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Crypto venture investor Vance Spencer took to Twitter on Monday to outline how the industry writ large may not fully appreciate the bullish forces at play in the market.

The co-founder of Framework Ventures noted that market sentiment “remains catatonic,” namely because a number of crypto native firms are still “nursing their wounds” from the previous year while TradFi firms remain underexposed. 

The comments come as a wide range of asset managers prepare to enter the market with new spot bitcoin exchange-traded funds, which Spencer expects to hit the market by the end of the year even though they have yet to be approved by regulators. It’s a development he believes will open the door to “ETF opportunities for other cryptoassets.”

“Crypto is in a far better place than anyone gives it credit for,” Spencer said. “History is on our side; we are replacing the financial system with software that nobody and everybody controls. Excited for the next few years and decades.”

Ethereum transition

Speaking on Ethereum, Spencer said that the blockchain’s successful transition to proof-of-stake from proof-of-work has caught the attention of major banking firms.

“The economics of the ETH have been noticed by major banks, and research reports have started to trickle out,” he wrote. “There are 3 DeFi apps that are tracking to $100M of ARR this year (in a bear market), and 1-2 of those have a line of sight to $1Bn of 95% margin ARR (in a bull market).”

The price of cryptoassets like ether are up significantly from all-time lows but still down more than 50% of the highs. Increased prices in various tokens have also yet to translate into a more active private market, with venture activity still stuck in the doldrums. 

As previously reported by The Block, web3 venture funding plummeted in the first quarter of 2023, down 80% from the same period a year earlier.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Blockchain data provider Arkham Intelligence appears to have made some customer emails publicly available through decodable referral links that were being shared by users in the runup to a token airdrop. 

Arkham, which announced an on-chain intelligence exchange on Monday, will see Binance conduct the public token sale of the new token dubbed ARKM. The company tweeted out instructions for an airdrop, which is due to go live on July 18.

Some users who shared referral codes for the program to garner more points quickly found out that sleuths were able to decode their email address from the links. Arkham’s growth has been fueled in part by referring links because it’s typically been a closed platform.

“The referral program is still live and according to previous mail, the points collected will directly be converted to $ARKM tokens and will be airdropped to your wallet,” one user on Twitter wrote, providing a link containing a referral code that can be easily decoded into an email address with online tools.  

Crypto Twitter goes on doxing spree

Crypto Twitter was quick to discover the issue, with some users going on doxing sprees, taking screenshots and posting emails associated with the decoded links. Email addresses are a valuable piece of information for hackers that can be used in phishing attacks, and the issue could possibly be used to identity previously anonymous crypto users.

Arkham Intelligence did not immediately respond to a request for comment from The Block. The company reportedly told one user on Twitter that it was aware of the issue. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A group of Republican lawmakers wants the Justice Department and Securities and Exchange Commission to investigate digital asset firm Prometheum, whose co-CEO Aaron Kaplan testified before a House committee as a Democratic witness at a hearing on crypto-related legislation last month. 

Prometheum recently gained approval from the SEC as an alternative trading system, with Kaplan testifying in June that he wanted to build a crypto trading platform that operated within existing securities laws — a message in line with the SEC’s approach since it began cracking down on initial coin offerings as unregistered securities in 2017. That view cuts against much of the digital asset industry, which argues that blockchain-based assets should not be subject to the same investment rules as other businesses. The firm has been subject to increased scrutiny since Kaplan’s appearance. 

Now several Republicans on the committee, as well as a senator uninvolved in the hearing, want the Justice Department and SEC to investigate the company.

“Making false statements to Congress is a crime. Submitting false or misleading statements in SEC filings constitutes securities fraud,” write the House and Senate Republicans.

Prometheum’s relationship to Hashkey under scrutiny

During last month’s hearing Republicans questioned Kaplan about Prometheum’s business operations, including Chinese investment. Now they want an investigation into whether Prometheum mischaracterized its relationship with overseas investors in statements to the SEC and Congress.

Sen. Tommy Tuberville, R-Ala., led the letter, and took issue with what he said is Prometheum’s largest outside investor — China-based company Shanghai Wanxiang Blockchain, Inc. and its subsidiary HashKey Digital Asset Group, Ltd., one of the largest crypto firms in Asia. Reps. Blaine Luetkemeyer, R-Mo., Barry Loudermilk, R-Ga., Ralph Norman, R-S.C., Byron Donalds, R-Fla., and Mark Alford, R-Mo., also signed the letter.

“These ties are deeply concerning to each of us and to many of our colleagues in Congress,” the lawmakers said in their letter on Monday.

Most of the House Republicans signing onto the letter are members of the House Financial Services Committee, which has jurisdiction over the SEC. Most Republicans on the committee did not sign the letter.

Prometheum did not immediately comment.

Before the June hearing Tuberville raised concerns about Promethem’s ties to China before in a June 5 letter to the Financial Industry Regulatory Authority, which approved Prometeum as a special purpose broker dealer, and the SEC.

Those concerns were “unfounded and without merit,” Kaplan said in his prepared testimony before the House Financial Services Committee last month. Hashkey made an investment into Prometheum in 2018, and Prometheum and Wanxiang entered into a “development agreement,” Kaplan said, but added that a year later it became clear that “joint development was not viable.” Kaplan added that all servers, code, data and proprietary technology were created by Prometheum independently of Wanxiang.

Republicans signing the letter cast skepticism on that statement. 

“If Prometheum began developing its own technology platform totally independent of its China-based, CCP-tied partners in December 2019 as Mr. Kaplan attempted to lead Congress to believe in his congressional testimony, why was this not made clear in Prometheum’s SEC filings,” the lawmakers said. 

In their request for an investigation, which the DOJ and SEC do not have to comply with, the lawmakers ask for “prompt attention to our concerns,” but do not provide a deadline for a response.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Attorneys for asset management company Grayscale criticized the U.S. Securities and Exchange Commission for allowing the first leveraged bitcoin exchange-traded fund while having rejected previous efforts for a spot fund.

Grayscale lawyer Donald Verrilli argued that a leveraged bitcoin ETF is “an even riskier investment product” in a letter sent Monday to the U.S. Court of Appeals for the District of Columbia Circuit. 

“The fact that the Commission has allowed a leveraged bitcoin futures ETP to begin trading demonstrates that the Commission continues to arbitrarily treat spot bitcoin ETPs differently than bitcoin futures ETPs,” Verrilli said. 

The Volatility Shares 2x Bitcoin Strategy ETF, or BITX, became effective last month after not being rejected by the SEC. The agency allowed the first bitcoin futures ETF to trade in 2021. 

Grayscale brought a case against the SEC last year for rejecting its proposal to convert its flagship fund, GBTC, into a spot bitcoin ETF. 

The SEC has reasoned that futures products are harder to manipulate in part because they are based on prices from the CME, which is regulated by the Commodity Futures Trading Commission. 

Others vying for a spot bitcoin ETF

The SEC has not yet approved a spot bitcoin ETF, but large asset managers including BlackRock and Fidelity have recently filed for funds with the agency. 

Proposals could face headway from the agency, as it has repeatedly cited concerns of fraud and market manipulation when assessing past applications.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Former U.S. Securities and Exchange Commission Chair Jay Clayton said that applicants for a spot bitcoin exchange-traded fund have a strong chance at approval if they can prove that it’s a more efficient and effective way for investors to buy into the digital asset.

“If they’re right that that the spot market has similar efficacy to the futures market, it would be hard to resist approving a bitcoin ETF,” Clayton said in an appearance on cable news network CNBC on Monday.

But Clayton, who led the SEC during several rejections of previous bitcoin spot ETF applications and now works in private practice as a senior policy advisor at the international law firm Sullivan & Cromwell, demurred on making a prediction as to when a bitcoin spot ETF might finally happen.

The SEC has rejected applications in the past due to lack of transparency and concerns about how to protect investor from the unregulated spot market.

Clayton explained further the SEC’s thinking, comparing how it handled approval of futures ETFs in the past.

“When the SEC approved a futures-based ETF, they said ‘let’s look at the futures market, we see the surveillance, we see the protections in that market for the investor, that are sufficient,” Clayton said in the televised interview. “We don’t see them in the spot market, so we’re going to make that distinction.’”

Latest efforts for a spot bitcoin ETF

A recent application by investment giant BlackRock, which has a near-perfect record in ETF approvals, spurred enthusiasm that a spot bitcoin ETF could finally become a reality.

The SEC first approved futures ETFs for the cryptocurrency in 2021.

The most recent applications from BlackRock and others have proposed using Coinbase as a partner for market surveillance and information on trading and clearing to increase transparency in the pseudonymous market. The SEC is currently suing the U.S. crypto trading firm over alleged violations of U.S. securities laws.

In another ongoing lawsuit, digital asset investment firm Grayscale took the SEC to court over the agency’s rejection of its own bitcoin spot ETF.

Legislation to grant greater authority to the Commodity Futures Trading Commission in directly regulating the spot market for bitcoin, among other possible digital assets, stalled last year due in part to the FTX collapse and scandal surrounding Sam Bankman-Fried. But new legislation could grant similar authority and might assuage regulators when considering ETF approval.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Aave community approved a $2 million token swap to procure BAL-WETH liquidity pool tokens from the decentralized exchange protocol Balancer as part of its diversification strategy.

The Aave DAO will conduct the swap, using 310,000 BAL valued at $1.4 million and 326 units of wrapped ether worth $600,000 from its treasury.

The approved assets will be converted into B-80BAL-20WETH, pairing BAL tokens with ether. The swap will be conducted with the help of CowSwap’s Milkman protocol, which will guard against miner extractable value exploits and minimize potential slippage risks.

The Aave DAO plans to convert its BAL-WETH holdings into vote escrowed Balancer tokens (veBAL), the main staking and governance token on the Balancer platform. The objective of the actions is to enhance Aave’s position in the DeFi market by attracting more liquidity to Aave’s Balancer pools, potentially leading to increased revenues from enhanced yields.

Balancer liquidity pool

Cryptocurrency users and projects can obtain veBAL tokens and corresponding governance voting rights by acquiring Balancer liquidity pool tokens from the BAL/ETH pool on Balancer. The voting rights allow holders to influence decisions like the distribution of liquidity mining rewards to various pools, encouraging more activity and leading many DeFi projects to accumulate tokens from major protocols like Curve and Balancer.

The moves coincide with Aave’s strategic decision to diversify its sizable $124 million treasury through the integration of a range of cryptocurrency assets. Most recently, the Aave DAO members have unanimously approved the conversion of 1,600 ETH from its treasury reserves into staked ether (stETH) and rocket ether (rETH) — an action that can generate additional revenue for the DAO.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.