👨‍⚖️ Will DeFi Exchange Survive?

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Good Morning,

Crypto markets are flat. Investors attention are over at stETH as well as whatever is going over at the land of $BEN and $PSYOP. Many thinks both tokens are pure honeypot (scams), so tread carefully.

Also, Bitcoin Miami 2023 conference is happening — historically, it hasn’t been good for the markets.

In Today's Email:

• What Matters: DeFi exchange will be regulated 👨‍⚖️

• Founders-Investors Highlight: Matthew Tan, Founder of Etherscan 🔎

• Deal Flows: Metaco $250M Acquisition 💰

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WHAT MATTERS

DeFi Exchange Will Be Regulated

State of play: CFTC Chair Behnam states that decentralized exchanges will be regulated either by the SEC or CFTC even if they’re just self-effectuating codes.

• In a podcast recorded at the ISDA meeting, Behnam was asked about the self-effectuating nature of crypto protocols.

• Behnam insisted that there’s still an entity behind the code that sets it up, writes the code, and launches the products to the public.

• “It’s easy to suggest, ‘Oh there’s no institution, there’s no individual, it’s just code, you can’t regulate that, it’s self-effectuating,’ but that really is the wrong set of questions. It’s really about what are U.S. customers being offered and exposed to? And who is either the individual or group of individuals who set up that entity, that code, to offer those products?” — The Block

Why it matters: It remains to be seen how DEXs like Uniswap will be regulated.

• Without the permissionless element (for example, if Uniswap is required to do a full KYC) there’s arguably no benefits that Uniswap provides compared to its centralized equivalent.

• Arguments around increased on-chain transparency can be made, but that might not be enough of a value proposition for the end users.

For builders: US regulators tone are increasingly concerning. If you’re building a product that facilitates crypto asset’s transaction, do not reside in the US.

• Even if you don’t launch a token, the regulatory trajectory isn’t looking good.

• Study what other jurisdictions are doing and relocate accordingly so you can be heads down focus on building great products instead of worrying about regulation.

For investors: I believe larger investors will be at the forefront of the legal battles that will provide clarity for US institutional crypto investors.

• Unfortunately, we have to wait for courts decisions to make sense of what’s next.

BUILDER-INVESTOR HIGHLIGHT

Matthew Tan, Founder of Etherscan

Matthew Tan is the Founder and CEO of Etherscan, a leading block explorer, API, and analytics platform for Ethereum. Etherscan is based in Malaysia.

• Etherscan is a primarily bootstrapped company. It raised capital twice in 2016 and 2021, but both were seed rounds with undisclosed sizes.

• Etherscan currently has a team of ~30 people and has expanded into more than 18 blockchains.

• Based on our assessment and industry insights, Etherscan is a profitable business with $20-30M annual revenue.

Previous backgrounds: Matthew is an extremely experienced technologist.

• He graduated from the University of Central Oklahoma with an MBA degree and led a software consulting firm for 15 years before getting into the crypto space in 2014.

The big idea: Etherscan is the most popular block explorer for Ethereum.

• It is now getting into the B2B business of creating block explorers for other Layer 1 chains, as well as expanding its analytics offerings.

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 👇

INSIGHTS

Curve’s $crvUSD Potential

Curve has launched its own decentralized stablecoin.

• Earnings from crvUSD will be distributed to veCRV holders.

• In a test environment, $1.5M crvUSD produced $2,000 in fees through stabilization, which is equivalent to 7% in APY.

• Unlike Maker’s DAI model, crvUSD will not liquidate a user’s collateral all at once, but it will be gradual instead.

Some use-cases for crvUSD:

DEAL FLOWS

Metaco $250M Acquisition

Deal flows soared this week 🔥 — we saw $500M+ in deals.

Ripple buys Metaco for $250M: The Swiss-based crypto custody firm will continue to operate as independent business unit.

• The acquisition allows Ripple to expand its offerings, getting into the realm of custody, issuance, and settlement of tokenized assets.

• It’s also a diversifying solution to broaden Ripple’s presence outside of the US amidst regulatory uncertainty.

• The deal was financed through a combination of cash and Ripple equity.

Deal flows in the past week:

• IZUMO, $2.2M Angel Round

• Lagrange, $4M Pre-Seed Round

• Airstack, $7M Pre-Seed+ Round

• Dolomite, $2.5M Seed Round

• Asymmetry, $3M Seed Round

• Hourglass, $4.2M Seed Round

• Anotherblock, $4.35M Seed Round

• Azteco, $6M Seed Round

• Unitea, $7M Seed Round

• Story Protocol, $29.3M Seed Round

• Cormint, $30M Series A

• Auradine, $81M Series A

• River Financial, $35M Series B

• Jia, $4.3M Unknown Round

• Soluna, $12M Unknown Round

• Aki Network, Undisclosed $ Seed Round

• The Open Network, Undisclosed $ Strategic Round

• Red Beard Ventures, $25M Venture Fund

• Metaco, $250M Acquisition by Ripple

QUICK BITES

• CFTC Chair says DeFi exchanges will be regulated.

• Tether plans to invest up to 15% of profits in BTC.

• SEC thinks Filecoin is a security.

• Jump did secret deal to help TerraUSD stablecoin, SEC says.

• Coinbase launches subscription service.

• Visa experiments with Ethereum Goerli Testnet.

• Hong Kong recruits firms to test digital currency.

• US Hearing highlights stablecoin rift in House bills.

• Circle moves $8.7B USDC reserves to repo agreements.

MEME & NOTEWORTHY READS

• Joel John’s read on crypto on-ramp for the masses.

• Grace Deng’s thread on possibilities in rollups sequencer restaking.

• @DeFiIgnas’ read on the DAO takeover playbook.

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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.