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The U.S. market is in the midst of regulatory mayhem, so when Zodia Markets decided to kick off business, it looked anywhere else, namely Europe and the Middle East.

Zodia Markets, which aims to be an institutional crypto trading partner, is already registered by the UK’s Financial Conduct Authority and is in late stage conversations with the central bank of Ireland, which with new EU regulation means a passport to Europe.

Still, the institutional demand for crypto trading is becoming so pronounced in the U.S., even without knowing where crypto will stand in coming years, Zodia’s accelerating plans in the country.

“There’s a number of firms that we would like to partner with and like to work with who have said, ‘we need you to be present in the United States,’” said Chief Executive Officer Usman Ahmad. “We have accelerated the strategy to access the U.S. markets. We’re in conversations with advisers here. We’re going through our registration processes in certain states where we’re talking to regulators as well to look at how we could establish ourselves and respond to that client demand.”

Backed by SC Ventures

Zodia Markets is backed by SC Ventures, the innovation and ventures unit of Standard Chartered Bank, and BC Technology Group, a digital asset company and parent of digital asset platform OSL.

The firm is non-custodial and instead has a sister company name Zodia Custody for that purpose, Ahmad told The Block’s Frank Chaparro in a podcast recording.

“We deliberately set up the businesses that way,” Ahmad said. “The fully integrated, vertically integrated crypto asset firms that offer custody of a trading offer, prop trading, the whole kind of gamut as it related to institutional adoption, that wouldn’t necessarily work for institutions looking to get into digital assets or scale them like they trade other asset classes. So we very clearly set up two businesses that are distinct in nature, legally distinct, separate shareholdings.”

For more of Chaparro’s interview with Ahmad, watch out for an upcoming episode of The Scoop podcast.

© 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.

Franklin Templeton, an investment management giant with about $1.4 trillion in assets under management, has expanded its OnChain U.S. Government Money Fund to the Polygon blockchain.

Launched in 2021, the fund was first available on the Stellar blockchain. Polygon is the second blockchain the fund is supporting, a Franklin Templeton spokesperson told The Block, adding that more networks could be supported in the future.

“Extending the reach of the Franklin OnChain U.S. Government Money Fund to Polygon enables the Fund to be further compatible with the rest of the digital ecosystem, specifically through an Ethereum-based blockchain,” Roger Bayston, head of digital assets at Franklin Templeton, said in a statement. “This furthers our distribution reach through a Layer 2 (L2) blockchain that has a proven track record.”

What is Franklin OnChain U.S. Government Money Fund?

FOBXX is the first U.S.-registered mutual fund that uses a public blockchain to process transactions and record share ownership. The fund’s transfer agent, Franklin Templeton Investor Services, maintains the official record of share ownership via a proprietary blockchain-integrated system.

Given the 24/7 nature of blockchains, the fund is available to trade at any time. It is available via Franklin’s Benji Investments app and currently has an AUM of over $270 million.

Stellar Development Foundation, a nonprofit organization supporting the Stellar blockchain, recently invested $20 million in the fund. Polygon Labs declined to comment when asked if it has also invested in the fund.

The fund’s investment strategy 

Given it is a money market fund, the fund invests at least 99.5% of its total assets in U.S. government securities, cash and repurchase agreements collateralized fully by U.S. government securities or cash, according to its website. The fund seeks to provide a competitive yield and maintain a stable $1 share price.

As with all other mutual funds, an investment in the Franklin OnChain U.S. Government Money Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Using blockchain technology has helped the fund with operational efficiencies, including increased security, faster transaction processing and reduced costs, ultimately benefiting the fund’s shareholders, according to Franklin Templeton. One share of the fund is represented by one BENJI token.

Polygon’s growing ecosystem

Ethereum-scaling platform Polygon continues to grow. Tens of thousands of decentralized applications utilize the blockchain, which has processed over 2.35 billion total transactions to date. The Polygon network supports some of the biggest web3 projects including Uniswap and OpenSea, as well as enterprises including Robinhood, Stripe and Adobe.

Earlier today, The Block reported that Solana wallet Phantom is expanding to Polygon and that Binance.US is set to launch branded web3 domain names on Polygon in the coming weeks.

© 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.

Ether options on the CME continue to reach fresh highs, with analysts seeing the Ethereum blockchain’s latest upgrade as a catalyst.

Volume has risen to $272 million so far this month, up from $94.7 million in March, according to The Block data. The 187% increase is being linked to the Ethereum blockchain’s Shapella upgrade that enabled withdrawals of staked ether on the network for the first time.

Open Interest, the total number of contracts outstanding in the market, reached a fresh record of around $205 million.

“Shapella was a de-risking event for Ethereum because it closed the loop on staking liquidity by allowing validators to finally withdraw their staked ether,” Carlos Gonzalez, a research analyst at 21Shares, told The Block.

The liquidity risk for investors, particularly for institutions, has been reduced, which could have contributed to increased ether options and open interest, Gonzalez said.

“Last week, we saw the highest amount of ETH being staked in a week,” he added. “The inflow was driven mainly by institutional-grade staking providers, including Stakefish, Staked.US, Kiln, Figment, and Bitcoin Suisse combined for 162,464 ETH staked in the last seven days.”

Ether futures activity

Beyond the Shapella upgrade, the 30-day moving average of ether’s spot-to-futures volume is nearing a three-year low, according to The Block data. This means that futures activity has been increasing faster than the demand from spot buyers, Gonzalez noted.

“The ratio has stayed in a somewhat tight band since September 2022 (the date of the Merge), suggesting that the system has become more leveraged as investors speculate on how proof-of-stake and staking withdrawals will impact Ethereum’s future,” he said.

As more traditional finance firms enter the market in the U.S. with structured products using proven options strategies, Dunn anticipates a further surge in interest, according to Michael Dunn, chief product officer at Bitnomial.

“We’re seeing increasing demand for crypto options, especially ether, as investors are actively seeking ways to earn yield on their assets,” he told The Block. 

Ether options on the CME launched in August of last year, shortly before The Merge — when the blockchain moved to a proof-of-stake consensus mechanism.

© 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 creators of Lens Protocol have introduced a beta version of Bonsai, a blockchain scaling solution, as the blockchain-based social media project gears up to handle an increased volume of transactions for users of Lens-based decentralized apps.

Aave Companies, the development firm responsible for Lens Protocol, announced that Bonsai was specifically engineered to facilitate the scaling of decentralized social media applications, enabling the processing of numerous transactions with minimal associated costs.

Scalability is a significant issue for decentralized social media, as such products are both data-intensive and involve a high throughput of transactions. Blockchains typically struggle with both of these issues. The team built Bonsai in response.

“To be competitive with web2, decentralized social platforms must scale. With the ability to support mass consumer adoption, we’ll see continued web3 innovation — new, exciting and compelling features and business models that will spur web3 adoption,” said Stani Kulechov, CEO of Aave and founder of Lens Protocol. “Bonsai provides hyperscalability that supports blockchain’s core values and guarantees, delivering secure, fast and cost-effective scalability.”

Lens Protocol is a social graph that offers a software stack to build decentralized competitors to social media giants like Twitter and Facebook. Launched on Polygon in May 2022, there are over 110,000 social media profiles and hundreds of applications on Lens.

Lens’ new scaling solution relies on data availability

Lens Protocol aims to achieve censorship resistance for social media apps and help them unlock new forms of content monetization with NFTs, as well as other crypto assets. These include apps such as Lenster, Lens Booster, Phaver, Lenstube, LensPort, Memester and others. 

To help such apps scale to a large number of users, Bonsai will optimize cost and scalability by batching transactions into off-chain data availability layers for storage, avoiding the limitations of block space on Ethereum and other blockchains, Aave explained in a press release. Bonsai will also allow developers and users to store select transactions off-chain in such a way that they remain accessible and verifiable, the team said.

Similar to existing scaling solutions, Bonsai will process most transactions off-chain, relying on a data-availability layer. Additionally, it will have a verifier component to help validate user transactions on-chain. Data availability is essential for scaling solutions like Bonsai because it ensures that off-chain data remains accessible and verifiable when needed for on-chain settlement, dispute resolution or audits.

© 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.

Note to Gary Gensler: The internet is forever.

Another old video of Gensler lecturing on cryptocurrency at the Massachusetts Institute of Technology gained traction online this week. In the 42-second clip, Gensler said that a wide swath of the crypto market are commodities, not securities.

“We already know in the U.S., and in many other jurisdictions, that three-quarters of the market are not ICOs, or not what would be called securities,” Gensler said. “Three-quarters of the market is non-securities. It’s just a commodity, a cash crypto.”

Years later, the SEC has named a number of crypto tokens as securities in lawsuits under Gensler’s leadership. Coinbase CEO Brian Armstrong, whose company is gearing up to battle the Securities and Exchange Commission in court, reposted the 2018 Gensler clip with a one-word addendum. 

“Wow,” Armstrong wrote in a tweet.

Coinbase was recently warned of an investigation by the SEC, and Armstrong’s poke at Gensler comes days after his company filed a lawsuit against the SEC.

The commission did not respond to a request for comment.

More videos circulate

Coinbase is suing the commission to answer its request that the SEC draft and approve a rule specific to digital assets. The company filed the initial petition for a rulemaking last year. 

“It seems like the SEC has already made up its mind to deny our petition. But they haven’t told the public yet,” said Paul Grewal, Coinbase’s chief legal officer, in a Monday blog post. A former Coinbase employee was wrapped up in a separate insider trading case last year.

Coinbase did not comment.

Crypto watchers have been dredging up old videos of Gensler talking crypto, especially as his agency takes a more aggressive approach to the industry. Gensler became SEC chair in 2021, and previously led the Commodity Futures Trading Commission from 2009 to 2014. Before joining the SEC, Gensler was a professor at MIT’s Sloan School of Management, where he taught on global economics and management.

After the SEC called Algorand’s token a security in a lawsuit against Bittrex this month, a video circulated online in which he calls the blockchain “great technology.” The 2019 video was filmed during a lecture Gensler gave at MIT.

© 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.