The Breakdown - Crypto's Biggest Funding Deal Ever

Episode Date: March 14, 2025

Binance has raised $2B in crypto's biggest ever fundraise. What's more interesting than the dollar amount, however, is the geopolitical implications underlying it. Is it part of a broader Gulf-state realignment? US dollar hegemony through stablecoins? NLW explores. Sponsored by: Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today. Buy now on Ledger.com. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, March 13th, and today we are talking crypto institutionalization. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Well, friends, we have something a little bit interesting today, and that is that there's not all that much that's interesting today.

In fact, seeing a slate of stories that really isn't a bunch of huge groundbreaking or controversial things is kind of a reminder of just what a whirlwind path we've been on for the last few months. Now, there are some important things going on today, including the biggest cryptofunding round ever, but they all still feel kind of quiet, relatively speaking. And maybe that's not a bad thing. We're still hovering down in the low 80s, but we're in the green today. Nothing has made us reevaluate everything we thought about the world in the last 24 hours.

And so with that, let's get into this slate of stories, starting with finance raising $2 billion, the largest ever crypto financing deal from MGX, which is the Abu Dhabi-based state-owned tech investment firm. This deal really is historic from a number of angles. It's the first time MGX has invested in the crypto industry, until now they've been focused on AI, taking stakes, for example, in OpenAI and Elon Musk's XAI. This is also the first time Binance has taken outside money from institutional investors. We don't know a ton about Binance's ownership, but it's pretty well presumed that the shares of the company are mostly held by founder CZ.

Finally, this is the biggest deal in the history of the industry, and believed to be the largest investment ever settled in stable coins. To give a sense for how big this is compared to other mega rounds in crypto, this deal is actually larger than all of the money raised by FTCX. combined across their three major fundraising rounds. Coinbase's largest raise was a $300 million series E in late 2018. There are numerous rounds near the $500 million mark from the bubbly late 2021 period, including Ledger, Ugo Labs, Consensus, and Circle, but we've never seen anything in the multiple billions of dollars. Indeed, if you're sitting there being like, $2 billion, it's probably because you've gotten so used to Open AI and Anthropic raising $3 billion, $6 billion, $13 billion,

that that has totally anesthetized you to just how much money this is from a private capital placement. After watching multiple cycles of crypto venture play out, fortunes Jeff John Roberts commented, I recall when Coinbase raising 25 million was a huge deal. Now, while most private investments are fairly simple to parse, i.e. VCs investing in startups that they hope will increase in value, MGX investments do tend to be a little bit more strategic in nature. The sovereign wealth fund is chaired by Jake Tenoon bin Zayat al-Nahyan,

who also serves as the national security advisor for the UAE. MGX's investments in AI companies and infrastructure are, yes, in some ways, traditional venture and private equity investments, but they also support the UAE's ambition to transition from an oil economy to a Middle Eastern tech hub. Abu Dhabi has also been in competition with Dubai and Riyadh to establish themselves as the financial capital of the region. In that context, comments from deal participants make this seem like a strategic partnership rather than an arm's length venture deal. Ahmed Yahyad, the CEO of MGX said, MGX's investment in finance reflects our commitment to advancing blockchain's transformative

potential for digital finance. As institutional adoption accelerates, the need for secure, compliant, and scalable blockchain infrastructure and solutions has never been greater. Finance has long been a driving force in cryptocurrency innovation, from exchange technology and tokenization to staking in payments. Together, we are committed to building a more inclusive and robust digital finance ecosystem. Binance CEO Richard Tang commented, this investment by MGX is a significant milestone for the crypto industry and for Binance. Together, we're shaping the future of digital finance. Our goal is to build a more inclusive and sustainable ecosystem with a strong focus on compliance, security, and user protection.

Now, Binance did already have a large footprint in the UAE with around a fifth of their workforce being based there. But the deal feels like it goes beyond just partnering with a large financial institution within their domestic headquarters. There's a subtext that the UAE wants to establish a foothold in the rapidly emerging blockchain-based financial system. That probably stands to reason given the U.S. government and financial institutions are beginning to push hard in that direction.

Yesterday, we discussed how the EU is starting to get concerned about the domination of U.S. stable coins, so this narrative is definitely starting to enter geostrategic discussions. The U.S. story is dominated by Coinbase and the traditional banks that are charging into the space. However, in other regions, Binance is the largest financial institution of any kind and the primary gateway to digital finance. Now, there could also be an element of MGX helping Binance shore up their balance sheet as well. Binance remains the largest crypto exchange in the world, but its growth has been constrained, of course, by everything the company has been through, all the way up to their founder, CZ, spending a brief stint in jail.

In February, Binance reduced their on-chain corporate holdings by around $4 billion. The exchange was pretty tight-lipped about what was going on, but many assumed that crypto tokens were being liquidated to pay fines owed to the U.S. government. That outstanding settlement was, of course, around $4 billion. We've never gotten the sense that Binance was strapped for cash, but the exchange is used to operating with a gigantic buffer that may have been somewhat depleted. We also have absolutely no idea how Binance was valued in this deal, so it's difficult to gauge how much ownership MGX has now.

Coinbase is currently valued at around $50 billion, and so you'd likely imagine that Binance would be valued at a multiple of that, meaning in other words that this probably isn't more than one or two or three percent of the exchange. Forlux, a Tradfai refugee in the crypto space noted that Binance could also use this powerful backer moving forward, commenting, the $2 billion investment in Binance by MGX is very bullish and unexpected. It gives Binance the regulatory shield of a powerful national government. Binance is a money-printing machine and will very likely make over $10 billion in net income

this year. With the MGX investment, its regulatory safe harbor has been secured, and there's a good chance CZ will be able to ameliorate the terms of his gunpoint settlement with the U.S. DOJ. Now, a couple other things I think that are worth noting here. First of all, for Binance to have survived everything that it's been through, including these huge settlements, including the fall of CZ. You have to say at this point that it's clear that the institution was more than just CZ's leadership. Second of all, let's not forget that Binance is hardly abandoning the U.S. In fact, they've recently made moves to rev back up their Binance U.S. arm. Lastly, I really do think there is a very, very interesting and even more subtle geopolitical

dimension of all of this. The Middle East, and particularly the Gulf states, have for years been looking to diversify out of oil. This has been a long-term generational imperative. At the same time, they've been trying to figure out their place in an increasingly bipolar world, with the U.S. on the one side and China on the other. The emergence of AI has really put to test where the Gulf states, allegiance lies. The U.S. government has seemed to think that the Gulf states were one of the main

conduits through which China was getting access to chips that were technically not allowed to them, and so has been putting more pressure on Gulf State institutions, companies, research institutions, universities, investors, to turn towards the U.S. and away from China. And so if you look at this in that light, and you look at how much the U.S. is now squawking about U.S. denominated stable coins as a tool of dollar hegemony and as an important strategy for U.S. dollar hegemony, this could potentially be seen as one more chess piece in the Gulf States subtly pointing back to the U.S. or at least the U.S. aligned global economy. Anyway, you have to think for Binance, it is a nice sign of things moving forward and getting

out of the last period. So congrats to them for closing. Hello, friends. I am thrilled to share that Ledger is once again partnering and sponsoring with the breakdown. Many of you know, but for those of you who don't, Ledger is the most secure hardware wallet for your crypto and logins. It's trusted by 7 million users and secures 20% of the world's digital assets. What's more, Ledger is a lot more than wallets. Over the recent years, they've built a comprehensive ecosystem of products and services, all of which are designed to make digital ownership more secure and accessible. You can buy your Bitcoin with Ledger and Ledger Live and so much more. Basically, not only did they want to

keep your assets secure, they want you to be able to do more with them. Ledger's newest devices, the Ledger Stacks, and Ledger Flex introduced the world's first secure to. touchscreens, making it easier and safer to manage your transactions and assets. Alongside Ledger Stacks and Ledger Flex, the company also launched the Ledger Security Key app, offering a safer alternative to traditional passwords and enhancing your digital security. If you are in this space, you owe it to yourself to at least check out Ledger and their ecosystem what they have available to you. So thanks, once again, to Ledger for sponsoring the show. Speaking of stable coins and institutionalization, back in the U.S., BNYMell is deepening their relationship with Circle. The

world's largest custodian bank will allow some clients to buy and sell USC through their BNY accounts. In a joint statement, the two companies said, BNY and Circle continue to work to bridge the gap between traditional and digital finance and are exploring how to deepen our relationship to benefit financial markets. BNY had already been serving as a primary custodian for Circle's reserves since April 2022, shortly after Silicon Valley Bank collapsed. However, until recently, BNY was prevented from acting as an on and off-ramp for institutional clients by banking regulations. Last week, though, the OCC formally withdrew chokepoint error restrictions, allowing banks to interact with stable coins directly. It's difficult to overstate how much of a paradigm shift it is for BNI to tap into

crypto networks. The bank is functionally the nerve center for Wall Street. They custody over 50 trillion in assets and process over 240 billion in U.S. dollar payments daily. A significant portion of all institutional money in this country and indeed globally passes through BNY. The bank has also recently been pushing up against the limits of traditional banking infrastructure. In February, they announced an upgrade to the privately operated RTP Real Time Payments Network, which increased the transaction limit from $1 million to $10 million in a single transaction. Obviously, those are rookie numbers compared to what's possible on public blockchains, so it's understandable that BNY has an interest in offering access to their customers.

Now, as I mentioned at the beginning of this show, this announcement does feel a little mundane on the surface, but it's a big step towards marrying the traditional financial system to crypto-rails. Commenters noted the partnership also has big implications for how the Wall Street adoption story will go. Ocami Crypto wrote, The greatest dynamic in stable coins in the next few years will be the entrance of the mainstream in TradFi, which has huge implications for Tether and Circle. And here's a good example. BNY will become a tokenizing bank for U.S.TC. That's a big deal as mainstream enterprise starts to use stable coins as they will prefer the safety of BNY. Tether won't get the time of day

from BNY, and let's not forget that BNY has 52 trillion of assets under custody, which, if tokenization of capital markets begins over the coming years, is a massive pool for BNY and Circle to explore. Mr. Vicks commented, very important to distinguish who will be the chosen stable coins adopted by institutions and who will not. BNY deal with Circle is huge, one of the biggest custodian banks and a globally systematically important bank. TLDR, we're in a moment where Wall Street is sorting out their tech stack for the era of digitized finance, and BNY appears to have chosen USDC. There is going to be a lot of this sort of jockeying for position in the stablecoin world. We've already seen some indications that companies are willing to play very aggressively in this

space, but I also think that it's more open than perhaps it seems at first glance, given, for example, that Tether CEO Paulo Arduino is walking around Washington, D.C. as we speak. Last note today, a quick update on the macro, which is, of course, the main factor in markets at the moment. Inflation relief could be on the way as the CPI report comes in cool. February's inflation data shows disinflation across the board. Headline CPI dropped slightly to 2.8%, while core inflation, which of course excludes food and energy moderated to 3.1%. Both readings came in below expectations and dropped by 10 basis points from January. This was the first simultaneous decline in both readings since July of last year. The slowdown in the shelter component remains the main story. Shelter costs increased by 0.3% for the

month, less than January's figures, but still responsible for half of the inflation for the month. Annualized shelter inflation is now running at 4.2%, the lowest rate since December 2021. The shelter component relies on a mix of imputed data and surveys, and it's also known to have significant lags of up to six months due to the way the rotating survey is conducted. There are many critics of the way shelter inflation is calculated, including Fed Chair Jerome Powell. So this inflation print could be discounted even lower and at the least shows that things are headed in the right direction. Trueflation, a private attempt at real-time inflation data, fell off a cliff at the beginning of March. While it did show headline inflation at around 2.3% throughout January, it's now reading 1.37% a 4-year

So if you're looking for signs that the economy fell apart two weeks ago and that inflation has been defeated, this is the best evidence available. However, even with all of that, the Fed is still unlikely to deliver a cut at next Wednesday's meeting. Markets are pricing in a 97% chance that rates are held steady. There are now three cuts priced in for the back half of the year, but unlikely to begin before June. It's easy to understand why, with analysts quick to explain why this inflation print can be discarded immediately. Kevin Gordon, a senior investment strategist at Charles Schwab said, a lot of this inflation data does not incorporate what is to come and what has already happened for tariffs. The vagaries and uncertainties associated with policy are still a much stronger force in the market

than anything CPI related or in terms of one data point. And indeed, Powell has been pretty clear that he is not going to react in either direction until he has hard data about the impact of tariffs. So alas, if you're waiting on the Fed to pump your bags, check back next month. For now that that is going to do it for today's breakdown. Appreciate you listening, as always. Until next time, be safe and take care of each other. Thank you.