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The executive branch issued a decree with directives following the approval of a crypto law in December 2022.

Ether tumbled below $1.7K just two hours after the U.S. central bank met widespread expectations by ending its more than year-long diet of interest rate increases.

Seattle-based decentralized finance (DeFi) platform EigenLayer has deployed its restaking protocol on the Ethereum mainnet, according to a press release.

Re-staking protocol EigenLayer launched on Ethereum today, enabling holders of liquid staking tokens to double down for additional yield — at the cost of extra risk.

The core idea behind EigenLayer is that the staking security provided by ether stakers can be used to secure other protocols on the network. To use it, holders of liquid staking tokens — like Lido staked ether (stETH) — can stake these tokens through EigenLayer. This means that the token holders will gain extra rewards from the newer protocols they’re supporting, but it opens them up to more risk of penalties through slashing.

“This is a significant step forward for Eigenlayer and we are excited to build the future of shared security together to work to hyperscale Ethereum,” the project’s team said in a press release.

At launch, EigenLayer will support native staking of ether plus liquid staking tokens stETH, Rocket Pool ether (rETH), and Coinbase’s wrapped staked ether (cbETH). 

The protocol commences operation with some capacity limits. For example, it will only allow 3,200 tokens for each liquid staking token, creating a total limit of 9,600 liquid staking tokens. At ether’s current price, that’s a limit of around $16.7 million. The protocol will only let each crypto wallet deposit a maximum of 32 tokens, resulting in at least 300 deposits from separate wallets. 

Users can also stake their ether directly with the protocol, which will go toward the total cap on liquid staking tokens. This approach is accomplished through the creation of what’s called an EigenPod.

“These limits will be raised progressively over the coming weeks and months, with the goal of reaching a totally open and uncapped state where any user can restake any amount of staked Ether,” said EigenLayer.

EigenLayer previously raised $64.5 million, including a $50 million Series A in March. The startup said today that its Series A raise was at a $500 million valuation, confirming The Block’s reporting ahead of the raise. Its backers include Blockchain Capital, Coinbase Ventures, Polychain Capital, Hack VC and Electric Capital. 

The startup was founded in 2021 by Sreeram Kannan, an assistant professor at the University of Washington, Seattle.

Concerns about re-staking

The re-staking model has drawn criticism from some notable corners of the Ethereum ecosystem. Perhaps most notably, Ethereum co-founder Vitalik Buterin has expressed concern about the emergence of re-staking. 

“We should tread lightly when application-layer projects aim to extend the ‘scope’ of blockchain consensus beyond the validation of essential Ethereum protocol rules,” Buterin stated in a blog post.

Buterin noted that while re-staking can be used for low-risk purposes, there are situations where it could compromise the mainnet’s security, such as when Ethereum validators face slashing on third-party chains.

“We should instead preserve the chain’s minimalism and support uses of re-staking that do not seem like slippery slopes towards extending the role of Ethereum consensus,” Buterin suggested.

At the time, EigenLayer co-founder Sreeram Kannan agreed with some of the concerns but argued that re-staking can be used in low-risk situations.

© 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.

Binance.US’s market share in the U.S. has fallen to the lowest level in two years.

The exchange’s market share in the country is 2.7%, according to the crypto data firm Kaiko. Last week, the Securities and Exchange Commission sued Binance and its affiliates over alleged legal violations.

Binance.US exchange volume had been decreasing steadily over the past three months, The Block data shows. Binance.US saw $17.6 million of exchange volume in March, $15.2 billion in April and $5.9 billion in May.

In a broader comparison, Binance.US has also been squeezed out of market share from all exchanges with USD support. It had 16.1% of spot trading trading volumes among other USD-supporting exchanges in April, but that figure dwindled to 8.5% in May. It’s currently around 5.4%, although data for June is incomplete. 

 

© 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.

BNB Chain volume saw a notable increase on decentralized exchanges in the last two recorded months. 

BNB Chain exchange volume was $11.79 billion in April and $19.52 billion in May — a 65.3% increase worth $7.73 billion, according to data compiled by The Block Research. 

“A big part of the reason BNB chain has seen an increase in DEX market share is Pancakeswap’s upgrade to V3 in April, which shifted the AMM to a concentrated liquidity model similar to Uniswap V3 and generally gives a lot more flexibility to liquidity providers,” says Kevin Peng, a research analyst at The Block Research. “It basically allows them to set price ranges that are more in line with current prices across the market. Over the past week alone, Pancakeswap V3 has done around $900 million in volume with only about $230 million in liquidity.”

“It’s hard to say definitively if it represents a broader shift away from centralized exchanges — the largest being Binance — but it does coincide with a period in May where DEX volumes as a percentage of CEX volume reached an all-time high,” Peng said. 

BNB Chain is a blockchain launched by the crypto exchange Binance. After a June 5 lawsuit from the Securities and Exchange Commission, some BNB holders appear to be selling their tokens, such as a crypto whale who sold off $2.3 million worth of BNB on June 12.

© 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.

FPG told customers via email that it had ceased trading, deposits and withdrawals after experiencing a cyber security incident on Sunday, June 11.

Floating Point Group (FPG), a crypto prime brokerage whose customers manage over $50 billion worth of assets, has ceased trading, deposits and withdrawals following a “cyber security incident” on Sunday.

Upon discovering the incident, FPG started working with third-party forensics experts and law enforcement, a source with direct knowledge of the matter told The Block.

An FPG spokesperson confirmed the incident, saying that the firm locked all third-party accounts and migrated and secured all wallets until it better understands the scope and circumstances of the incident. The company has also confirmed the incident on Twitter.

FPG’s account segregation limited the overall impact of the attack, the spokesperson said, adding that while the loss at this point is still being investigated and analyzed, the number as of today is between $15 million and $20 million in cryptocurrencies lost.

“We are working with the FBI, the Department of Homeland Security, our regulators, and Chainalysis to understand how this occurred and to recover assets,” the spokesperson said. “As this is an ongoing investigation with law enforcement, we cannot share specifics at this time. We will provide updates as they become available.”

The cyber security incident comes six months after FPG said it has earned a SOC 2 (Service Organization Control 2) certification — a recognized standard that verifies a service organization’s implementation of security, privacy and other controls, ensuring reliability in handling sensitive data and systems.

What is FPG?

FPG, formed at the Massachusetts Institute of Technology in 2018, is a crypto prime brokerage platform and agency trading desk for asset managers, providing access to liquidity across markets. In December, FPG said its blockchain foundation customers represent 5% of the total treasury management market.

FPG is backed by high-profile investors, including Coinbase Ventures, SkyBridge Capital’s Anthony Scaramucci and AngelList founder Naval Ravikant, having raised $12 million in total funding to date. 

Last August, FPG said it secured registration as a virtual asset service provider (VASP) in the Cayman Islands. The registration meant the firm was “able to hold customer assets safely and ensure that its customer’s assets are protected from its own creditors in the unlikely event that the company becomes bankrupt.” FPG at the time said it had about 100 customers. 

© 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.

Crypto exchange Coinbase, which has been embroiled in a lengthy public spat with the U.S. Securities and Exchange Commission, sent a fresh letter to the regulator on Monday, this time arguing against a proposal to regulate decentralized exchanges like their centralized counterparts.

Chief Legal Officer of Coinbase Paul Grewel said Tuesday that it would be impossible for a DEX, as the decentralized exchanges like Uniswap are called, to register in the same way as a national securities exchange. 

“This proposal is too flawed on process & substance to move forward,” he wrote in a thread on Twitter. “In particular, the SEC is attempting to front run Congressional action by baking unsupported assumptions about its crypto jurisdiction into the proposed rules.”

Coinbase argues SEC can’t ban industry

In the 8-page letter, Grewel argued an agency’s authority to regulate a particular industry “does not include the authority to ban that industry, absent clear Congressional authorization.”

“Truly decentralized systems do in fact exist and have no single organization capable of being responsible for compliance,” he wrote. “The proposed rule, as applied to DEXs, would be just such an impossible requirement.”

“The Commission has failed to engage in a real economic analysis and instead used the patina of an economic analysis to justify its policy preferences,” Grewel continued. 

 

© 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.

Securitize, a blockchain firm that specializes in tokenizing real-world assets, doesn’t buy the argument that crypto companies don’t know how to register with U.S. regulators — it’s done it. 

“People don’t know how to register?” Carlos Domingo, the company’s founder and CEO, asked. “Well, we know how to register. It’s just the normal registration path.”

He was referring to some of the heated discourse that’s occurred as crypto exchanges Coinbase and Binance battle fresh lawsuits brought by the U.S. Securities and Exchange Commission and argue for new legislation for the sector. On Tuesday, Gemini co-founder Tyler Winklevoss called the SEC “downright evil” for bringing lawsuits in an attempt to ” destroy crypto companies under the false premise that the rules are clear when they know they are not.”

Coinbase CEO Brian Armstrong has also been a vocal critic of the regulator and argues that the registration process for crypto firms has not been clear. 

‘These are the rules’

Securitize, for its part, was founded in 2017 and has raised over $120 million. The company obtained a registered transfer agent license in July 2019 and owns a broker-dealer. 

“We have this set of licenses, and the underlying technology, to be able to take the tokenization process from end to end,” Domingo said in an interview, acknowledging that tokenization “starts with the premise that this is regulated.”

“What the SEC is telling everybody is that ‘if you want to register, these are the rules,'” he continued. “The SEC is not going to create a different path for crypto people that is that is completely different than what other companies do.”

While Domingo said Congress could eventually pass new legislation, he said it would be unlikely in the next two to three years given. And despite concern that crypto firms could start to offshore some activities, he doesn’t see too many companies leaving the country outright. 

Going to Dubai?

“It’s 20% of the world’s economy, but it’s 40% of the world capital markets,” Domingo said. “Whoever thinks that they can ignore the U.S. is probably missing out on the biggest, most mature, most sophisticated financial services market.”

“This narrative that people can go to Dubai operate, it means first they’re operating from a jurisdiction that is very small, and it doesn’t actually allow you to then solicit investors in other parts of the world,” he said.

While Europe has made strides with its new crypto rules, Domingo said it’s still not perfect.

The U.S. “is the most reliable, trustworthy capital market in the world for a reason,” he said. “It has a very strong regulatory framework, and that’s why it attracts capital.”

Tokenization sector

While there’s always been interest in the tokenization sector, he said there hadn’t been massive adoption in the past, with many crypto firms focusing on initial coin offerings, decentralized finance, governance tokens and NFTs. Now, amid the regulatory crackdown in the U.S., there’s more interest in the space, and the company is seeing more institutional adoption.

“Crypto people have realized that issuing magic beans on chain, you know, goes as far as it goes,” Domingo said. “These are assets that don’t have any intrinsic value, that are problematic as we’ve seen. They’re very illiquid, and they’re easy to manipulate.”

The company last month launched a new feeder fund that offers tokenized exposure on Polygon to a private credit fund from asset manager Hamilton Lane. 

Securitize, meanwhile, doubled its revenue in 2022, and Domingo said the company expects to grow 50 to 100% this year, despite the so-called crypto winter.

© 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.