Choke Point 2.0 & De-banking Crypto

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Good Morning.

Do you know that a hippo would win against a crocodile or a polar bear?

Pablo Escobar even imported one to Colombia in the late 1970s, now the descendants of his hippos have multiplied to nearly 200. What’s the point of this story with crypto?

The best-performing meme coin in the past week is Moo Deng, a baby hippo. It did a 50x in the past week.

This is why you’re reading this newsletter.

In Today's Email:

• What Matters: Choke Point 2.0 😱

• Founders Highlight: Chasm founders 🛠️ 

• Deal Flow: Helius’s $21.75M Series B 💰️ 

You read and share. We listen and improve. Send us feedback at [email protected].

WHAT MATTERS

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WHAT MATTERS

Operation Choke Point 2.0 & De-banking Crypto

State of play: Nic Carter published a piece on how the Biden administration played a key role in the downfall of Silvergate Bank through regulatory pressure and an informal mandate to limit crypto deposits.

Regulatory Pressure and Warren's Criticism

• According to Carter, regulatory pressure, the mandate, and Senator Elizabeth Warren's vocal criticism of Silvergate’s ties to FTX led to a run on the bank.

• Warren’s pressure on regulatory bodies and her public statements are presented as significant contributors to Silvergate's collapse

• While the volatile crypto industry is blamed for Silvergate collapse, new bankruptcy filings suggest regulatory scrutiny played a major role.

Voluntary Liquidation

• Silvergate voluntarily liquidated in March 2023, raising suspicions about external pressures.

• Reportedly, the San Francisco Federal Reserve imposed an unofficial 15% cap on crypto deposits, communicated verbally to Silvergate.

• Despite no criminal charges against Silvergate, political pressure reportedly led the Federal Home Loan Banks (FHLB) to refuse loan renewals.

Debanking Crypto

• Some allege a coordinated effort by the government to debank crypto-friendly institutions.

• The regulatory crackdown extended beyond Silvergate, with the FDIC also restricting Signature Bank from selling its crypto-related deposits.

• By mid-2023, all major banks serving the crypto sector had either collapsed or exited the industry due to heightened regulatory pressure.

Why it Matters: Carter’s new piece alleged that the Biden administration used covert tactics, such as backroom deals and intimidation, rather than public rulemaking.

For builders and investors: Always remember that crypto is a global industry and weigh your strategic move accordingly depending on your personal circumstances and geographical arbitrage that you can capitalize on.

BUILDER-INVESTOR HIGHLIGHT

Thee, Koh, and Han of Chasm

Intro: Khai Chun Thee, John Koh, and Lai Weng Han are the co-founders of Chasm, a decentralized platform focused on making AI accessible, open, and user-friendly for everyone.

Previous background: The three co-founders worked together in Pacer, a wellness-to-earn app, and Hooga Gaming, a web3 gaming project.

• John was a data science and machine learning engineer for 3 years.

• Han worked for CoinGecko for 3 years as an engineer.

• Thee started his career at Hooga.

The big idea: Thee, Koh, and Han through Chasm are crafting an inclusive, transparent, and efficient AI ecosystem where innovation thrives and intelligence is democratized.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 500 crypto VC individuals 👇

INSIGHTS

Crypto Projects That Actually Make Money

Credits to Darshan Gandhi and Blockcrunch for the original piece

State of play: Many Web3 startups have struggled to scale, prioritizing short-term gains over sustainable business models. As a result, few have thrived since the 2021 peak, often relying on token speculation instead of building long-term value.

What’s Changing?
There’s a shift towards tokens linked to real business models and tangible revenue. Investors and users are now favoring projects that offer sustainable benefits, with mechanisms like staking and token burning gaining traction.

• For example, Uniswap rewards users with fees for trading and providing liquidity.

Which Sectors Are Performing Well?

• DePIN: This sector has garnered attention due to projects like Helium, which uses its HNT token to reward users for providing wireless coverage.

• Social Platforms: Although still nascent, Web3 social apps like Farcaster and Lens Protocol are gaining traction and generating revenue.

• Launchpads: Platforms like Pump Fun and Multiplier are helping new projects gain relevance and distribution, generating millions in revenue.

• DeFi Products: DeFi platforms like Uniswap and Aave continue to generate substantial revenue.

Web3 vs. Web2 Models
Web2 companies rely on centralized revenue models (subscriptions, ads), while Web3 leverages decentralized models (tokenomics, transaction fees). The focus must shift to sustainable revenue models, prioritizing real token utility over hype.

Examples of Successful Projects:

• Helium: Focusing on mobile carrier services, Helium's value is tied to network usage. It has rapidly gained users and data transfers.

• Uniswap and Jupiter: Solana's Jupiter is gaining market share, with combined trading volumes nearing $45B across top DEXs.

• Farcaster: A leading crypto social platform generating revenue through permanent storage fees.

• GEODNET: Providing precise location services for AI and IoT, GEODNET has scaled rapidly and is on track for $2-3M ARR by year-end

• Across Protocol: Facilitating asset transfers across blockchains, Across earns revenue through fees, showing strong demand for cross-chain liquidity.

DEAL FLOWS

Helius’s $21.75M Series B Round

Deal flows bounced this week, we saw $220M+ in deals 💼 

Helius, a provider of developer tools for Solana, has raised $21.75M to enhance its app developer services.

• The funding round was led by Haun Ventures and Founders Fund, with support from 6MV, Foundation Capital, Chapter One, and Spearhead.

• Helius raised $9.5M in a Series A round earlier this year.

• Helius offers high-performance RPC Nodes, APIs, Webhooks, and Geyser Plugins for low-latency data streaming, along with a ZK Compression tool.

Deal flows in the past week:

• EarthFast, $1.4M Pre-Seed Round

• Helix Labs, $2M Pre-Seed Round

• Meridian, $4M Seed Round

• AminoChain, $5M Seed Round

• Daylight, $6M Seed Round

• Smolbound, $6M Seed Round

• Zulu Network, Undisclosed $ Seed Round

• Mind Network, $10M Pre-Series A Round

• Initia, $14M Series A Round

• Grass, Undisclosed $ Series A Round

• Mawari, $10.8M Startegic Round

• Celestia, $100M OTC Deal

• Infinex, $65.3M Unknown Round

QUICK BITES

• Base surpasses $2B in TVL.

• South Korea fines Worldcoin.

• Core blockchain surpasses $400M TVL.

• Crypto hack and scam losses fall to $413M in Q3.

• Robinhood considers a potential stablecoin launch.

• Mark Cuban wants to lead SEC if Kamala is president.

• Bitdeer and TSMC to launch state-of-the-art mining chip.

• Tornado Cash developer to face trial as US judge rejects dismissal.

• Ethena plans to launch a new stablecoin backed by BlackRock's fund.

• DOJ seizes exchanges’ domain related to Russian money laundering ops.

• US Foreign Affairs Committee passes resolution demanding Binance exec release in Nigeria.

NOTEWORTHY READS

• gtx360ti’s read on Polychain selling TIA.

• Forbes’ read on Brian Armstrong and Coinbase.

• Electric Capital’s read on its multi-chain stablecoin dashboard.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.