Blockchain Confidential - 1 April 2022

Axie hacked, CME Solana & Cardano futures, Cathie Wood's ETF dreams denied

The Week

April Fool’s came early to Axie Infinity, unfortunately, with a massive $625M hack of its Ronin network bridge. In a small milestone, 19 million Bitcoins have now been mined, with only 2 million left to go in the coming years. VanEck analysts predicted the O.G. crypto could hit $4.8M if it became a global reserve asset; the ETF issuer has a long history of interest in the space. Anchor outpaced DeFi Blue Chip Aave, and is now the third-largest DeFi protocol by total value locked (TVL), though questions about its sustainability hung over that milestone. Blockchain Confidential likes to geek out about decentralized identity (DID) and Zero Knowledge Proofs (ZKP) and so Polygon’s announcement of Polygon ID was nice to see. A trustworthy DID implementation is in our view a key building block for the future. On the blockchain scaling front, Binance’s BNB Chain will launch sidechains to cut transaction costs and improve performance, though sharp-eyed readers of that article will note that the comparison to Ronin is a bit unfortunate given the Axie hack.

In a new report on The Future of Capital Markets, one item caught our eyes: half the survey respondents predicted they will launch a pilot bond blockchain in the next three years. Tokenization of all assets is a big theme at Cloudwall Capital, and so this is an interesting signal of fixed income market expectations. The CME is looking to expand its crypto futures offerings with Solana and Cardano futures. Circle chose custodial bank BNY Mellon for its stablecoin reserve assets backing USDC. ANZ reversed course and embraced stablecoins, minting an AUD-backed stablecoin on Ethereum. The Opera web browser will be adding support for eight different blockchain networks to better support decentralized applications (DApps). Finally, the Devil wears Prada in the metaverse now: this week saw Decentraland hosting the first-ever metaverse fashion show. If Citibank analysts are right, the overall metaverse economy could grow to $13T by 2030. That’s a lotta Louboutins.

The Good Read

Coinmonks had a new primer on tokenomics and token taxonomy which is worth checking out. If you don’t feel like a read and instead feel like a good listen, try Aislinn Keely’s Policy Scoop podcast on the impact of sanctions on crypto exchanges.

Regulator Radar

This week’s regulator radar is off the charts in the U.S.. We have Senator Warren calling for a U.S. CBDC, a proposed bill tightening reserve reporting requirements for stablecoins, and most prominently the ECASH bill was introduced. The latter calls for the U.S. Treasury — not the Fed — to develop a ledger-less, cash-like digital payment mechanism. While it could exist alongside a CBDC, such an instrument is a political shot across the bow of both private stablecoins and CBDC networks, and it is very clearly motivated by privacy concerns. But wait! There’s more! The GAO issued guidelines on blockchain policy, the SEC wants custodians to disclose crypto asset holdings as liabilities and do more to disclose risks to investors, though it seems SEC Commissioner Pierce was not pleased with how they went about it, though not as unhappy as those objecting to a tweak to a rule that could turn many DeFi protocols into unregistered dealers.

Continuing in the U.S., the FTX derivatives exchange clearing proposal before the CFTC drew fire at a congressional hearing. The OCC got into the act as well warning banks about tail risks from crypto derivatives exposures. Finally, it is Friday, which means the SEC rejected yet another Bitcoin spot ETF application: this time it was Cathie Wood’s Ark 21Shares. Will they never learn?

The big news across the pond was in the EU Parliament, which aims to ensure even the smallest crypto transactions are subject to robust AML reporting requirements, scrapping an EUR 1000 floor. Given the blockchain community’s mile-wide libertarian streak, this of course led to a burst of outrage over the threat to privacy

At the Office

April is teardown and rebuild month for Serenity, with a complete rewrite of the middleware and a substantial refresh of the front-end UX underway. Makas, Ilya and Boris worked on how best to integrate our risk models with the Serenity data platform; the ability to rapidly develop, test and deploy new models is going to be key to our success so we can respond to client needs in the fast-moving digital asset market. We launched our “Rebel, Rebel” online recruiting campaign to build up the Research and DevSecOps teams as quickly as possible, and as part of that almost everyone was interviewing people over the last week. We continued outreach to select institutional investors in digital assets to better understand their risk management needs now and in the future. Finally, while we are fond of our 40 Wall Street address for the NYC office, we are also looking at a potential new space for May as we grow.