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Two aspects of the crypto word, blockchain tech companies and exchanges and crypto miners, reveal that M&A activity is strong and that crypto-related companies have converged with the rest of tech, a sign that the digital-asset industry is maturing.

New York’s head banking regulator used an appearance before a congressional committee on Wednesday to push back against the narrative that Signature Bank failed because of its exposure to the crypto industry.

“It is a misnomer that the failure of Signature Bank was related to crypto,” said  Superintendent Adrienne Harris. In her testimony before the House Financial Services Committee’s panel on digital assets, financial technology and inclusion, Harris noted that Signature customers including fiduciary trusts and wholesale food vendors pulled their money from the bank during a panic last month following the collapse of Silicon Valley Bank.

“So it’s of course unfortunate that there was a run on the bank,” Harris said. “But it is not the case that the failure Signature was related to crypto.” 

Maxine Waters, the top Democrat on the House Financial Services Committee, pressed Harris as to how she could say that cryptocurrency didn’t play a part in the large regional bank’s sudden collapse. 

Harris replied that about 20% of Signature’s deposits left the bank the evening that Silicon Valley Bank failed, but that only “20% of that 20%” were crypto-related deposits. “The rest were normal commercial customers with uninsured deposits that were leaving the bank, and so we did not see the collapse as a result of crypto deposits and their instability,” Harris said. 

Harris’ comments came during a hearing on legislation to create a U.S. regulatory framework tailored to stablecoins. 

Signature Bank closure

The New York regulator announced its closure of the bank two days after Silicon Valley Bank’s failure in order to prompt continuation of operations by the Federal Deposit Insurance Corp., a federal bank regulator. 

The New York regulator’s testimony came before the same committee that former Rep. Barney Frank, a Signature Bank board member, used to chair. Frank has criticized the NYDFS for what he alleged was premature action in closing the bank because of its involvement with the digital asset industry.

In addition to holding deposits from digital asset-related companies, Signature also ran a crypto-oriented payments network called Signet, which Martin Gruenberg, the chair of the FDIC, said last month that the agency was trying to sell as part of its wind down of the bank. The regulator also has tried to offload all deposits to other banks to avoid disruption to customers, though Gruenberg indicated in testimony last month that the FDIC had yet to find a buyer for the crypto parts of the business. 

“They closed us even though there was no good, compelling reason to do that because they wanted to show that banks shouldn’t be involved in crypto,” Frank told The Block last month.

© 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.

It’s been a volatile 18 hours for the crypto.

In an interview ahead of Consensus, the early Coinbase employer turned investor-philosopher discusses crypto’s product-market fit, ideas no one gets and living the good life.

Research done by internet sleuth ZachXBT indicates that the “Crank That” rapper has promoted dozens of NFT projects on social media, some of which turned out to be rug pulls.

A blockchain-based high frequency trading bot whose alias references a disgraced former spokesperson for sandwich-maker Subway is profiting from the rising speculation involving high-demand, low-liquidity meme tokens such as the new one with “Pepe the Frog” branding.

In the last 24 hours, a MEV bot operator identified by the ENS name “jaredfromsubway” has spent over $1.1 million on Ethereum network fees in an attempt to front-run transactions involving the tokens. That’s nearly 1.7% of all gas fees on the network, according to data from Etherscan, making the bot the second-largest spender in terms of gas fees.

The bot contract has amassed around $700,000 in profits over the past day by employing a “sandwiching” technique on decentralized exchanges like Uniswap. The detail was first observed by Bobie, a pseudonymous researcher at the on-chain analytics project 0xScope, and shared with The Block.

Targeting memecoin traders

The MEV bot has primarily focused on profiting from front-running memecoins, especially with tokens such as Pepe, Wojak, and Chad attracting fresh attention from traders. MEV, which refers to “maximal extractable value,” is a strategy that involves manipulating transaction sequencing to exploit profitable on-chain trades.

Memecoins have seen a remarkable surge in recent days. The value of the Pepe token, for example, skyrocketed nearly 100-fold since April 14, reaching a market capitalization of $100 million just one week after its launch.

Others meme tokens including Wojak, Chad, and Arbi Pepe have also seen considerable upswings, driven by the excitement of numerous retail traders and the minimal effort required for their creation, as pre-existing smart contract templates are readily accessible on open-source software forums.

Hype slippage 

Memecoins typically rely on hype and, although they sometimes trade at high volumes, usually lack sufficient liquidity since they are primarily traded on decentralized exchanges. As a result, they may be subject to slippage costs, making them ideal targets for MEV bots to exploit through sandwich attacks.

During a sandwich event, a bot identifies a pending user transaction and submits a transaction with a higher gas price to buy or sell the same cryptocurrency just before the user’s transaction, thereby causing a price change. Afterward, the bot quickly executes another transaction to buy or sell the cryptocurrency, taking advantage of the change.

While this form of front-running can yield substantial profits for malicious actors, it adversely affects the trading experience for regular investors who are often urged to use tools that can provide protection from the threat. The adoption of these resources, however, remains limited within the crypto community.

The growing interest in memecoins, combined with an increase in MEV activities, has been cited as a contributing factor to the recent spike in Ethereum gas fees, which are currently hovering around 70 gwei. That’s about $20 for an on-chain swap, although it briefly peaked at over 200 gwei ($50) earlier today.

© 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 news comes a day after the firm teased a potential blockchain announcement by tweeting an orange dot.

Todd Groth of CoinDesk Indices quizzes ChatGPT about crypto and then explores how that might factor into an investment opinion.

After spending a day building hype with a series of cryptic tweets including images of orange balls, A16z Crypto just revealed what all the fuss was about: a new Layer 2 rollup client called Magi. 

The venture capital giant’s client software is being built on the OP Stack, a software stack to create a blockchain dApp ecosystem around the Optimism Layer 2 network, according to a blog post announcing the launch.

Magi is a new rollup client developed in Rust to increase client diversity and improve the OP Stack ecosystem. It is in its early stages and needs further development before being a feasible alternative to existing clients. Future plans for Magi include improving latency, sync speed and testing frameworks, according to the firm.

A client refers to a software application that allows users to interact with a blockchain network, validating transactions and maintaining a local copy of the network. Having multiple clients or client diversity is important for a blockchain network so it has no single point of failure.

“Magi acts as the consensus client (often called a rollup client in the context of the OP Stack) in the traditional execution/consensus split of Ethereum — it feeds new blocks to the execution client in order to advance the chain. Magi performs the same core functionality as the reference implementation (op-node) and works alongside an execution node (such as op-gETH) to sync to any OP Stack chain, including Optimism and Base,” the firm wrote in the blog post.

A16z’s crypto investments

Andreessen Horowitz is one of the highest-profile investors in crypto, with more than $7 billion in funds dedicated to investments in the sector. The firm has been involved in 11 fundraisings for crypto startups so far this year, according to The Block’s Deals Dashboard.

A16z Crypto is an investor in Optimism, the Ethereum scaling startup formed in early 2020. Optimism’s OP token climbed to $2.65 from about $2.55 following today’s announcement, according to CoinGecko data. 

© 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.

Members of the European Parliament seem nonplussed as they are set to consider legislation for a central bank digital currency.