A Ripple In The SEC's Plans
In the ongoing SEC vs. Ripple Labs lawsuit, the judge declined to issue a summary judgment, allowing the trial to proceed. The case focuses on whether XRP, Ripple's token, constitutes an unregistered security in violation of securities laws. The court, guided by the Howey test, determined that XRP sales to institutional investors were securities transactions and thus unlawful. Conversely, programmatic sales on exchanges did not meet the securities classification, introducing some regulatory clarity regarding secondary digital asset trading. The inconsistencies within the current regulatory framework are conspicuous, suggesting impending new legislation in Congress.
This verdict could shape the SEC's handling of other cryptocurrencies, possibly resulting in nuanced classifications predicated on the nature of sales and buyer expectations. While it provides temporary relief to exchanges facing SEC lawsuits, it underscores the need for a comprehensive approach to navigate the diverse world of digital assets. SEC Chair, Gary Gensler, reacted with mixed feelings, appreciating the protection extended to institutional investors but lamenting the perceived neglect of retail investors.
Ripple's partial victory establishes a precedent for digital tokens beyond Bitcoin, potentially enabling certain tokens to be classified as "not a security." The anticipated appeal inches us closer to a Supreme Court renowned for resisting regulatory overreach. This outcome fundamentally questions the SEC's framework for regulatory enforcement, opening the door for institutional capital inflow and innovation.
Token Specific News
Eyeigen On The Prize
EigenLayer, a protocol that allows staked Ether to secure applications beyond the Ethereum blockchain, has gained significant attention from crypto investors. The project recently increased the cap on liquid staking tokens (LSTs) users can deposit, and the deposits of popular LSTs like Lido's stETH and Rocket Pool's rETH are now full. EigenLayer aims to enable other projects to rely on restaked ETH for security instead of creating their own validator sets, offering additional yield for restakers. While EigenLayer doesn't have its own token yet, its rollout is planned in three phases, with significant deposits already accumulated. EigenLayer's achievements have the potential to revolutionize the implementation of blockchain security, although it has also sparked controversy due to concerns about its impact on Ethereum's consensus mechanism. The rapid influx of deposits indicates that crypto investors are eagerly anticipating a potential airdrop when EigenLayer introduces its native token.
Source: Eigenlayer
All About That Base + MATIC to POL
Coinbase-supported Layer 2 network Base, utilizing Optimism's OP Stack, has introduced its mainnet for developers. With Base operating as a rollup network, applications can now be deployed, offering faster and more cost-effective transactions while maintaining Ethereum's security benefits. The network's safety has been extensively audited, with Coinbase protocol experts and over 100 external security researchers involved. Following a successful testnet deployment that garnered interest from over a million wallet addresses, Base is expected to have a public launch in August. However, there are no current plans to introduce a native token for Base. In similar news has put forward a technical upgrade proposal for its native token MATIC. The upgrade would involve transforming MATIC into a new token called Polygon (POL). The aim of the upgrade is to maintain scalability while upholding security within the Polygon ecosystem. The proposed POL token can be staked across various protocols within Polygon, enabling validators to secure transactions across different chains, including PoS, zkEVM, and Supernets. Token holders will be given a grace period of at least four years to complete the migration from MATIC to POL, with the migration process expected to commence in the coming months.
Aave Launches GHO Stablecoin On Ethereum Mainnet
Aave, the leading DeFi lending protocol, has launched its GHO stablecoin on Ethereum, offering users a fixed interest rate of 1.5% with AAVE stakers receiving a 30% discount. GHO allows users to mint stablecoins against collateral assets, generating revenue for Aave DAO. The stablecoin's deployment follows a governance proposal and aims to provide a decentralized and resilient option in the stablecoin sector, catering to DeFi, cross-border remittances, and micropayments applications. Governance and facilitators play a crucial role in managing GHO's risk and parameters, and Aave plans to expand its collateral assets in the future.
Polkadot Rethinks the Economics of Parachain Auctions
Polkadot founder Gavin Wood has proposed Polkadot 2.0, an overhaul to the network's resource allocation system. Wood envisions a network of sovereign chains connected by treaty-like "accords," shifting from parachains to cores and aiming to create a more agile and application-centric ecosystem, allowing apps to span across chains seamlessly. The proposed changes come after the initial parachain auction system faced challenges, leading Wood to introduce the concept of core time allocation through an NFT marketplace, making resources more accessible and fostering collaboration within the ecosystem.
Moving Ondo The Next RWA
Ondo Finance, an Ethereum-based asset manager, is expanding its market by partnering with Polygon Labs to promote the adoption of tokenized financial products in the DeFi space. By integrating with Polygon, Ondo aims to reduce transaction costs and broaden access to institutional assets on-chain. The move comes as Ondo looks to extend its offerings beyond the Ethereum mainnet, following its successful tokenization of U.S. Treasuries. The growing interest in Ondo's platform is reflected in the increasing deposits of liquid staking tokens, potentially indicating investor anticipation for a future airdrop of the project's own token. Wealth management firm Bernstein forecasted the RWA market could grow to $5 trillion in the next five years. In similar news, MakerDAO generated 79% of its fee revenue, totaling $13.5 million, from real-world assets (RWAs) over the past year. Despite the revenue generated, RWAs have been a contentious subject within the MakerDAO community, but the protocol's Endgame roadmap is expected to facilitate further growth in RWA activities as the protocol looks to double down.
Google's In
Google Play has implemented a significant change in its policy by allowing developers to integrate cryptocurrencies, including NFTs, into Android apps. This move has the potential to bring tokens further into the realm of mobile gaming. However, companies must disclose the presence of blockchain-based elements in their apps and are prohibited from creating experiences that resemble gambling. To ensure user protection, developers are not allowed to promote or glamorize potential earnings from playing or trading activities. Reddit, a prominent tech platform embracing cryptocurrencies, collaborated with Google on this policy update. See similar: Meta Goes All In on AI: Can It Compete With Google, ChatGPT and MidJourney?
Regulation
U.S. Government Gets Cryptic with Silk Road's Bitcoin Stash
Two crypto wallets controlled by the U.S. government and associated with the Silk Road have conducted three separate transactions on Wednesday, moving over $300 million worth of bitcoin (BTC). Of the 9,800 bitcoin moved, 8,200 was transferred to a new wallet address, with the remainder sent to a change address. The first transaction showed 0.01 BTC sent to wallet 361yog and 506 BTC to a change address. The second showed 8,200 BTC sent to the same 361yog wallet, with 1,118 BTC going to a different change address. This move follows a previous sale of 9,861 BTC for $216 million by the government in March, after the seizure of 50,000 BTC linked to Silk Road in late 2022. The recent transactions caused a minor dip in the price of bitcoin, but it has since recovered. It is important to note that while criminal activity involving cryptocurrencies has decreased, ransomware attacks have resulted in approximately $450 million being stolen.
Source: Blockchain.com
IMF First 20 Companies Selected for New EU Blockchain Regulatory Sandbox
The European Union (EU) has chosen twenty companies to participate in the Pan-European Blockchain Regulatory Sandbox, following the implementation of MiCA regulations. The sandbox allows for real-life experimentation in a secure and controlled environment, enabling regulators to observe results and provide legal guidance. The selected companies come from various sectors, including finance, telecom, IT, global trade, and transportation. The aim is to foster a better understanding of blockchain use cases, job creation potential, and to inform regulatory frameworks. The sandbox will be open to new participants annually until 2026, with projects spread across different regions of Europe. The initiative leverages the EU Digital Finance Platform and the European Blockchain Services Infrastructure (EBSI) to advance blockchain adoption and cross-border services.
Deltec Bank Gets Crypt-Blocked: Tens of Millions Seized
On June 13 and June 15, the U.S. Secret Service executed seizure warrants, seizing tens of millions of dollars from accounts linked to Deltec Bank, a Bahamian bank with connections to digital asset firms. The seizure, authorized up to $58.5 million, was based on probable cause for wire fraud, bank fraud, or money laundering. The accounts held by Deltec were custodial accounts for corporate clients reportedly engaged in an international fraud scheme involving cryptocurrencies. The fraudulent scheme operated through fake crypto sites that deceived victims into depositing digital assets or cash with promises of substantial returns on investments but ultimately blocking withdrawals. This action underscores law enforcement's efforts to combat financial crimes in the digital asset industry.
Celsius Gets Colder
Celsius and its former CEO, Alex Mashinsky, are facing a series of charges and lawsuits from various U.S. agencies, including the Department of Justice, SEC, CFTC, and FTC. The federal prosecutors have accused Mashinsky and other employees of orchestrating a scheme to inflate the price of Celsius's token, CEL, and misleadingly portraying Celsius as a "modern-day bank" while operating as a risky investment fund. The SEC alleges securities fraud and misrepresentation of Celsius's business model. The CFTC has also filed a lawsuit, accusing Mashinsky and Celsius of defrauding investors. Additionally, the FTC has reached a settlement with Celsius, banning the firm from offering certain products or services and imposing a judgment of $4.7 billion. Mashinsky and co-founders Leon and Goldstein did not agree to the settlement. Celsius filed for bankruptcy in July 2022, revealing substantial liabilities. Mashinsky has been arrested, and both he and Cohen-Pavon face multiple criminal charges.
Other Domestic Regulation Updates
SEC Says Coinbase Knew About Securities Law Violations
NYC Mayor Adams deems bitcoin not a security in disclosure mishap
Lummis, Gillibrand bring new bill to the table hoping for a different outcome
Gary Gensler wonāt recuse himself from crypto cases despite āappearance of biasā
Other International Regulation Updates
UK Sandbox to Lighten Rules on Digital Bonds, Securities for Five Years
Crypto payments to āhigh-riskā crypto exchanges to be blocked by Aussie bank
Russians Sought Crypto During Wagner Rebellion
Denmark Orders Saxo Bank to Dispose of Crypto Holdings
Chinaās President Touts Its CBDC, Announces New Features in Speech
Pain & Gain
Pain
Blockchain Association concerned over Prometheumās āsweetheartā deal with SEC
Celsius moves $59.4 million in altcoins to potentially sell for BTC, ETH
Traders in the perpetual futures market tied to BNBĀ are the most bearish in months as the embattled exchange and its related cryptocurrency face a challenging environment on multiple fronts
NFT woes spell trouble for Dapper Labs, CFTC makes major hire
Binance dismissed more than 1,000 employees in recent weeks
Gain
NFT Lending Platform Gondi Goes Live After Landing $5.3MM Seed Round
Crypto miner Hive CEO anticipates $100M annual revenue from GPU computing
Coinbase Introduces Messaging Service to Its Self-Custody Wallet
Celsius has been earning MEV this whole time ā $10M in 10 months
Binance Labs Leads $4MM Seed for Singaporeās Web3Go
Fractionalized NFT Project Particle Loans $12.9M Banksy Artwork to Global Museums
Bitcoin Ordinals Cross 350,000 Daily Inscriptions
Important Legal Notices
This reflects the views MJL Capital LLC (āMJLā), but it should in no way be construed to represent financial or investment advice. Nothing in this correspondence is intended to constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite, or otherwise acquire or dispose of any security, including any interest in any private investment fund managed by MJL. Any such offer may only be made pursuant to a formal confidential private placement memorandum of any such fund, which may be furnished to potential investors upon request and which will contain important information to be considered in connection with any such investment, including risk factors associated with making any investment in any such fund. Further, nothing in this correspondence is, or is intended to be treated as, investment or tax advice. Each recipient should consult their own legal, tax and other professional advisors in connection with investment decisions.
Domenic Salvo is a Managing Partner at MJL Capital, helping lead Portfolio Research and Investor Relations.
