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Dealers are stuffed with record negative gamma in BTC. With only a little move in the spot price, “we could witness fireworks,” one observer said.

The Lightning Network, a second-layer payment protocol on Bitcoin, has reached a new all-time high bitcoin capacity — the amount of bitcoin locked in payment channels on the network. 

The record capacity of 5,630 BTC was hit on Saturday, according to The Block’s data dashboard, breaching the 5,620 prior peak on April 18. The network’s capacity in U.S. Dollars also reached an all-time high, exceeding $172 million. Lightning Network capacity is up 42% and 105% in bitcoin and U.S. Dollar terms, respectively, over the last 12 months as adoption has continued to grow.

Lightning Network operates as a network of bi-directional payment channels on top of the Bitcoin blockchain, designed to enable fast and cost-effective micropayments. Enabling users to transact directly without immediate settlement on the main blockchain, Lightning offers a solution to the slower transaction speeds and higher fees associated with Bitcoin’s mainnet. Users can open payment channels between themselves, allowing for off-chain transactions later settled on the Bitcoin blockchain.

A growing Lightning network

David Marcus, CEO of enterprise-grade Lightning Network firm Lightspark, highlighted the importance of building out the infrastructure and capacity of the network. “Particularly because we can actually guarantee that even larger payments succeed on Lightning, which in the past has been pretty hard to achieve,” Marcus told The Block.

“It’s really building the capabilities that will enable any enterprise out there to access a real time, super low cost settlement network for the internet that’s interoperable, that’s open that any developer can build on. I think that you’re going to see more adoption,” added the former PayPal president and head of Meta’s abandoned Diem stablecoin project. “You need more exchanges to be on the network so they can actually move not only bitcoin but be good on and off ramps for the Lightning Network.”

“There’s just more happening. I think there’s more happening on Bitcoin in terms of development energy in the last 12 months than in the last X number of years combined. It’s really pretty amazing to see,” Marcus said.

Adoption by crypto exchanges

The Lightning Network’s growth coincides with a recent price rise and increased adoption from crypto exchanges. It also follows a period of congestion and higher transaction fees associated with the rise in popularity of Ordinals — NFT-like tokens minted on the Bitcoin blockchain.

Binance, the world’s largest cryptocurrency exchange, recently announced it was integrating the Lightning Network on its platform, following rivals including Kraken and Bitfinex. Last week, eagle-eyed users spotted the exchange spinning up new Lightning Network nodes, Binance confirmed.

Bitcoin capacity is a more accurate reflection of adoption of the Lightning Network, with the record high in U.S. Dollar terms less surprising given bitcoin broke through yearly highs on Friday. Bitcoin is currently trading at $30,300, up 83% since the start of 2023, according to CoinGecko data. However, bitcoin’s price is still down around 56% from an all-time high of $69,000 in November 2021.

© 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 Financial Conduct Authority’s (FCA) head of digital assets Binu Paul has left the organization less than one year after joining. A spokesperson for the FCA confirmed the departure in an email to The Block.

Paul joined the UK financial regulator in October last year. He previously worked as a fintech specialist lead at New Zealand’s Financial Markets Authority. He took over the head of digital assets role from Victoria McLoughlin who was covering it on an interim basis.

The FCA did not respond to a request for comment or confirm who would replace Paul by the time of publication.

Embracing Web3

This departure comes as the UK aims to become “the world’s Web3 center.” The country has recently celebrated Andreessen Horowitz’s (A16z) decision to set up an international outpost in London. The renowned venture firm is a major player in the crypto industry and has boasted that the UK government “sees the promise of Web3.”

The UK government has also made headway with the regulation of digital assets and is expected to pass the Financial Services and Markets bill imminently, which includes provisions for crypto assets. The FCA is expected to play a significant role in the country’s governing of digital assets.

Currently the financial regulator maintains a register of cryptoasset firms. The process for registering is compliance with strict anti-money laundering laws. Some firms found the registration process to be cumbersome with many being held on a temporary register for months while the regulator dealt with hundreds of applications.

The regulator also runs programs to encourage innovation within its regulatory framework, including a sandbox program that enables companies to test innovative ideas with consumers and an innovation pathways service that helps companies understand the FCA’s regulatory regime.

Paul is currently working as a consultant and departed the FCA in June this year, according to LinkedIn. He did not respond to a request for comment by the time of publication.

© 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.

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