Grayscale $17 Billion Victory

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Good Morning,

It is a good day to write about positive crypto news for once: Grayscale won!

Crypto markets soared $100B in market cap, as it might be easier for new capital to flow into the markets from US investors. On a side note, the SEC also filed a sealed motion related to Binance.

Sealed filing usually means it’s related to DOJ charges.

In Today's Email:

• What Matters: Grayscale wins 🔥

• Case Study: $115B illicit crypto ⚠️

• Governance & Features: Polygon L2 tools 🛠️

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WHAT MATTERS

Grayscale Wins Lawsuit Against SEC

State of play: A federal court ordered the SEC to review its refusal of Grayscale's bid to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

• Circuit Judge Neomi Rao agreed with Graysclae that the proposed Bitcoin ETF is materially similar to the Bitcoin futures ETFs.

• The ruling said that the SEC failed to adequately explain why it approved the listing of two bitcoin futures ETFs but not Grayscale’s proposed bitcoin ETF.

• The court decision caused BTC to surge by over 7%, marking the most substantial daily gain in months.

James Seyffart from Bloomberg stated that the SEC has two options to stop Bitcoin ETFs from listing:

1. Revoke the listing of existing Bitcoin Futures ETFs

2. Refusal based on as-yet unused grounds on the custody or settlement of Bitcoin.

He stated that the second option is more likely to be used by the SEC as the custody and settlement issues will not concern the Bitcoin futures ETFs.

Why it matters: The ruling establishes a precedent for the wider crypto sector and underscores the importance of clear and reasoned regulatory decisions that hold significant implications for the industry.

For builders: The decision will have little legal bearing on other parts of the US crackdown on crypto (DeFi, token cases). However, the court's message is clear: the crypto industry needs clear and reasoned regulation.

For investors: With certainties around spot-based investment products in the US, the floodgates will open and it will be easier for new capital to enter the crypto markets.

CASE STUDY

Dark Crypto Underworld in Southeast Asia

Credits to WuBlockchain and Bitrace for the original article.

State of play: Bitrace reports that $115B+ USDT entered illicit Southeast Asian platform wallet addresses in 2022.

The illicit transaction flows comprised of $37.16B USDT used for online gambling, with $69.78B USDT linked to money laundering, and $460M USDT connected to fraud.

• The illicit crypto transactions exhibited a degree of resistance to cryptocurrency market fluctuations, suggesting a certain level of resilience to market volatility.

• In 2022, $14.64B+ contaminated USDT entered CEXs from identified Southeast Asian entity-linked addresses.

• One specific exchange (not named) has seen a greater influx of polluted USDT from Southeast Asia into its business address.

Our take: Emerging markets (EMs) have always had a much lighter focus on AML.

• The standards implemented in the US/EU around capital markets have not always been implemented in EMs.

• That said, completely ignoring AML regulation won’t be a net positive for the crypto space in the long run.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

INSIGHTS

PYUSD Faces Challenges Gaining Traction

Based on Nansen’s research, approximately 90% of PayPal's PYUSD is presently stored in the wallets of Paxos Trust, the issuer of the stablecoin.

• The report indicates that crypto exchange wallets hold nearly 7% of the total supply, including balances on platforms such as Kraken, Gate.io, and Crypto.com.

• The data reveals that there are fewer than 10 holders, excluding contracts or exchanges, who possess a balance surpassing $1,000.

• The largest non-exchange, non-contract holder possesses less than $10,000 PYUSD.

FEATURES & GOVERNANCE UPDATE

Polygon L2 Chain Development Kit

Polygon Labs introduced the Chain Development Kit (CDK), a tool that enables developers to create Ethereum L2 chains using zero-knowledge proofs.

• CDK represents the advancement of the Supernets tool, which is a component of the upcoming Polygon 2.0 roadmap.

• Utilizing the CDK, L2 blockchains that are deployed will possess the capability to link with a shared ZK bridge.

• Polygon stated that the codebase for the CDK will be open-sourced.

Why it matters: The CDK will allow chain interoperability as Polygon 2.0 will prioritize fostering interconnected chains, aiming for an ecosystem similar to Cosmos and Polkadot, tailored for Ethereum L2 developers.

Other notable feature updates:

• Ajna Permissionless Pools goes live.

• Thales Speed Markets goes live.

• XION Testnet goes live.

• Dymension Testnet goes live.

• Aevo lists FRIEND-PERP.

• Beam launches Instant Payouts.

• Membrane Finance launches EUROe on Solana.

• Num Finance launches Peso stablecoin on Polygon.

QUICK BITES

• Grayscale wins the SEC lawsuit.

• Binance considers Russia exit.

• DCG reaches in principle deal with Genesis creditors.

• SEC’s widens scrutiny to NFTs.

• SEC submitted a secret court filing related to Binance.

• Republicans express concern over the Fed’s crypto oversight.

• Tether taps Bahamas private bank to process USD.

• Robinhood and Jump Trading end crypto partnerships.

• Binance launches LatAm payments platform.

• MoonPay launches investment arm MoonPay Ventures.

MEME & NOTEWORTHY READS

• a16z crypto’s read on the impossibility of stateless blockchains.

• Will Clemente’s read on Bitcoin cointime metrics.

• Ignas’ read on crypto Twitter blockchain activity.

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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.