SEC Drops Dealer Rule Appeal

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Good Morning.

Crypto's in a bit of a renaissance right now. Regulators are finally loosening their grip, ditching rules that just made things messy, while innovators are busy tearing down barriers and mixing up the old playbook. It's like watching a digital art rebellion—messy, exciting, and totally redefining the rules of the game.

In Today's Email:

• What Matters: SEC Drops Dealer Rule Appeal 🥳 

• Founders Highlight: Yu Hu of Kaito AI 👨 

• Deal Flow: Fluent Labs’s $8M Fundraising 💰️ 

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WHAT MATTERS

SEC Drops Dealer Rule Appeal

State of play: The US Securities and Exchange Commission (SEC) has abandoned its appeal of a contentious dealer rule designed to classify digital asset operations as regulated securities dealers broadly.

• A federal judge ruled that the SEC had exceeded its authority by potentially categorizing nearly any participant in buying and selling securities as a dealer.

• This decision is part of a broader reset in the SEC's approach to digital assets under new leadership.

• The agency’s move to drop the appeal, amid concerns that continued litigation could reduce Treasury market liquidity and increase taxpayer costs.

• Additionally, the SEC recently sought to pause its enforcement actions against Binance, indicating its readiness to resolve disputes through alternative means.

• Blockchain Association CEO welcomed the dismissal, expressing hope for more productive discussions between regulators and the crypto industry as the US embraces a friendlier regulatory framework for digital assets.

What’s next: With acting chairman Mark Uyeda overhauling senior staff and legal strategies, the SEC is shifting away from its historically adversarial stance, a policy long associated with former chairman Gary Gensler.

For builders and investors: The new approach encourages constructive conversations between regulators and industry players, potentially leading to clearer guidelines and a more predictable operating landscape for both builders and investors.

BUILDER-INVESTOR HIGHLIGHT

Yu Hu of Kaito AI

Intro: Yu Hu is the CEO and founder of Kaito AI, an AI-powered search engine to index a wide range of Web3 sources including social media, forums, research papers, and more.

Previous background: Before founding Kaito AI, Yu Hu built a solid foundation in finance and entrepreneurship.

• He managed a $500M long/short portfolio at Citadel in London.

• He also developed M&A and financing expertise at Deutsche Bank and co-founded Babel Education.

The big idea: Yu Hu and Kaito aim to solve the information fragmentation issue in the crypto space.

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INSIGHTS

BitGo & Copper Launch Off-Exchange Custody Trading on Deribit

State of play: BitGo and Copper have launched a trading solution that lets users trade spot and derivatives on Deribit while keeping assets securely off-exchange.

• Assets are held with BitGo Trust, and trades settle automatically using Copper’s ClearLoop and BitGo’s Go Network.

• This setup eliminates the need for pre-funding, boosting capital efficiency and liquidity.

• The innovation addresses post-FTX security concerns, offering a safer and more agile trading experience.

DEAL FLOWS

Fluent Labs Raises $8M for Blended Execution Network

Deal flows soared this week - we saw $190M in deals 💼 

Fluent Labs has secured $8M in funding led by Polychain to develop the first blended execution network.

• The platform overcomes the limitations of current rigid environments by integrating EVM, SVM, and Wasm.

• The platform enables developers to use a wide range of programming languages—from Solidity and Rust to C++ and AssemblyScript—in one unified system.

• The approach not only maintains compatibility with Ethereum and Solana standards but also supports both web3-native and web2-native tools.

Deal flows in the past week:

• Fomo, $2M Angel Round

• MANSA, $3M Pre-Seed Round

• Altius, $11M Pre-Seed Round

• Cygnus, $20M Pre-Seed Round

• Maestro, $3M Seed Round

• Fluent Labs, $8M Seed Round

• Blockaid, $50M Series B Round

• ResearchHub, $2M Strategic Round

• Acre, $4M Strategic Round

• Uswap, $1.5M Unknown Round

• Yield Basis, $5M Unknown Round

• GamerBoom, $9M Unknown Round

• Universal Protocol, $9M Unknown Round

• Mango Network, $13.5M Unknown Round

• Kinto, $20M Unknown Round

• Hashkey Group, $30M Unknown Round

QUICK BITES

• LIBRA fiasco destroyed $251M in investor wealth.

• Strategy set for another $2B in Bitcoin buying power.

• SEC launches new unit focused on fraud in crypto and AI.

• BitGo & Copper enable off-exchange custody and settlement.

• Bitcoin edges higher as investors digest Fed's inflation concerns.

• Tether leads $10M funding in cross-border payments firm MANSA.

• EigenLayer, Polymarket and UMA collaborate on 'next-gen oracle.'

• SEC voluntarily dismisses appeal in case to push 'dealer rule' on crypto.

• Opensea NFT market share surging to 71.5% after SEA token announcement.

• ECB explores using digital ledgers to settle transactions in central bank money.

NOTEWORTHY READS

• Tachi’s read on /arc_angels.

• Delphi Digital’s thread on 10 DeFi Key Insight.

• Kairos Research’s read on Dinero: Staking Redefined.

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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.