsp;



“Many investors are now just waiting for pure exposure via spot ETFs instead of investing in futures ETFs,” she told Blockworks. “There are now hopes that we could see a spot bitcoin ETF approved much sooner than earlier anticipated. The debut of ether spot ETFs would not be far behind.”



Read more: <a href="https://blockworks.co/news/21shares-ark-filing-for-spot-ether-etf">Race for a spot ether ETF begins with bid from Ark Invest, 21Shares</a>



Ether&#8217;s recent underperformance isn&#8217;t helping either, Mishra added. The asset is up 39% on the year but was down nearly 4% on the day as of 4:45 pm ET.&nbsp;



“What could change this situation?” Mishra said. “A surge in ether followed by performance chasing by some investors, or clear signals by the [US Securities and Exchange Commission] that they will not approve spot ETFs anytime soon.”



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The race begins: How ETH futures ETFs fared on day 1

James Cirrone

A recent investigation by the Federal Reserve Board of Governors found that Silvergate Bank collapsed because of its overreliance on crypto clients and nepotism, amongst bank leadership and risky deposits.&nbsp;



The full report wasn’t released because Silvergate is still technically an open institution, which means that “confidential supervisory and trade secret information” are at play.



Commissioned by the Inspector General’s office at the Federal Reserve Board, the summary of the unreleased Sept. 27 <a href="https://oig.federalreserve.gov/reports/board-review-silvergate-summary-sep2023.pdf">report</a> claimed that the underlying problems leading to the bank’s downfall began in 2013.&nbsp;



It all started when the bank’s senior leadership changed strategy to focus on “customers engaged in crypto activities.”&nbsp;



Putting all the risk in one industry was precisely the problem, the Fed said.&nbsp;



Another problem, the <a href="https://blockworks.co/tag/federal-reserve">Fed</a> pointed out, was the bank’s caliber of deposits.



“Silvergate had significant, multilayered concentration risk: The bank’s deposit accounts were largely funded from companies in one industry, and nearly all deposits were uninsured and noninterest bearing,” the Fed wrote in the summary report.



And the problem with Silvergate’s overreliance on crypto and crypto-adjacent clients became evident when companies in that industry faced a massive downturn throughout November and December of last year, which was triggered in part by <a href="https://blockworks.co/news/ftx-bankrupt-hacked-investigated-a-timeline-of-events">FTX going bankrupt</a>. Collectively, <a href="https://blockworks.co/news/sbf-ellison-thought-bitcoin-wouldve-crashed-more-as-ftx-caved">hundreds of billions of dollars were erased from crypto markets</a> in the days following FTX’s downward spiral in early November.&nbsp;



FTX’s demise and <a href="https://blockworks.co/news/silvergate-intends-wind-down-operations">Silvergate’s eventual voluntary liquidation</a> in March 2023 are closely linked, especially since <a href="https://blockworks.co/news/silvergate-stock-surges-20-despite-1b-quarterly-earnings-loss">Silvergate lost $1 billion in the fourth quarter of 2022</a>.



All of this and more were factors in the crypto bank’s added stress levels, according to the Fed.&nbsp;



The Fed added that given the growing size of the bank and its evolving strategy in regards to risk, those in charge were simply “ineffective.”



The bank increased its assets from less than $1 billion in 2017 to more than $16 billion at the end of 2021.&nbsp;



“Silvergate’s board of directors and senior management were ineffective, and the bank’s corporate governance and risk management capabilities did not keep pace with the bank’s rapid growth, increasing complexity and evolving risk profile,” the Fed wrote.&nbsp;



Nepotism allegations among the senior leadership team also flew in the summary report, which the Fed said had a role in undermining “the effectiveness of the bank’s risk management function.”



Investigators’ ire was also directed at the Federal Reserve Board and the San Francisco Fed, the regional central bank responsible for regulating <a href="https://blockworks.co/tag/silvergate">Silvergate</a>.



If a bank wants to change the general character of its business, it needs to obtain approval from the Federal Reserve Board under Regulation H. Apparently, neither the Fed Board, nor the San Francisco Fed considered Silvergate’s pivot to crypto to have met that standard because neither of them required the bank to file an application under Regulation H.



“The Board’s and FRB San Francisco’s narrow interpretation allowed Silvergate to enter a new business activity and gradually shift from commercial and mortgage banking activities to operating as a monoline entity serving the crypto industry without obtaining approval or implementing any conditions to address that transition,” the summary report stated.



Investigators also recommended that the San Francisco Fed should have assigned a team to facilitate Silvergate’s transition into a regional bank much sooner. Regional banks are much larger than community banks, the type of financial institution Silvergate was prior to January 2022.



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Fed report blames Silvergate collapse on crypto coziness, nepotism

Casey Wagner

With a rocky September behind us and federal funding ensured until mid-November, stock and crypto investors are hoping for a successful October, but Monday’s rally has proved short-lived.&nbsp;



“October is typically a strong month for bitcoin, earning it the term ‘Uptober,’” author of Crypto is Macro Now and former head of market insights at Genesis, said. “And while we know that patterns don’t necessarily repeat (after all, this past September turned out to be positive, breaking a six-year trend), they are comforting.”&nbsp;



More than $70 million in cryptocurrency short positions were liquidated on Oct. 1, pushing bitcoin and ether more than 3% and 4% higher, respectively. An eleventh hour deal on Capitol Hill to prevent a government shutdown, at least for the next 45 days, could have spooked short traders.&nbsp;



Short positions are still ahead, with about 50.5% of the futures market in shorts as of Monday. A short squeeze could propel prices higher. Cryptos had lost their momentum by Monday afternoon though, with bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) losing around 0.6% and ether (<a href="https://blockworks.co/price/eth">ETH</a>) in the red more than 4%.&nbsp;



“Over the past few months, we’ve seen a few of these sharp spikes up. Usually they are followed by a correction, sometimes sharp and sometimes gradual, but almost always reverting to where the market was before the upward move,” Acheson said.&nbsp;



Stocks posted a disappointing month at the end of the third quarter. The S&amp;P 500 and Nasdaq Composite indexes lost 4.9% and 5.8%, respectively, in September, marking it the worst month for returns in 2023.&nbsp;



Read more: <a href="https://blockworks.co/news/nasdaq-pulls-plug-crypto-custody">Nasdaq says it’s not the ‘right time’ to launch crypto custody business</a>



“Market breadth deteriorated last week but the percentage of S&amp;P 500 constituents trading above their 200 day moving averages stabilized near the 2023 lows, another potential sign of a relief rally forming,” Tom Essaye, founder of Sevens Report Research, said. “Investor sentiment indicators dropped to the lows of the year last week but ended off the worst levels Friday. If the lows in the Fear-and-Greed index hold, that further supports an emerging relief rally.”&nbsp;



Cryptocurrencies, on the other hand, were able to stay in the green. Bitcoin and ether gained about 4% and 1.5% in September 2023, respectively. These mild returns came after a bad August, where both cryptos lost more than 11%.&nbsp;



Stocks look poised to end the first trading day of October relatively flat. The S&amp;P 500 is down by approximately half a percentage point, while the Nasdaq Composite is marginally positive at the time of writing.



Traders are still betting on the <a href="https://blockworks.co/tag/fed">Fed</a> extending its interest rate pause at its next policy meeting in a month, according to CME <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">data</a>, which currently shows about a 74% likelihood the central bank opts to hold rates.



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Uptober? May be too early to tell, analysts warn 

Ross Ulbricht has officially been behind bars for ten years, a grim milestone for the Silk Road founder who is serving a double life sentence — plus 40 years — without parole.



His X account, updated with his fiancée’s help, reminded the world of his conviction with a Sunday evening <a href="https://twitter.com/RealRossU/status/1708605103044010424?s=20">post</a>.&nbsp;



“I sometimes fear I&#8217;ll spend the rest of my life behind concrete walls and locked doors. But I have no one else to blame. It&#8217;s my poor choices that led me here,” the post read. “All I can do now is pray for mercy.”



Ulbricht, now 39, created the Silk Road online marketplace, named for the ancient Eurasian trade route, back in 2011. Modeling itself after eBay, Silk Road offered users the ability to transact anonymously with one another using bitcoin.&nbsp;



The site, which was accessible through Tor, facilitated sales totaling 9.5 million bitcoin (valued at $1.2 billion at the time of transaction) from February 2011 to July 2013, according to a 2013 FBI <a href="https://web.archive.org/web/20140220003018/https://www.cs.columbia.edu/~smb/UlbrichtCriminalComplaint.pdf">criminal complaint</a> against Ulbricht.&nbsp;



Ulbricht thought of himself as an “idealistic libertarian” and a passionate advocate for free markets. He alleges that ideology inspired him to create an online marketplace based on the non-aggression principle. It would allow users to buy and sell anything they desired, even if the items would be harmful to the buyer, so long as no third party was harmed in the process. Ulbricht claims that the site <a href="https://freeross.org/what-was-silk-road/#ProhibitedItems">worked to prohibit</a> numerous items falling outside of this criteria, including child pornography, acts of violence-for-hire, stolen property, and anything used to “harm or defraud” others.



Read more: <a href="https://blockworks.co/news/doj-bitcoin-silk-road-mempool">DOJ gets Silk Road coins worth $305M stuck in Bitcoin mempool</a>



But rather than becoming a hub for the free and anonymous sale of books, art, clothing and electronics — the kinds of items Ulbricht <a href="https://freeross.org/case-overview/">claims</a> he intended the site to be for — Silk Road became synonymous with the illegal drug trade.



US authorities shut down Silk Road in October 2013, and the FBI arrested Ulbricht on Oct. 1, 2013. The government also <a href="https://www.cbsnews.com/news/silk-road-founder-wants-30-million-bitcoin-us-govt/">seized</a> 144,336 BTC, worth about $30 million at the time.



Ulbricht was later <a href="https://www.fbi.gov/history/artifacts/ross-william-ulbrichts-laptop#:~:text=A%20judge%20sentenced%20Ulbricht%20to,digital%20currency%20from%20this%20case.">convicted</a> of drug trafficking, computer hacking and money laundering in February 2015. He was sentenced to life in prison on May 29, 2015.



“Ross has expressed heartfelt remorse for creating Silk Road and accepts responsibility for the mistake he made. Although he never intended harm, he has learned how even well-meaning and idealistic actions can have unintended consequences,” a blog post on freeross.org <a href="https://freeross.org/case-overview/">stated</a>.&nbsp;



The remorseful tone that Ulbricht has struck has, at times, been shared by Sam Bankman-Fried — <a href="https://blockworks.co/news/sam-bankman-fried-trial-starting-soon">whose trial is set to begin Tuesday</a>, days after Ulbricht’s tenth year of incarceration. The two share additional commonalities.



Read more: <a href="https://blockworks.co/news/us-government-dumps-bitcoin-silk-road">US government dumps bitcoin stolen from Silk Road, $1.2B to go</a>



Both were major figures in the crypto space, though Ulbricht was involved at a time when bitcoin was much more under the radar. While they were in the public eye, both Bankman-Fried and Ulbricht were young, idealistic and were ultimately accused of some similar crimes, including money laundering.&nbsp;



Notably, there is no equivalent movement behind the former leader of FTX to free him from jail or to drop the charges against him like there is with Ulbricht. A Change.org petition requesting clemency for the Silk Road founder has garnered over half a million signatures.



While Ulbricht was initially accused by the US government of involvement in several sensational and violent crimes, including a murder-for-hire plot, he was never formally charged with any violent crimes in court.



Ulbricht claims these allegations are false and that he never planned a hit against anyone. Prosecutors went <a href="https://web.archive.org/web/20160305020239/http://www.theguardian.com/technology/2013/nov/21/silk-road-founder-held-without-bail">on the record</a> in 2013 saying they believed none of the alleged killings transpired.



There have also been complaints that Ulbricht’s sentence is disproportionate when compared to others involved with Silk Road and subsequent “darknet” marketplaces.



For example, Cornelis Jan “SuperTrips” Slomp, who made a name for himself as the most prolific drug dealer on Silk Road, was convicted and sentenced to 10 years in prison in May 2015. In 2021, he was granted a compassionate release due to Covid-19 nearly six years into his sentence, according to <a href="https://www.vice.com/en/article/4adjaw/i-made-millions-selling-drugs-online-then-it-all-came-crashing-down">Vice</a>.



The two men who tried to resurrect Silk Road — Blake Benthall and Thomas White — also received much lighter scrutiny than Ulbricht. White was <a href="https://www.theguardian.com/technology/2019/apr/12/uk-man-jailed-guiding-mind-behind-silk-road-drugs-site-dark-web">sentenced</a> to over five years in prison by UK authorities in 2019 for his role in operating Silk Road 2.0. Benthall was charged in November 2014 but is <a href="https://www.vice.com/en/article/nea4kw/silk-road-2-admin-defcon-blake-benthall-tax-crimes-cooperate">believed</a> to have avoided prison time over Silk Road 2.0 due to a guilty plea that requires him to cooperate with law enforcement.



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Silk Road founder notes 10 years in prison on eve of Bankman-Fried trial

Christopher Perkins

The Commodity Futures Trading Commission is going down the wrong path.



Throughout its history, the CFTC has prided itself as a pro-innovation regulator that constructively engages with industry, academia and the public to deliver principles-based regulatory outcomes.&nbsp;



Sadly, some of the agency’s recent enforcement cases — or what they call their “continued enforcement focus in the digital asset decentralized finance [DeFi] space” — are a material departure from this precedent.&nbsp;



In an era when DeFi offers opportunities to foster more inclusive markets, deliver enhanced risk management and improve price discovery, the CFTC’s self-proclaimed enforcement campaign against DeFi is a step in the wrong direction. Its stance on DeFi threatens to force innovation offshore, undermining US competitiveness and leadership across the global financial system.&nbsp;



The recent CFTC cases against Opyn, ZeroEx (0x) and Deridex are emblematic of the issues with this new enforcement-first approach.



Ironically, just days after a federal judge dismissed a <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.577791/gov.uscourts.nysd.577791.90.0.pdf">civil claim</a> against DeFi software developer Uniswap Labs for the actions of a third party, the CFTC announced <a href="https://www.cftc.gov/PressRoom/PressReleases/8774-23">enforcement actions</a> against these three DeFi protocol operators.&nbsp;



The <a href="https://blockworks.co/news/defi-cftc-crypto-derivatives" target="_blank" rel="noreferrer noopener">enforcement actions</a> come even after a <a href="https://blockworks.co/news/uniswap-class-action-dismissed">federal judge reasoned in the Uniswap case</a> that it wasn’t possible to hold a DeFi platform at fault for the actions of its users, reasoning that it was akin to “attempting to hold an application like Venmo or Zelle liable for a drug deal that used the platform to facilitate the fund transfer.”



But in the CFTC’s new cases, the agency held 0x responsible for tokens issued by a third party that represented levered positions. The CFTC’s orders also conflated the activities of software development and protocol operational control. Additionally, Opyn had also already blocked US intellectual property addresses, but the CFTC alleged that those steps were insufficient.&nbsp;



Importantly, a <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090723">dissent</a> by the CFTC’s own Commissioner Summer Mersinger notes that an &#8220;enforcement first&#8221; approach does not provide guidance for how a DeFi protocol could comply with legacy regulatory requirements, which are designed for centralized, intermediated entities.&nbsp;



In sum, the CFTC’s new, current reasoning could arguably <a href="https://twitter.com/RSSH273/status/1700038308313903449">sweep</a> DeFi and other developer activity into the CFTC&#8217;s jurisdiction. And as software clearly cannot comply with outdated legacy rules, this move could effectively end DeFi in the US.



Today, legacy market structure and regulation is simply not keeping up with innovation. Intermediaries, required by current CFTC regulation, are <a href="https://x.com/perkinscr97/status/1691783702316044352?s=20">withering</a>. Like it or not, the risk management realities of markets that function 24 hours a day, seven days a week have arrived, but aging technology and regulation have failed to keep up. <a href="https://www.census.gov/library/stories/2022/09/income-inequality-increased.html#:~:text=The%20ratio%20of%20the%2090th,a%204.9%25%20increase%20from%202020.">Income inequality</a> plagues our financial system, and failure to adapt to recent technological realities is leaving US market participants behind, unable to hedge risk.&nbsp;



Some of our best and brightest entrepreneurs have sought to solve these problems by developing new decentralized, open source DeFi protocols that can actually promote global financial stability and enable equitable access to safe and affordable financial services: two core bipartisan principles highlighted in the Biden Administration’s “<a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/#:~:text=The%20United%20States%20must%20ensure,and%20preserve%20or%20enhance%20the">Executive Order on Ensuring Responsible Development of Digital Assets</a>.” The lifeblood of our economic future — our innovators — should be welcomed, encouraged and defended, not banished or scared away to foreign jurisdictions.



Questions continue to swirl over whether regulatory agencies currently have the authority to regulate cryptocurrency markets, based on recent case law and the <a href="https://crsreports.congress.gov/product/pdf/IF/IF12077">Major Questions Doctrine</a>. However, it’s already clear that the ideal solution would be for Congress to pass proactive, nuanced legislation that actually empowers and enables the CFTC to engage in what it does best — principles-based rulemaking — that could help cutting edge technologies, like DeFi, achieve their promise.&nbsp;&nbsp;



However, in the absence of this hypothetical legislation, the CFTC should immediately end its self-proclaimed campaign against DeFi and take the following steps:



<ol>
<li>Engage its five advisory committees and seek guidance and insight from members and the general public on effective and principles-based DeFi regulatory design.</li>



<li>Cease enforcement actions against protocol developers for writing code and engaging in other core software development activities, while providing fair and reasonable guidelines on the demarcation between software development versus protocol control.&nbsp;</li>



<li>Dedicate its precious resources to rooting out perpetrators who engage in fraud, manipulation and abuse, consistent with its current legislative mandate.</li>



<li>To the extent the CFTC has clear legislative authority to ban certain activities, it should provide transparent and reasonable geofencing guidelines.&nbsp;</li>



<li>Through <a href="https://www.cftc.gov/LabCFTC/News-Events/index.htm">LabCFTC</a>, or via new regulatory <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/opapham9">sandboxes</a> as proposed by Commissioner Caroline Pham, the CFTC should bring together top DeFi and industry professionals,&nbsp; offer safe harbor and encourage innovation and experimentation — without fear of reprisal.</li>



<li>The CFTC should work with other government agencies to better protect and defend US crypto entrepreneurs from hostile state sponsored attacks and hacking activity.</li>
</ol>



The CFTC should be promoting leadership in technology and encouraging economic competitiveness. A new and uncharacteristic approach of “regulation by enforcement” will have catastrophic consequences and cause irreparable harm to the US economy for generations to come. There is a better way.



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<div class="wp-block-post-author-biography">Christopher Perkins is President of CoinFund, a web3 focused Registered Investment Advisor. He is also a member of the CFTC’s Global Markets Advisory Committee and its Digital Asset Markets Subcommittee.</div>


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C is for crypto, but the CFTC didn’t get the memo

The first ETFs to hold ether futures contracts launched Monday, with fund groups like VanEck, ProShares, and Bitwise Asset Management competing for assets.



Volatility Shares, the firm that kickstarted the latest wave of filings for such products in July, no longer intends to launch an ether futures product, a person familiar with the firm’s plans told Blockworks.&nbsp;



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



VanEck on Monday launched its Ethereum Strategy ETF (EFUT), which invests in standardized, cash-settled ETH futures contracts traded on exchanges registered with the Commodity Futures Trading Commission. The fund joins a bitcoin futures ETF the firm launched in 2021.&nbsp;



“While investors still do not have the means to gain exposure to digital assets here in the US via a spot ETF product, we’re very pleased to be launching EFUT as a means to access the robust futures market that has developed around ETH itself,” Kyle DaCruz, VanEck’s director of digital asset product, said in a statement.&nbsp;



Meanwhile, ProShares and Bitwise Asset Management launched multiple ether-related ETFs Monday.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-consider-ether-futures-etfs">SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?</a>



The ProShares Ether Strategy ETF (EETH) began trading on the New York Stock Exchange. The firm also brought to market the ProShares Bitcoin &amp; Ether Equal Weight Strategy ETF (BETE) and its Bitcoin &amp; Ether Market Cap Weight Strategy ETF (BETH).



The three funds join ProShares’ Bitcoin Strategy ETF (BITO) — the first bitcoin futures ETF to market in the US, which now has about $860 million assets under management.&nbsp;



Like ProShares, Bitwise is offering investors choice in how they want to access exposure to ether futures. The company launched its Ethereum Strategy ETF (AETH) and Bitcoin and Ether Equal Weight Strategy ETF (BTOP) on Monday. 



Competing crypto ETF issuer Valkyrie <a href="https://blockworks.co/news/ether-futures-etfs-launch-soon">began adding ether futures contracts</a> to its bitcoin futures ETF on Thursday as part of an investment strategy change set to go into effect on Oct. 3, a spokesperson told Blockworks Thursday. But the firm said in a Friday filing that it would <a href="https://blockworks.co/news/valkyrie-etf-ether-futures-unwind">“unwind” its positions in ether futures contracts</a> until the investment strategy is officially amended.&nbsp;



Meanwhile, a source familiar with Volatility Shares’ plans said the company chose to ditch its ether futures ETF plan due to losing its potential “first-mover advantage.” Such an advantage is critical for smaller issuers going up against rivals with bigger marketing budgets, the person added.



Read more: <a href="https://blockworks.co/news/volatility-shares-eth-futures-etf">Volatility Shares not giving up on ETH futures ETF effort</a>



Volatility Shares was in position to potentially launch the first fund with pure exposure on Oct. 12. But ether futures ETFs were able to come to market ahead of schedule as the US Securities and Exchange Commission appeared to accelerate such launches to prepare for a potential government shutdown.&nbsp;



The regulator did not return a request for comment.&nbsp;&nbsp;



VolatilityShares is not the only firm to abandon its ether futures ETF plans.



Roundhill Investments requested to withdraw its application for such a fund in a Sept. 29 filing to the SEC.&nbsp;



Kelly ETFs founder Kevin Kelly told Blockworks in an email Monday the firm is not launching its proposed ether futures ETF.&nbsp;&nbsp;



<h2 class="wp-block-heading">Products look to stand out</h2>



Nate Geraci, president of The ETF Store, said in August he expects the demand for ether futures ETFs to be “fairly limited overall.”&nbsp;&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I expect demand for ETH futures ETFs to be fairly limited overall… BTC futures ETFs have &lt; $1.5bil AUM &amp; much of that came in first few days post-launch. Combined BTC + ETH futures ETFs prob best path to succeed for now IMO. Ultimately, investors want real deal (spot ETFs). <a href="https://t.co/hNx61wmYbz">https://t.co/hNx61wmYbz</a>&mdash; Nate Geraci (@NateGeraci) <a href="https://twitter.com/NateGeraci/status/1687229563212824576?ref_src=twsrc%5Etfw">August 3, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Bloomberg Intelligence’s Eric Balchunas said in a Friday X <a href="https://twitter.com/EricBalchunas/status/1707872247791185998">post</a> he estimates all ether futures ETFs to have about $200 million in assets under management by the end of the first week of trading.&nbsp;



BITO quickly amassed $1 billion in assets when it launched ahead of competitors in October 2021. But with a more crowded field of ether futures ETF issuers launching at or around the same time, industry watchers have said marketing and fees will be key.



VanEck’s product carries an expense ratio of 66 basis points. The Bitwise funds charge 85 basis points, while the ProShares offerings cost 95 basis points.&nbsp;



As for marketing, VanEck had been teasing the upcoming launch of EFUT last week, posting a <a href="https://twitter.com/vaneck_us/status/1707419473337033075?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1707419473337033075%7Ctwgr%5E2944f8bab5605f486fa8429b85307f1b9a9ee0c9%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fblockworks.co%2Fnews%2Fether-futures-etfs-launch-soon">video</a> on its X page Thursday inviting investors to “enter the ether.”



“As we&#8217;ve been saying both with ETH futures, but especially with spot bitcoin, it will be a marketing war like we&#8217;ve never seen since they all do [the] same thing and launch on [the] same day,” Balchunas said in an X <a href="https://twitter.com/EricBalchunas/status/1707421312518386086">post</a> in response to the VanEck video. “Unprecedented.”



VanEck added in a Friday X <a href="https://twitter.com/vaneck_us/status/1707888396171977036">post</a> that it plans to donate 10% of its profits from EFUT to Protocol Guild — a collective of 152 Ethereum core protocol contributors.&nbsp;



“Marketing war has definitely begun,” Bloomberg Intelligence analyst James Seyffart said in response to the announcement on X.&nbsp;



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Friday night fun. 10% of Vaneck’s profits on their Ethereum ETF <a href="https://twitter.com/search?q=%24EFUT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$EFUT</a> are gonna go to <a href="https://twitter.com/ProtocolGuild?ref_src=twsrc%5Etfw">@ProtocolGuild</a> which is an org made up of ETH core developers. So basically going back into the ETH ecosystem in a way. Marketing war has definitely begun <a href="https://t.co/mCruFnOdap">https://t.co/mCruFnOdap</a>&mdash; James Seyffart (@JSeyff) <a href="https://twitter.com/JSeyff/status/1707889507775762524?ref_src=twsrc%5Etfw">September 29, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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ProShares highlighted in a Friday news release that it is the issuer of BITO, the largest crypto-linked ETF. It has also touted the greater optionality it is offering compared to VanEck and Bitwise with its three ether-related funds.



“We believe that BETE and BETH are groundbreaking in that they offer investors the opportunity to target the performance of the two leading cryptocurrencies in their brokerage accounts through one transaction with a single ticker,” CEO Michael Sapir said in a statement. “We are offering two weightings depending on an investor’s desired exposure.”



Bitwise CIO Matthew Hougan said the difference between his firm and the other initial issuers of ether futures ETFs is the level of crypto expertise.



“We&#8217;re excited to see big traditional equity assets managers come into the market; it&#8217;s a great validation of the space,” Hougan told Blockworks in an email. “For investors, the difference with Bitwise is that crypto is all that we do.”



Read more: <a href="https://blockworks.co/news/bitwise-matt-hougan-spot-bitcoin-etf-price-discovery">New Bitwise research seeks to fill gaps in rival bitcoin ETF proposals</a>



VanEck and ProShares have 67 and 137 ETFs trading in the US, respectively, according to ETF.com — funds across an array of asset classes.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



“Every day at Bitwise, 64 investment professionals show up to work and all we do is study crypto,” Hougan added. “We have the builders, regulators, technologists, venture capitalists and entrepreneurs on speed dial.”



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Fight for assets begins as ETH futures ETFs debut

Grayscale Investments wants to morph its Ethereum Trust into an ETF, a move that parallels a proliferation of ETH-related fund applications.



The news came in a Monday filing by NYSE Arca, the exchange that would list the planned fund. Shares of the Grayscale Ethereum Trust (ETHE) currently trade on the OTC Markets Group under the ticker ETHE.&nbsp;



ETHE has about $5 billion in assets under management. The trust’s shares were trading at about a 31% discount to its net asset value on Friday, according to <a href="https://ycharts.com/companies/ETHE/discount_or_premium_to_nav">YCharts.com</a>.&nbsp;



“As we file to convert ETHE to an ETF, the natural next step in the product’s evolution, we recognize this as an important moment to bring Ethereum even further into the US regulatory perimeter,” Grayscale CEO Michael Sonnenshein said in a statement.&nbsp;



The filing follows <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf#">Grayscale’s court win against the Securities Exchange Commission</a> over its proposed conversion of its Bitcoin Trust (GBTC) to an ETF.&nbsp;



<a href="https://blockworks.co/news/judges-grayscale-sec-ruling#">Judges ruled in that case</a> that the SEC’s denial of that application — but its allowance of bitcoin futures ETFs — was “arbitrary and capricious.”



Though the decision doesn’t force the SEC to approve GBTC’s conversion to an ETF, it prevents the regulator from denying such an application on the grounds previously used.&nbsp;&nbsp;



Firms such as Ark Invest, 21Shares and VanEck <a href="https://blockworks.co/news/21shares-ark-filing-for-spot-ether-etf">filed last month to launch spot ether products</a> on the heels of that ruling.



The NYSE Arca filing also comes as various fund groups — including VanEck, ProShares and Bitwise — said Monday they were set to launch the first ETFs investing in ether futures contracts.



Read more: <a href="https://blockworks.co/news/sec-consider-ether-futures-etfs">SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?&nbsp;</a>



“This filing is another important milestone as Grayscale continues to build its best-in-class ETF team, product suite, and capabilities — serving investors as a globally respected asset manager with unmatched crypto expertise,” Grayscale ETF head David LaValle said in a statement.



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Grayscale seeks to convert its Ethereum Trust to an ETF

Shalini Nagarajan

The asset management arm of Swiss banking giant UBS has launched a tokenized investment fund on Ethereum.



The tokenized Variable Capital Company (VCC) fund was launched as part of Singapore&#8217;s Project Guardian pilot, an initiative by the Monetary Authority of Singapore announced in May last year. UBS said it aims to carry out more pilot programs under Project Guardian.



The fund is structured as a smart contract on Ethereum and was launched using the bank’s proprietary tokenization service, UBS Tokenized, according to an <a href="https://www.ubs.com/global/en/media/display-page-ndp/en-20230927-first-blockchain-native.html?caasID=CAAS-ActivityStream">announcement</a> on Monday.



It allows UBS Asset Management to perform various functions, such as processing fund subscriptions and redemptions.



“This is a key milestone in understanding the tokenization of funds, building on UBS’s expertise in tokenizing bonds and structured products,” said Thomas Kaegi, Singapore and Southeast Asia head at UBS asset management.&nbsp;



“Through this exploratory initiative, we will work with traditional financial institutions and fintech providers to help understand how to improve market liquidity and market access for clients,” he added.



According to a recent <a href="https://blockworks.co/news/bis-tokenization-central-banks-cryptocurrencies">report</a> by the Bank of International Settlements, tokenization has the potential to significantly enhance efficiency and transparency in financial markets.



Research by Bank of America <a href="http://booking.com/hotel/id/villa-kayu-lama.en-gb.html?aid=356980&amp;label=gog235jc-1DCAsoaEIPdmlsbGEta2F5dS1sYW1hSDNYA2hsiAEBmAEJuAEHyAEM2AED6AEBiAIBqAIDuAKMpoWoBsACAdICJDdkYmM5NWJmLWUyYWUtNDY2Ni1hYzVmLWMyMTc2OTdjODk1ZdgCBOACAQ&amp;sid=d41683a7c1d27e1b1751f79b27f4d7df&amp;dist=0&amp;keep_landing=1&amp;sb_price_type=total&amp;type=total&amp;">suggests</a> that the total value of tokenized assets could represent as much as 10% of global GDP, amounting to $16.1 trillion, by the year 2030.



Companies such as Goldman Sachs, JPMorgan, Hamilton Lane and Siemens have <a href="https://blockworks.co/news/2023-year-of-asset-tokenization">previously announced their involvement</a> in asset tokenization projects.



UBS first ventured into the blockchain realm in November last year, <a href="https://blockworks.co/news/european-institutions-public-blockchains">issuing</a> a $370 million bond on SIX Digital Exchange’s private blockchain platform.



That bond was designed for regulated tokenized offerings and was also made available on the Six Swiss exchange.&nbsp;



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UBS trials tokenized money market fund on Ethereum

Web3Auth, a wallet-as-a-service infrastructure provider, has launched a noncustodial wallet extension on Firebase, Google’s mobile development platform.&nbsp;



Now, the thousands of businesses and the millions of applications that use Firebase — the New York Times, Lyft and Venmo to name a few — can get their customers using crypto with Web3Auth’s extension.&nbsp;



Web3Auth, which also powers popular crypto storage solution Trust Wallet, uses a multi-party computation (MPC) setup to secure users’ assets. MPC wallets split a user’s keys into several parts, often called shards.&nbsp;



Co-founder and CEO of Web3Auth, Zhen Yu Yong, told Blockworks in May that <a href="https://blockworks.co/news/mpc-wallets-security">his company shards users’ private key into three parts</a>: the user’s device, a social login provider and a recovery method. For a user to access their assets, at least two methods must be triggered.



The recovery methods for Web3Auth includes a manual backup of the device key shard, an SMS one-time passcode and a recovery email.



But for its Firebase extension, Web3Auth told Blockworks that social logins are the only supported recovery methods.&nbsp;



“Users can choose either one of email, Google, Apple, Telegram or Discord among others,” Web3Auth wrote.&nbsp;



According to a press release shared with Blockworks, latency times for people logging in are under 1.5 seconds, which Web3Auth chalks up to its collaboration with Google Cloud for over a year.



“For an unparalleled performance to meet global demand, we needed a multi-region cloud infrastructure setup across the world at Web3Auth,” Yong said in a statement. “This Firebase extension sits on top of <a href="https://blockworks.co/tag/google-cloud">Google Cloud</a>.”



He continued, “No matter where you are in the world, any Web2-centric application or Web3-native dapp can now allow its users to use their social logins with uniform login times.”



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Web3Auth launches Firebase wallet extension

Coinbase has obtained a full license in Singapore, allowing the crypto exchange to broaden its offerings to both individual users and institutional clients in the city-state.



The company scored its Major Payment Institution (MPI) license about a year after Singapore&#8217;s central bank <a href="https://blockworks.co/news/coinbase-secures-crypto-payments-license-in-singapore">granted preliminary approval</a>.



On Sunday, the company <a href="https://www.coinbase.com/blog/coinbase-obtains-major-payment-institution-licence-from-the-monetary">highlighted</a> the importance of Singapore within the crypto industry, pointing out that 25% of local residents surveyed view cryptocurrency as the future of finance, and 32% have owned or currently own crypto assets.



“From our initial involvement in the Lion City, we&#8217;ve identified Singapore as a vital market for Coinbase,” the exchange said in a statement.



“The nation&#8217;s progressive economic strategies and approach to regulation sync well with our global mission and objectives,” it added.



Obtaining a license for a cryptocurrency company in Singapore is a <a href="https://blockworks.co/news/crypto-singapore-license-standards">challenging process</a>.&nbsp;



The Monetary Authority of Singapore (MAS), responsible for regulating crypto business licenses, only grants approval to applicants who have strong anti-money laundering measures in place, according to its director of corporate communications, Dawn Chew.



After implementing initiatives to reduce the risks posed by crypto to customers, Singapore will establish one of the strictest regulatory regimes in the world governing retail access to cryptocurrencies, Chew has said.



A limited group of companies, such as Blockchain.com, Circle Internet Singapore, Crypto.com, and Revolut, have so far managed to secure an MPI license for digital payment token services.



Just about a week ago, Coinbase <a href="https://blockworks.co/news/coinbase-bank-of-spain-vasp-crypto-exchange">obtained registration</a> in Spain, granting it the ability to function as a crypto exchange and wallet service provider within the country.&nbsp;



Coinbase also recently <a href="https://blockworks.co/news/coinbases-international-exchange-futures-retail">extended access to its perpetual futures service</a> to non-US retail users due to significant institutional trading volume exceeding $5.5 billion in the second quarter.



As Coinbase continues its global expansion efforts, it is actively pushing for crypto-related legislation within the US. 



In September, the exchange <a href="https://blockworks.co/news/coinbase-campaign-us-crypto-legislation">launched a campaign</a> urging crypto users to reach out to their Congressional representatives and request the enactment of well-defined legislation in this field.



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Coinbase expands regulatory moat with Singapore license

Bessie Liu

Crypto security blockchain Babylon has revealed a minimum viable product (MVP) of its Bitcoin staking protocol today at Cosmoverse in Istanbul, Turkey.



According to Glassnode, over 66% of bitcoin’s circulating supply — roughly $329 billion — is sitting idly. Babylon aims to tap into the dormant bitcoin and use it to build economic security for proof-of-stake chains.&nbsp;



Earlier this year, the Babylon team released a bitcoin timestamping protocol that proof-of-stake (PoS) networks could use for enhancing long-range security. It later revealed a <a href="https://blockworks.co/news/bitcoin-staking-babylon">bitcoin staking litepaper</a> designed to repurpose bitcoin sitting idly in wallets and use them to help secure PoS chains.&nbsp;



Traditional PoS chains rely on native assets to secure their blockchains. On Ethereum, for example, stakers can <a href="https://blockworks.co/news/proof-of-stake-investors-guide">lock up their funds</a> onto the network to help enhance its security while earning rewards.



Babylon notes that most of this capital is currently being geared towards securing already-established networks and protocols, and up-and-coming chains often face challenges with having limited staking resources that subsequently undermine the security of their network.&nbsp;



By tapping into bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) instead of relying on their native tokens, these emerging PoS chains will have a chance to inherit security from one of the most secure chains in the world, the company claims.



Read more: <a href="https://blockworks.co/news/babylon-bitcoin-security-dapps">Bitcoin security for proof of stake? Why not, says Babylon</a>



In a press release reviewed by Blockworks, Babylon co-founder David Tse notes that Babylon’s goal is to ultimately transform bitcoin into a security backbone for PoS chains.



&#8220;Our approach seamlessly integrates Bitcoin staking with almost any PoS protocols in a modular fashion, allowing any bitcoin holder to earn staking rewards from a wide variety of PoS chains,” Tse said. “This not only amplifies economic incentives but paves the way for broader adoption, underscoring Bitcoin&#8217;s diverse utility beyond its widely-recognized role as a store of value.&#8221;



The launch of the MVP will enable bitcoin holders to test Bitcoin staking with a straightforward web application, Tse notes. The team will be focusing on the adoption of its protocol in the Cosmos ecosystem after launch.&nbsp;



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Bitcoin staking protocol Babylon launches MVP at Cosmoverse

The Bank for International Settlements knows it has to stay ahead of the curve, and that means getting its hands dirty, Cecilia Skingsley, head of the Innovation Hub at the BIS said.&nbsp;



“Our project portfolio is my biggest pride,” Skingsley said during a discussion at the New York Fed Conference on Fintech: Artificial Intelligence and Digital Assets in Manhattan on Friday. “I think that it distinguishes us from many similar operations because we actually get our fingers into the technology and report our findings to the community.”&nbsp;



The Innovation Hub is tasked with researching and investigating how new technologies, including crypto, are and can change how central banks operate. The BIS knows it cannot afford to ignore the digital asset space, Skingsley said.&nbsp;&nbsp;



“On the back of the Libra experience back in 2019, and all that followed, it really made everybody realize that there is too much going on in the tech space that we can&#8217;t just ignore.”&nbsp;



In the BIS’ most recent report, researchers found that tokenization has huge potential in increasing efficiency and transparency in financial markets. Cryptocurrencies themselves however have yet to demonstrate their value, the report added.&nbsp;



Read more: <a href="https://blockworks.co/news/deutsche-bank-crypto-custody-tokenization">Financial giant Deutsche Bank eyes crypto custody, tokenization</a>



“Crypto and decentralized finance (DeFi) have offered a glimpse of tokenisation’s promise, but crypto is a flawed system that cannot take on the mantle of the future of money,” researchers wrote in the report, titled “BIS Blueprint for the Future Monetary System.”&nbsp;



Regardless, central banks need to be prepared, Skingsley said.&nbsp;



“If the future is tokenized, if we&#8217;re going for a future where we will have <a href="https://blockworks.co/tag/tokenization">tokenized</a> assets on a broad scale, what would that mean for central banks?” Skingsley said. “What sort of infrastructure do you have to have?”



The <a href="https://blockworks.co/tag/bis">BIS</a> Innovation Hub has been in partnership with the New York Innovation Center (NYIC), which operates under the New York Federal Reserve, since 2021. Engaging with central banks is an important tool the Innovation Hub has to target problems facing the global financial system, Skingsley said.&nbsp;



The NYIC is currently in the process of exploring how distributed ledger technology can enhance cross-border payments, a program dubbed Project Cedar. Its first phase of research found that “blockchain could enable faster, simultaneous, and safer cross-border payments,” the NYIC said.&nbsp;



“We&#8217;re in the beginning of a beautiful friendship and a beautiful collaboration,” Skingsley said of the partnership. “Stay tuned, there will be more in the public eye in a couple of months.”



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Like crypto or not, central banks need to prepare, BIS innovate head says 

Eight crypto startups raised $72.2 million this week, with the largest sum going to a firm that’s developing a cross-chain oracle solution.&nbsp;



Supra raised $24 million in early-stage private investing rounds from Animoca, Coinbase Ventures, HashKey and over a dozen others.&nbsp;



Supra’s cross-chain tools are available on over 40 testnets, including Aptos, Arbitrum, BNB Chain and others, its website says. Supra will also be airdropping a native token, which will be distributed to funds, investors and node operators.&nbsp;



Investors this week also capitalized on the marriage of NFTs and apparel.&nbsp;



Web3 startup IYK, which stands for “If You Know,” announced <a href="https://blockworks.co/news/a16z-funding-iyk">a nearly $17 million fundraise</a> from lead investor a16z Crypto, Collab Currency, Lattice Capital, 1kx, Synergis Capital and others.&nbsp;



IYK’s mission is to embed NFC (near-field communication) chips within merchandise or apparel items. This would allow customers to tap their smartphone on the chip and instantly confirm an item’s authenticity. IYK then gives them NFTs in exchange.&nbsp;



IYK’s clients so far include VÉRITÉ, an independent musician, 9dcc, and Adidas. Adidas and IYK <a href="https://twitter.com/iyk_app/status/1646705948327567362?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1646705948327567362%7Ctwgr%5Ed94c4b52ca949e1b557ccbf4bf99dfb078a00b07%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fblockworks.co%2Fnews%2Fa16z-funding-iyk">partnered</a> during NFT NYC 2023 for an exclusive limited shirt release that yielded 152 shirts.&nbsp;



<h2 class="wp-block-heading">Beacon chain explorer, upcoming layer-2 raise funds</h2>



Rated Labs <a href="https://blog.rated.network/blog/series-a">raised</a> more than $12 million in a Series A round. The firm is behind the Rated Network <a href="https://www.rated.network/?network=mainnet&amp;view=pool&amp;timeWindow=1d&amp;page=1&amp;poolType=all">Explorer</a>, which keeps tabs on Ethereum beacon chain validators and provides data on participation rate, inclusion delay, and correctness percentage.



Archetype led the round with additional participation from Placeholder, 1confirmation, Cherry and Semantic.&nbsp;



With the fresh cash, Rated Labs plans to improve its explorer tool, which was its first product. It also will develop a new API console and launch credentials for node operators.&nbsp;



Separately, the team behind the soon-to-launch layer-2 network Fhenix secured $7 million in seed funding. The round was led by Multicoin Capital and Collider Ventures with added support from Node Capital, Robot Ventures, Bankless, HackVC, TaneLabs and Metaplanet, among others.



Fhenix plans to launch its testnet, which will employ fully homomorphic encrypted smart contracts, in early 2024.



Read more: <a href="https://blockworks.co/news/fhenix-homomorphic-encryption">Encryption startup Fhenix raises $7M for private computation</a>



Fhenix CEO Guy Itzhaki told Blockworks FHE is different from zero-knowledge proofs, where data is moved off-chain where the decrypted message can be seen by a prover.&nbsp;



“With FHE, it’s really the first time that we can have data on-chain, encrypted, and being used as if it’s non-encrypted for the sake of confidentiality,” Itzhaki said.&nbsp;



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



<ul>
<li>Avantis Labs, a DeFi derivatives trading platform, raised $4 million in a seed round led by Pantera Capital.</li>



<li>AnchorWatch, an institutional custody provider and insurer, <a href="https://www.prnewswire.com/news-releases/anchorwatch-raises-3m-to-solidify-bitcoin-custody-and-insurance-platform-301938468.html">got</a> $3 million to continue managing risk for&nbsp; firms holding bitcoin.&nbsp;</li>



<li>DeFi portfolio manager Bril Finance locked down $3 million from FalconX, Kosmos Ventures, and the Algorand Foundation.</li>



<li>Pimlico <a href="https://blog.pimlico.io/posts/pre-seed">raised</a> $1.6 million in pre-seed money to build infrastructure for smart accounts, a concept borne out of ERC-4337.&nbsp;</li>
</ul>



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Crypto funding: A $72M week for cross-chain oracles, NFT merchandise 

Daniel Batten

The earth is heating up —&nbsp;that’s a non-negotiable fact.



And the best way to slow down the impending environmental disaster, according to the UN, is to urgently reduce the amount of methane emissions. And the best way to urgently reduce methane, funnily enough, just might be bitcoin mining.



Despite what you may have heard about the harmful effects of bitcoin mining on the environment, the cryptocurrency mining industry could actually be a ready-made way to reduce methane on a large scale.



Yes — in a twist worthy of a John Le Carré novel, what I and other environmentalists were led to believe was the villain, turns out to be the good guy.



It is my opinion as a climate tech investor that if you’re a manager of an ESG fund or a member of an ESG investment committee, failure to consider<a href="https://twitter.com/hashtag/BTC?src=hashtag_click"> </a>Bitcoin in the mix is gross negligence of your ESG obligations.



In a nutshell, Bitcoin offers a financial incentive to capture methane from landfills. Not only does Bitcoin mining require the large amount of energy that landfills can supply, this solution could also lead to updated infrastructure at landfills that in theory could benefit other uses of electricity.



My assessment of Bitcoin’s potential environmental impact for good is based on a two-month solid due diligence on bitcoin mining, and it’s only grown stronger during 2023 as I’ve seen new energy and environmental applications.&nbsp;



First, some context. According to a recent <a href="https://www.pwc.com/gx/en/news-room/press-releases/2022/awm-revolution-2022-report.html">PwC report</a>, there are 23 trillion ESG investments, much of which cannot deploy into Bitcoin because of the perception that Bitcoin doesn’t tick the ESG box. Nine out of ten asset managers believe integrating ESG into their investment strategy will improve overall returns, but demand is outstripping supply of good ESG propositions.



In recent months, endorsements by KPMG, the Institute of Risk Management, Bloomberg Intelligence and a peer-reviewed academic study have brought the spotlight on the true impact of Bitcoin as an enabler of renewable transition — and a key force in methane mitigation.&nbsp;



Two years ago, I was hearing very differing views on whether Bitcoin was good or bad for the environment, both in my role in the environmental movement and from my friends in the Bitcoin community.



I resolved this discrepancy by doing my own analysis. What I found surprised me: There were 41 bitcoin mining companies that were either exclusively or almost exclusively using renewable energy. I found that the argument “Bitcoin revives old fossil fuel plants” was not supported by Security Commission filings. Instead, these filings clearly showed that the one gas plant that was claimed to have been revived for bitcoin mining was in fact opened to provide additional power to the grid. It only started bitcoin mining three years later.&nbsp;



I found that the claims “Bitcoin’s major energy source is coal,” “Bitcoin’s emissions are 65 MT CO2e/year and rising,” “Bitcoin’s emission intensity is increasing” and “Bitcoin is struggling to go green” were all based upon a single bitcoin mining model from Cambridge University.&nbsp;



However, on close inspection, I learned that this model measured less than half of hash rate, did not factor in either offgrid mining or flare-gas mitigation, and had not updated its dataset since January 2022 (when fossil-fuel intensive Kazakhstan represented 13.2% of global hash rate, today it is 0.73%).&nbsp;



Once those three exclusions were factored in, the picture changed completely, and all four claims from Cambridge were invalidated: Bitcoin mining was revealed to be mainly powered by hydro, 52.6% sustainable-energy powered, dropping in emission intensity markedly, and emitting 34 MT CO2e — a figure which has not increased over the last four-year cycle.&nbsp;&nbsp;



Now we get to the issue of methane reduction — methane is 84 times more warming than CO2 over a 20-year period, and it&#8217;s growing at a parabolic rate.&nbsp;



How do you make mitigating methane from landfills profitable? Well, where possible, the best solution is to capture and scrub that landfill gas, then send it to a generator to create electricity — which removes almost 100% of methane emissions. You’re turning pollution into an asset.&nbsp;



Problem is, many landfills cannot sell that electricity back to the grid. Either the grid upgrade costs too much, or government policies prevent it.&nbsp;



Nuno Barbosa, CEO of Landfill Gas Carbon Consulting company Unicarbo, recently said to me that “50% of the world’s landfills have no option to sell their power back to the grid, but if they had an onsite customer, that would change everything.”



Who could be that user? Landfills are not popular places to set up a business. Furthermore, why would anyone invest millions in power generation, unless electricity is most of your running costs? This is where bitcoin mining company’s huge use of electricity —&nbsp;80% of their operating budget and once maligned by environmentalists — proves to be its biggest environmental asset.&nbsp;



Unless we make methane mitigation profitable, the methane mitigation our planet needs won’t happen and our climate efforts will be in vain. Bitcoin mining is already the most sustainable-energy powered major global industry, and it’s in a unique position to make methane mitigation profitable for half of the world’s landfills.



Taking all these facts into consideration, my opinion is that Bitcoin is the most important ESG asset of our time — and the fiduciary duty of every ESG fund manager and investment committee to evaluate.&nbsp;



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


<div class="wp-block-post-author-biography">Daniel Batten is a ClimateTech investor, Bitcoin environmental impact analyst, CEO advisor and author. He is most widely known for his data-driven approach to Bitcoin mining research.
</div>


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Want to help save the planet? Mine bitcoin

The most high profile hires at crypto firms this week were those tasked with regulatory matters.&nbsp;



For instance, Ripple Labs added former Obama Administration official Lauren Belive as head of US Public Policy and Government.&nbsp;



With Ripple still engaged in a court battle with the US Securities and Exchange Commission over alleged unregistered securities offerings, Belive will likely have her hands full. The SEC’s appeal of the July ruling was <a href="https://blockworks.co/news/judge-greenlights-sec-motion-to-file-appeal">granted</a> on Aug. 17.



Belive wrote a <a href="https://www.linkedin.com/feed/update/urn:li:activity:7112397888764162049/">LinkedIn post</a> announcing her new role and what it would entail.&nbsp;



“My role will be to lead our engagement in Washington and nationally,” she wrote. “With regulatory landscapes evolving, it&#8217;s paramount that we advocate for policies that not only support the crypto industry but also the countless individuals and businesses that could benefit from these advancements.”



Read more: <a href="https://blockworks.co/news/ripple-abandons-plan-fortress-trust">Ripple ditches plan to buy Fortress Trust</a>



<a href="https://www.linkedin.com/in/lauren-belive-ba355246/">Belive</a> was a policy director at the White House from April 2012 to May 2015, but she was in Barack Obama’s orbit for far longer. She previously served on his 2008 campaign, the White House transition team and finally, the White House’s legislative affairs office for over three years.



Read more: <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security">Judge rules in SEC case vs Ripple</a>



After that, she left the public sector and has been working as an advisor to large corporations on governmental matters. The role she’s taken at Ripple is similar to roles she’s had at Lyft, Zoom and SoftBank.



<h2 class="wp-block-heading">Kraken makes moves in Canada</h2>



This week was a busy one for Kraken, a San Francisco-based crypto exchange.&nbsp;



First, <a href="https://blockworks.co/news/kraken-licenses-spain-ireland">it received key crypto licenses in Ireland and Spain</a>. Just a day later, there were reports that <a href="https://blockworks.co/news/kraken-stock-trading">Kraken will offer stock trading by next year</a>, which will in no doubt put it in direct competition with Robinhood.&nbsp;



Then on Thursday, Kraken publicly <a href="https://blog.kraken.com/news/kraken-bolsters-its-canadian-offering">announced</a> a new hire in Canada — one that’s focused on keeping in step with regulation in the country.



Dina Mainville will be joining Kraken’s board of directors in Canada, also known as Payward Canada.



Mainville has been a member of the Canadian Blockchain Consortium, a nonprofit lobbying group, since September 2020. Since then, she founded and chairs its regulatory committee.&nbsp;



She’s also the founder and president of Collisionless, a Toronto-based professional services firm that specializes in blockchain technology and digital assets.&nbsp;



Kraken added that she’s advised global Fortune 500 companies on blockchain initiatives and has “trained hundreds of government and law enforcement professionals on cryptocurrency forensic investigation strategies.”



As part of this announcement, Kraken also expanded access to Interac e-Transfer — Canadians&#8217; method of electronically transferring money — to all Canadians on the mobile and web platforms. The firm is also reducing the Interac e-Transfer fee to 0.95% down from 1.5%.



And in the coming days, there will be eight new digital assets that Candians can trade, including Sui, Audius and others.&nbsp;



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



<ul>
<li>Wednesday was Alex Chriss’ <a href="https://twitter.com/acce/status/1707053986606465169?s=20">first day</a> as <a href="https://blockworks.co/news/hiring-roundup-silvergate-paypal">PayPal CEO and president</a>. He is taking control during <a href="https://blockworks.co/news/paypal-stablecoin-slow-uptake">the implementation of PayPal’s stablecoin PYUSD</a>.</li>



<li>Matteo Leibowitz, head of ventures at Uniswap Labs, said it was his last day after three years at the company in a Friday <a href="https://twitter.com/teo_leibowitz/status/1707789881752387704">post</a> on X.</li>



<li>Swan Bitcoin, a Bitcoin financial services firm, announced that pro basketball player Matthew Dellavedova would be joining the firm as vice president of business development. The Australian point guard won an NBA Championship alongside Lebron James while on the Cleveland Cavaliers in 2016.</li>



<li>Epic Games <a href="https://www.epicgames.com/site/en-US/news/layoffs-at-epic">laid off</a> 830 employees, or 16% of its staff, right as the game studio is trying to fashion Fortnite into a monetizable metaverse.</li>
</ul>



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Crypto hiring: Firms shore up operations with key regulatory hires

Katherine Ross

BlockFi&#8217;s Chapter 11 plan received approval earlier this week, supported by both the company&#8217;s management and the Committee of Unsecured Creditors.



According to a blog post, the plan got 90% approval across all voting classes. 



The former crypto lender filed for bankruptcy in late 2022 following the collapse of FTX. It followed in the footsteps of bankrupt lenders Voyager and Celsius.



<a href="https://blockworks.co/tag/blockfi">BlockFi</a> will continue to seek recoveries from the Three Arrows Capital and FTX bankruptcies as part of the plan, which would then increase recoveries for customers.&nbsp;



As Blockworks previously reported, BlockFi is also <a href="https://blockworks.co/news/blockfi-ftx-3ac-claims-creditor-funds">fighting claims from both FTX and 3AC</a>, which both seek to recover funds. The company alleged, however, that it fell victim to the former crypto exchange.



Read more: <a href="https://blockworks.co/news/how-blockfi-went-from-tech-unicorn-to-crypto-burnout">How BlockFi went from tech unicorn to crypto burnout</a>



Additionally, back in early September, <a href="https://blockworks.co/news/ftx-blockfi-sam-bankman-fried-oppose-bankruptcy-plan">FTX objected to BlockFi’s bankruptcy plan</a>, alleging that it “still suffers from certain fundamental shortcomings.”



The plan will ensure that digital assets are distributed to customers, including <a href="https://blockworks.co/news/blockfi-return-300m-some-customers">BlockFi Interest Account holders</a>.&nbsp;



Regarding the interest accounts specifically, the <a href="https://blockfi.com/blockfi-plan-confirmed/">blog</a> post said that “the company expects that this will be the first wave of distributions, which will be followed by additional distributions.”



BlockFi is still working to distribute “funds to clients with assets in the BlockFi Wallet product,” it said.



After the plan goes into effect, BlockFi will exit bankruptcy, and then start winding down the business. However, the timing is still uncertain due to being dependent on “a few factors, including the Bermuda court, which regulates our international clients, recognizing the US bankruptcy court’s approval of the plan.”



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