29 June

“The crypto custody firm is enrolling customers a few months ahead of Ethereum’s planned transition to a proof-of-stake mechanism. The transition to PoS, which is intended to be faster and more energy efficient than PoW, is expected to occur in August.

Rewards for validators are expected to double to about 8% or 9% after the Merge as transaction priority fees currently paid to miners start to be distributed to validators.

Institutional staking is definitely a win for institutional investors. [Ethereum] is the biggest network to do proof-of-stake, and having it bank-supported legitimizes [staking] as a real alternative to proof of work.”

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The bank reiterated its view that blockchain technology delivers the most significant evolution of software since the internet, adding that the emerging ecosystem of Web3 applications has the ‘potential to transform every industry.’

Client engagement continues to grow and focus remains on the rapid development and disruptive nature of blockchain technology.

Participants said regulatory clarity is critical for institutional and corporate engagement, which could ultimately speed up real-world use and result in mainstream adoption as consumer confidence in the sector increases. It was a consensus view that institutional investors and corporates are preparing to enter the digital assets ecosystem, but remain on the sidelines until a comprehensive regulatory framework is established.”

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“The State Duma, the lower house of the Russian legislature, has passed a bill on the taxation of digital assets that exempts their sale from value-added tax (VAT) in the Russian Federation. In addition, the bill established income tax rates of 13% for Russian exchanges on the first 5 million rubles (currently about U$93,000) of the taxable base annually, 15% on amounts above that limit and 15% across the board for foreign exchange operators. The current tax rate for companies is 20%.

The government noted in the bill that a separate tax procedure for digital assets is key to the creation of an effective and competitive digital economy. Russia has tempered its skeptical stance on cryptocurrency as the country has increasingly felt the pressure of Western economic sanctions.

I think all self-respecting states will have a national digital currency within three years. […] We should be ready as soon as possible. Plus, this will settle the issue of being blocked from SWIFT, because this integration will make SWIFT unnecessary.”

“The crypto industry was “brought to its knees” in recent weeks by an “old-fashioned Madoff-style Ponzi scheme” wrapped in a trade that was similar to the positions that sunk Long Term Capital Management (LTCM), research firm FSInsight said in a report Friday.

Madoff in this scenario would be the founders of 3AC, Su Zhu and Kyle Davies, who used their reputation to ‘recklessly borrow from just about every institutional lender in the business,’ resulting in pain for some high-profile firms in the industry, including Voyager Digital, Babel Finance and BlockFi. Bernie Madoff was an American financier who ran the largest Ponzi scheme in U.S. history.

Given the size of the exposure that companies like Voyager Digital and BlockFi had to the fund, it appears that the vast majority of 3AC’s assets were bought with debt and its collateralization ratio was quite small. It is likely that Zhu and Davies were simply ‘using borrowed funds to repay interest on loans issued by lenders, while ‘cooking their books’ to show massive returns on capital.’

As asset prices collapsed and margin calls were triggered, 3AC could no longer hold its “daisy chain of leverage together,” which caused illiquidity issues across the whole crypto lending market. The overleveraged nature of this arbitrage trade is similar to the types of trades that were the “death knell” for Long Term Capital Management.”

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“U.S. SEC Chair Gary Gensler has reiterated his claim that bitcoin (BTC) is a commodity. His interpretation is partially rooted in precedent and, one would hope, reality.

Some, like bitcoin, and that’s the only one, Jim, I’m going to say because I’m not going to talk about any one of these tokens [that] my predecessors and others have said [are] a commodity.

The government’s stamp of approval seems to separate BTC from “crypto,” but decentralization is a path.”

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Post-merge MEV Reward Structure