28 February

Liquid Staking Replaces DeFi Lending as Second-Largest Crypto Sector

“The Ethereum blockchain’s upcoming Shanghai software upgrade, which will allow stakers to withdraw the ether (ETH) they have staked and the accumulated rewards for the first time, has galvanized investor interest in liquid staking.

Liquid staking is the best-performing crypto sector this year, with growth in total value locked approaching 60%. Lido’s governance token LDO has rallied 220% this year, outperforming industry leaders bitcoin (BTC) and ether by a huge margin. Governance tokens of Lido’s rivals Rocket Pool and Frax have also surged.

The upgrade will innovate the current space by allowing for healthy competition between liquid staking solutions, will strengthen ETH’s position by providing yield from staking/unstaking, and will give users the security of maintaining sovereignty over their assets.

By opening up to withdrawals, the upgrade is expected to improve overall liquidity. Since December 2020, more than 16.5 million ETH has been staked in Ethereum’s Beacon Chain, of which 42% has been locked through liquid staking protocols.

Only 14% of ETH is currently being staked vs. 58%, the average for layer 1 coins. Its likely interest in staking will continue to swell. It could be argued that many groups of individuals had been waiting for Shanghai to stake their ETH, as withdrawals will remove the liquidity risk and uncertainty of an previously undefined lock-up period.

The total value of crypto assets deposited in liquid staking protocols was $14.1 billion as of European trading hours on Monday, making it the second-largest crypto market sector, according to data source DefiLlama. The total value locked in decentralized-finance (DeFi) lending and borrowing protocols was $13.7 billion, the third largest, while decentralized exchanges, with deposits of $19.4 billion, held the top spot.”

CDCROP: UK United Kingdom British England Flag (Unsplash)

UK Banking Regulator to Propose Rules on Issuing, Holding Crypto

“The Prudential Regulatory Authority (PRA), which regulates banks in the U.K., is planning to propose rules on issuing and holding digital assets. New standards for PRA-regulated firms will be coherent with rules for other sectors, according to a footnote accompanying the text of the speech.

The country is trying to firm up its approach on crypto, including stablecoins and other digital settlement assets that could pose a risk to financial stability. Once the Financial Services and Markets Bill becomes law, authorities will have powers to regulate the sector. The U.K. government is currently consulting on its regulatory approach.”

CDCROP: Japan, Tokyo, West Shinjuku, office buildings and flag, low angle view (Getty Images)

Mitsubishi, Fujitsu and Other Tech Firms to Create ‘Japan Metaverse Economic Zone’

“Several major Japanese technology, manufacturing and finance firms are teaming up to create the infrastructure for an open metaverse in order to propel the nation’s Web3 strategy forward.

The goal of the metaverse alliance is to help build the framework for corporations to tap into Web3 marketing, work reform and consumer experience initiatives. RYUGUKOKU will serve as a virtual world to connect users to different Web3 services created by companies and government agencies.

Japan has been working to integrate Web3 technology into its national agenda. In October, Prime Minister Fumio Kishia said the country would be investing in digital transformation services, including non-fungible tokens (NFTs) and the metaverse. And in November, the country’s Digital Ministry laid plans to create a decentralized autonomous organization (DAO) to help government agencies enter Web3.”

Crypto Crime Hit All-Time High of $20.6B in 2022: Chainalysis

“According to the Chainalysis report, criminal activity accounted for 0.24% of all blockchain transactions last year – an increase from the year before of 0.12%. However, crypto crime is ‘a small share of total volume at less than 1%,’ the report found.

While other forms of illicit activity may have trended down, there were two categories that really stood out in terms of their growth, and that’s sanctioned activity and hacking.

Grauer said that after the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) began to crack down on crypto platforms in 2021 rather than singling out crypto addresses of specific bad actors, all transactions done by the platforms that were said to facilitate crimes were counted.

OFAC’s success often depends on the type of entity OFAC is sanctioning and whether users in that jurisdiction care about the sanctions imposed on the platform. Chainalysis found a significant increase in the amount of funds hacked by North Korean organizations during 2022. North Korean-based cyber criminals hacked $1.6 billion worth of funds.

In 2022, $3.8 billion worth of crypto was stolen from DeFi protocols, an increase from $3.3 billion stolen the year prior. ‘We can’t continue to have this rate of hacking, because it just really undermines trust in the ecosystem.'”

TrueUSD Becomes 5th-Largest Stablecoin as Binance Mints $130M TUSD in a Week

“TrueUSD’s resurgence comes as Binance has been increasingly relying on the token after its BUSD stablecoin became a prime target in a U.S. regulatory crackdown. TUSD’s growing presence on Binance represents a significant reversal, coming six months after Binance ditched TUSD among other stablecoins from the platform’s trading pairs to consolidate trading liquidity and boost BUSD.

TUSD has toppled decentralized finance protocol Frax Finance’s native stablecoin frax (FRX) for fifth place in market value by growing 15% over the last week. With the recent gains, TrueUSD stablecoin’s circulating supply surpassed $1.1 billion.

TUSD is a dollar-pegged stablecoin issued by crypto firm ArchBlock, previously known as TrustToken. Its value is fully backed by fiat assets, according to blockchain data provider ChainLink’s proof-of-reserve monitoring tool. In 2020, Asian conglomerate Techteryx acquired TUSD’s intellectual property rights, TrustToken said at the time, separating the stablecoin from the decentralized lending protocol TrueFi.”

Barry Silbert. CEO & Founder Digital Currency Group (DCG)

Crypto Conglomerate Digital Currency Group Reports Loss of $1.1B in ‘Challenging’ 2022

“Cryptocurrency conglomerate Digital Currency Group (DCG) reported a loss of $1.1 billion last year as the firm struggled with plunging crypto prices and the restructuring of its lending platform, Genesis.

In addition to the negative impact of [bitcoin] and crypto asset price declines, last year’s results reflect the impact of the Three Arrows Capital (TAC) default upon Genesis.

From a consolidated balance sheet perspective, DCG held total assets of $5.3 billion as of Dec. 31, 2022, the report said. This included cash and cash equivalents of just $262 million. Investment assets, including tokens, Grayscale trust shares, venture and fund investments amounted to $670 million. The remaining assets consist mostly of assets held by divisions Grayscale and Foundry, according to DCG.

Despite the challenges of last year, DCG said it had “hit a milestone” regarding the restructuring of Genesis, pointing to a nonbinding term sheet agreement involving some of the main creditors. Negotiating definitive transaction documents and soliciting votes on a reorganization plan is expected to take several months, said the report.”

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