US Treasury Department: DeFi Threatens National Security

Happy Holiday,

The crypto market is flat and quiet. So sit back, relax, and take your well-deserved break.

In Today's Email:

• What Matters: DeFi threatens national security 👨‍⚖️

• Founders-Investors Highlight: Gauthier Le Meur, Co-Founder of Alongside 📈

• Deal Flows: LayerZero $120M Series B 🤝

We plan to start a weekend issue breaking down crypto businesses. Reply to this email to let us know what protocols/companies you want us to cover!

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WHAT MATTERS

US Treasury Department: DeFi Threatens National Security

State of play: The US Treasury Department has published its illicit finance risk assessment report focusing on DeFi.

• The report states that decentralized crypto markets threaten US security.

• The report acknowledges that illicit finance activities conducted via DeFi are still significantly small in comparison to government-issued fiat currency.

• The report realized the innovation in blockchain compliance tools, but argue that they "do not sufficiently address the identified vulnerabilities on their own."

The key takeaway: The report clearly states that even if a provider fully decentralizes, AML-related obligations will continue to apply "so long as the provider continues to offer covered services".

Why it matters: This emphasizes the risk of writing code similar to Tornado Cash, even if it eventually runs autonomously. As the founders, you can still be held responsible.

For builders: If you're working on anything that directly touches crypto assets, the level of compliance necessary will continue to go up. That's not necessarily a bad thing for the space, but it does require more resources from founders.

For investors: Once again, if you're a big investor, helping fight legal cases that can set positive precedents for the space is key.

• If you're a retail investor; understand that no matter how good a project is, if it becomes the subject of constant regulatory pressure (see: Sushi), it won't be going anywhere.

BUILDER-INVESTOR HIGHLIGHT

Gauthier Le Meur, Co-Founder of Alongside

Gauthier Le Meur is the Co-Founder and COO of Alongside, a company that aims to provide the smartest and simplest way to invest in crypto assets. The firm's approach is by providing low-fee index products in a modern way.

• Alongside's first product, a broad crypto market index, allows investors to get exposure to the entire crypto market by purchasing one token, called $AMKT.

• Alongside raised a $11M seed round in February 2023.

• The round was led by a16z, with participation from Coinbase Ventures, Franklin Templeton Investments, Village Global, and Not Boring Capital.

Previous backgrounds: Gaut has a strong passion for technology and startups. He was previously an Enterprise Salesperson at Maze and a Partnership Manager at Google.

• He also writes for Shitposting Works, a newsletter covering the best trends, shitposts, and memes.

The big idea: Alongside's first product, a broad crypto market index, allows investors to get exposure to the entire crypto market by purchasing one token, called $AMKT. It currently has $2.8M in market cap.

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

DEAL FLOWS

LayerZero $120M Series B

Deal flows ramped up in the past week 🤝 — we saw $590M+ in deals.

LayerZero $120M Series B: LayerZero Labs, the firm behind the blockchain interoperability protocol LayerZero has raised $120 million Series B at a $3B valuation. A total of 33 investors participated in the round, including a16z Crypto, Sequoia Capital, Circle Ventures, Samsung Next, OpenSea, and Christie's

• The firm last raised on March 2022 at a $1B valuation.

• The new capital will go towards growth initiatives in the gaming space, and to expand the firm's presence in the APAC region.

• CEO Pellegrino said that LayerZero doesn't need the money, but conducted the raise nonetheless to do significant growth push.

Deal flows in the past week:

• DappBack, $2.5M Seed Round

• Franklin, $2.9M Seed Round

• Ecosapiens, $3.5M Seed Round

• Opside, $4M Seed Round

• Finst, $4.4M Seed Round

• Satsuma, $5M Seed Round

• Astria, $5.5M Seed Round

• Nibiru Chain, $8.5M Seed Round

• RACA, $16M Seed Round

• M^ZERO, $22.5M Seed Round

• Polyhedra, $15M Pre-Series A

• Authlete, $4M Series A

• LI.FI, $17.5M Series A

• SwissBorg, $23M Series A

• LayerZero, $120M Series B

• Lore, $4M Strategic Round

• GoJoe, $1.48M Unknown Round

• Alchemy Pay, $10M Unknown Round

• Bitget, $10M Unknown Round

• UnstoppableFi, 2050 ETH Token Round

• Delphi Labs, $13.5M Web 3 Accelerator

• Republic Crypto, $100M Liquid Token Fund

• Apex Crypto, $200M Acquisition by Bakkt

• RARA, Undisclosed $ Acquisition by Mask Network

QUICK BITES

• Jane St., Tower, and Radix revealed to be unnamed VIPs in Binance CFTC case.

• Singapore plans new banking guidance for crypto clients.

• Binance rejected Justin Sun's offer to buy his Huobi stake.

• MicroStrategy buys an additional 1,045 BTC.

• Binance lost its Australia derivatives license.

• CoinFLEX Founder offers Roger Ver a settlement deal.

• Mt Gox opens repayment window.

• Bitcoin hashrate hits a new all-time high.

• Bitstamp launches a new lending product.

MEME & NOTEWORTHY READS

• @thiccythot_'s thread on the mechanics of token market making deals.

• Paul Grewal's thread on the Tornado Cash case.

• Elena Burger's read on machine learning and zk proofs.

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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.