Unchained - How BlackRock’s New Fund on Ethereum Got a Very Crypto Welcome - Ep. 623

Starting point is 00:00:00 And I think BlackRock is a very, now that I've got to know them a little bit, I'll say, it's a very forward-thinking company that they see where the future is. And if the future is a public blockchain and you can start there, why would you not start a public blockchain instead of a private blockchain? Hits up, everyone. In the next few weeks, we're launching a new show on the Unchained Channel called Bits and Bips, exploring how crypto and macro collide, one basis point at a time. As you can guess, it's a show all about crypto and macro topics and where they intersect.

Starting point is 00:00:27 We started with the dry run the other day, and the show was so good, we decided to tease a few moments in this podcast. The speakers you'll hear pepper throughout this episode include Alex Kruger of Asgard Markets, James Seaford of Bloomberg Intelligence, and Ram Al-Alawalia of Lumida Wealth. We'll play the first clip from Bits and Bips featuring Alex now, and then it'll be on to the main show. Solana has delivered what Ethereum could not. It's actually the ultimate retail. speculation platform to put it in a way. And what we see right now is on one hand, we're seeing a lot of people realizing this and therefore buying Solana because of the insane volumes that we're seeing and the engagement. And on the other hand, the two things are happening. One is all the crypto speculators in bull markets, they think in crypto.

Starting point is 00:01:21 So therefore, when they take profits, they take profits into Solana and when they buy they buy soul first and with soul they buy into the mincoins. And the other thing is if you look at the pools of these mincoyans, they're all paired against Solana. Why is this important? Because teams deploying meme coins, they need to buy soul. So for the mimcoins to launch, they buy soul. And then when people takes profit, they take profit into soul.

Starting point is 00:01:57 And then on top of that, this generates this incredible mania online. And everybody's looking at it and the fundamental guys are looking at the metrics and going like, wow. And they buy more. Hi, everyone. Welcome to Unchained. You're no hype resource for all things crypto. I'm your host, Laura Shin. Author of The Cryptopians. I started covering crypto eight years ago.

Starting point is 00:02:22 And as the senior editor of Forbes was the first Main Tree Reader reporter to cover cryptocurrency full-time. This is the March 22nd, 2024 episode of Unchained. Pocod is the original and leading Layer Zero blockchain with over 2,000-plus developers, and the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at Pocodot.network slash ecosystem slash community. Uniswap makes it easier and safer than ever to access DFI seamlessly across desktop and mobile. No more clunky experiences, just clean and. simple and smart. Visit smarter.uniswap.org to learn more. With I Trust Capital, you can buy and sell

Starting point is 00:03:03 crypto in a tax advantage retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees. Here's another clip from Bits and Bips featuring James Seafurt and Ram Al-Alawalia. The deadline for ETH is May 23rd. We're nearing in on that, right? And there's still nothing. And the SEC is basically where I'm asking, I have like sources and people that I talk to, and we're not hearing any sort of development. They're not even engaging. They're not answering their questions for the most part, which tells me that like if the SEC was ultimately going to approve, this thing, they'd at least be engaging with the issuers. The second argument that they could make is that Eith has a staking yield and it's a security. And we'll see if they make that argument. But it's

Starting point is 00:03:45 also an election year. And Gensler has been kind of kicking and screaming around the Bitcoin ETF, anytime he talks about it, he's cautioning the public around it. So I don't know, I don't think that'll happen. But if it doesn't happen, look, that can elongate the bull market. It will happen eventually. It'll get litigated. We're seeing that as well on Twitter. I think it was Paul Grual from Coinbase.

Starting point is 00:04:07 The legal counsel said that they would take this to court. With AMX Platinum, $400 in annual credits for travel and dining means you not only satisfy your travel bug, but your taste buds too. That's the powerful back. of Amex. Conditions apply. Today's guest is Carlos Domingo, founder and CEO of Securitize. Welcome, Carlos. Hi, Lada. Thanks for having me again.

Starting point is 00:04:33 On Wednesday, BlackRock, the world's leading asset management firm announced the launch of a tokenized investment fund, the BlackRock USD institutional digital liquidity or Biddle Fund, developed in collaboration with your company, Securitize. Tell us about the Biddle Fund. So the bill fund is basically a tokenized money market fund that contains repos and two-month treasury duration. So it's like a caste equivalent that is native on chain. It will be on the public Ethereum blockchain. And the idea is to basically bring an institutional grade, you know, cash management product,

Starting point is 00:05:09 which I did not a day. This is what this is to put it on chains for all the crypto institutions where they can use it in a variety of different use cases, with much faster always the issuance, redemption, transferability of the token across, you know, while listed wallet, etc. And so as you mentioned, they are putting these cash equivalents, the U.S. Treasury bills, repurchase agreements, and Biddleville will seek to offer this stable value of a dollar per token and then just pay daily accrued dividends directly to investors' wallets as new tokens each month. Why did they decide to create a product with a stable value?

Starting point is 00:05:46 Well, that's how a lot of the money market funds work, right? That you get more units of the fund as you go, rather than the value of the token or the security changes. So this is not unusually in the world of money market funds. I think the cool stuff is that we're going to be airdropping. I know that's probably not a regulatory legal term, but you will be getting more tokens on the wallet as the dividends are being paid. And then keeping the stable value also makes it easier for a variety of all the things

Starting point is 00:06:14 in terms of knowing, you know, the enough of the fun and without having to do any calculations and all the things. And just, you know, a question that I have is about the quote-unquote air drop. So that's like, so I don't know how it is not. What is the traditional analog, or it doesn't even want to be the term, but what's the analog way of doing that? Is it like much more cumbersome on the back end to give dividends like that? Oh, yeah, of course.

Starting point is 00:06:42 this is all automated, right? So we get the NAF calculation, we run it through this, we run a transaction on chain, we issue tokens, as one transaction for all the different wallets. We know in real time who are the beneficial owners because we monitor changes of the token ownership on chain. So this is hugely automated compared to what happens in traditional finance. Ultimately, you can think of because of how blockchain works

Starting point is 00:07:07 that you could actually, you know, air drop these tokens on a block by block basis, right? Because tokens are infinitely divisible. So there's no reason why you couldn't give like a zero zero one percent of a token in every block of the blockchain. So you will have all your dividends always fully updated on chain. And were there any specific regulatory concerns that they had if they were to have a tokenized fund that traded at a market price and not a fixed price?

Starting point is 00:07:33 I think it was a regulatory contract. I think that's how many of their money market funds work. From a regulatory perspective, whether the token changes in value or not changes the nature of the token. And this is, by the way, this is a security. So nobody's question is this a security. We are registered transfer agent with the SEC. We're using a broker-dealer to sell it. So this is all very compliant from a regulatory perspective.

Starting point is 00:07:56 So in that sense, there weren't really too many regulatory questions? I think there were some regulatory questions in terms of, you know, first, BlackRock is the largest asset manager in the world. So obviously them feeling comfortable with us, even though we're a regulated entity, we're a tiny one compared to them. So making sure they felt comfortable with us, with our compliance procedures, with our past history as a regulated entity,

Starting point is 00:08:19 whether we had any issues with the SEC or not, etc. So we went through a pretty extensive review. Fortunately, we always tried to keep everything as clean as possible. So eventually, that's not a problem, obviously, to be able to become their provider. And here we are. We rely on. And it said that your company's role would be to be Black Rock's transfer agent, tokenization platform, and placement agent.

Starting point is 00:08:45 So can you describe what all that means and generally how it works on the back end? Sure. As a transfer agent, we are the entity that basically keeps the captive of the fund, like who holds what. That's one of our roles. We also play the role of investor onboarding. So if somebody wants to invest in the fund, they have to come to us. And then we do the investor onboarding. we create accounts in our platform where people can actually see their holdings.

Starting point is 00:09:09 We also do a lot of other stuff in terms of like monitoring on-chain transactions, you know, monitoring the wallets, where the tokens are going to go to make sure they're not sanctioned wallets or wallets that have any regulatory risk, et cetera. And then we also report the positions of the fund back to, BlackRoeb has a backend platform and investment management platform for Al-Aladin, which is very big in traditional finals where they report all the positions. So we basically integrated with them to report the own chain positions back into the, if you want, off-chain work.

Starting point is 00:09:40 And then as a broker-dealer, we basically act as the distributor. So we represent the fund. And if an investor wants to purchase the fund, we're the ones that can talk to them and explain the characteristics of the fund, the nature, et cetera, and eventually sell the fund. And so I understand that the assets themselves, the underlying assets will be held at, I think, is B&Y Mellon. But you did note that there would be other ecosystem participants, and these are crypto companies, Anchorage, BitGo, Coinbase Fireblocks. What role do those entities play?

Starting point is 00:10:12 So the first companies we've mentioned, and by the way, we want this to be an ecosystem product that is being used and maybe we can discuss about the use cases in a variety of parts of the crypto ecosystem. The first ones that we feature this week are basically custody solutions. So Coinbase obviously has Coinbase custody. Anchorage is a federally chartered bank that can do custody as well. So it's Bitcoin as a trust company. And Fireblocks is a custody solution that we're also using for key management. So we use their tech as a key management to issue the tokens, etc. And that's the custody for the investors themselves.

Starting point is 00:10:49 That's correct, yeah. Got it. And when is the expected launch date? Oh, okay. Okay. Okay, okay. Yesterday we issued the first tokens. So yesterday we issued, I think, $40 million tokens.

Starting point is 00:11:01 You can see that chain. On Ethernet, you can go there. Every day we issue new tokens at 3 p.m. So, and then you will see the transition, you know, how it starts growing over time the next few days. So now day one, like what is the AOM of this fund? The first day, we go $40 million. Okay, nice. And who's investing in it?

Starting point is 00:11:22 We're not disclosing that. Does it like not literally, but demographically, can you describe? Oh, no, these are all crypto companies. Look, the target of this is crypto companies. So we're looking at doing two things with these. One is obviously treasury management. So crypto companies have some of them very large treasuries. Some of them they keep them on their own token.

Starting point is 00:11:41 Some of them they keep it in stable coins. So them do have access to Tyshal bank accounts, but obviously it's a clanky interface. So that's one use can try anything at all the Dow's, the foundation. etc, that they can move part of the treasury to an on-chain, money-market fund, daily liquidity, and then also managed by the largest asset management in the world, so you don't have any counterparty risk towards any random crypto company that you give me the money to manage, right?

Starting point is 00:12:12 That's one. The second one is derivative products. There is a lot of people that are building derivative products using treasuries or using money market funds that have very interesting use cases that maybe us or Blacker will not, that far, but that they now can actually use this underline in a much more efficient way, because obviously this is on chain, we have fast additions, preppedore demptions, we have

Starting point is 00:12:33 tradeability. So that's kind of like the second use case. And the third use case is possibly like the one is quite might take a little bit longer to build, but the most interesting one is to use it as collateral management and to take asset leverage for trading, right? So today, you know, people post-collateral an honest chains to be able to, you know, wait until they settle the trades. So depending how this trade settled, they can be created or to get leverets, etc. Once you have something on chain that is earning a yield,

Starting point is 00:13:02 there is no reason why you will do this instrument rather than using something else, like, you know, tether or whatever is the oil coin. Because this is cash equivalent, but it actually gives a yield. So also when you're trading and you're trying to move the velocity of your balance sheet as much as possible and squeeze every single basis points in what happens, this actually gives you a first put a yield on the. And second, potentially you can actually leverage it more, right? Like maybe you post stable coin, you get 90 cents on a dollar.

Starting point is 00:13:30 You post this. Maybe you can get like 98 cents or $1. Yeah, I mean, just hearing you describe it, I definitely can see what the benefits are. So in a moment, we're going to talk about the usage of the Ethereum blockchain for this product. But first, a quick word from the sponsors you make this show possible. Pocod is the original and largest layer zero blockchain with over 2,000 plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Upgrading the infrastructure with 8 times higher transaction throughput and twice as fast block times,

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Starting point is 00:15:01 started. Here's the final clip from Bits and Bips featuring Alex Kruger. I have a very hard time finding a seldom use for AI and things related to AI because I am so bullish AI that it's actually changed my outlook on humanity. Let's put it that way. The way I think about it is, is for the first time in humanity, in history, growth will not be driven by us, but by something we create it. And these things code doesn't rest. So it makes sense to expect things to move at a faster speed than ever before, at a speed that we cannot even comprehend. Back to my conversation with Carlos. So as you mentioned, Biddle is tokenized on Ethereum. Why is it that BlackRock or or securitize or you two together decided to use the Ethereum blockchain.

Starting point is 00:15:57 So first, the first thing I want to say is that we want this to be a multi-chain product. I think the crypto ecosystem is evolving as a multi-chain ecosystem where there's multiple chains with different characteristics, with different languages, different use cases, different type of people that live on that particular ecosystem. So Ethereum probably is the most, if you want the least controversial way to start, because is the large one. It's also the one that has the largest supply of stable coins. It's also the one that has been there for the longest.

Starting point is 00:16:30 And you mean the largest smart contract chain? Correct. As opposed to like Bitcoin. Well, yeah, Bitcoin, you will be able to do this on Bitcoin. I don't see how to do it. Maybe you could use something like RSK on top of that to do contracts, but we couldn't have native smart contracts. This is a security, right?

Starting point is 00:16:47 So the token actually is it governed by a set of a smart contracts that does things like, you know, issuing the new evidence, controlling the transfers, etc. So this will not be able to be done on a blockchain that is not smart contract. So Ethereum obviously is the largest in the first one. As I mentioned, we want to be in other chains, you know, EVM ones that are compared to well with the chain, but not EVM ones because there's some large ones out there. And I think they will want to have this product, right? Eventually, any chain that has stable coins will want to have this,

Starting point is 00:17:21 because this is going to be kind of like the institutional version of stable coins settlement layer, right, that people are going to use on chain. So if you use today, let's say stable coins for settling trades on like DFI, at the institutional level, you will want to use the Biddle token to do that. So all the chains eventually, I think, will come and want to have this product. And so I imagine that there was a time when the Black Rocks of the world would say blockchain, not Bitcoin, and they would issue public blockchains. So what were the conversations like with them when you were discussing what type of blockchain to use? Like, I don't even know

Starting point is 00:17:59 if you thought about using private blockchains or if they were advocating for that. Just talk a little bit about what those discussions were like. So first, myself personally, I just think that the private blockchains are not that interesting because I think one of the beauties of the public blockchain is precisely the openness of the ecosystem, right? The fact that the compositive ability with what all the people doing, like this token is out there, people can build, you know, lending protocols, could be derivative protocols, they could integrate through smart contracts, like this, a lot of stuff that hopefully is going to happen as part of the ecosystem that will not be able to happen on a private blockchain.

Starting point is 00:18:31 That's definitely not. So I think that the banks use private blockchains, I don't think because of their desire to use public platforms, at least some of the banks, but because from a regulatory perspective, the OCCC does not allow them to use public blockchins. The asset managers don't have a regulatory problem of using public blockchains. And BlackRock is a very, now that I've got to know them a little bit, I'll say, it's a very forward-thinking company that they see where the future is.

Starting point is 00:18:56 And if the future is a public blockchain and you can start there, why would you not start a public blockchain instead of a private blockchain? A private blockchain is like, I don't know, like American Online, right? So yes, it was nice. You could use the internet, but that's it. And a public blockchain is where the explosion of innovation on the internet happened. So you're saying it wasn't a just, difficult conversation, you didn't have to kind of give them a hard sell?

Starting point is 00:19:19 No, no. I think that they understand that and they support that. And so obviously, at this point, we've seen that BlockRock has seen quite a bit of success with its strategy to pursue the digital assets face. It's I shares Bitcoin ETF or I bid launched in January and has already accumulated over $15 billion in assets. You know, just generally, like you kind of hinted at it a little bit, but I was curious to hear like what the attitude was toward crypto over at BlackRock?

Starting point is 00:19:48 I think that BlackRock, so they obviously have been extremely successful with the Bitcoin ETF. There's no doubt about it. They were the catalysts for this space to explode. They're the largest one of the new ones, but by far, and they're already like 60% the size of gray scale, which have been there for years. So I think this is extremely successful. I think for the way I see it, and I'm not speaking on their behalf, but my reading is that the Bitcoin EQMETF is a Web 3 product on a Web 2 wrapper. So you take a crypto product and you put it on Tritfi. What we're doing is the opposite.

Starting point is 00:20:21 We're taking Tritfi stuff and we put it on Web 3 and crypto. And they do believe on that strategy. You've probably seen Larifeng talking in a very articulated way about how talking is the future of asset management, how they can, you know, have faster settlement, more transparency, you know, lower cost, automation, et cetera. and I think that they do see that as one of the big trends that they need to follow, and they've been following it for a while, and now they're thinking their first step into the space, which is right.

Starting point is 00:20:51 And I think with the rollout of this, they definitely have seen how wild things can get in crypto. You talked a little bit about how your announcement got sort of front runs. So can you tell that story? So yes, when you launch a fund at some point, you have to file forms with the SEC, right? This is security. So this is very kosher from our original perspective, as you can imagine.

Starting point is 00:21:16 So we have to file something as a rubber dealer, BlackRock has to file something as an issuer. So one of those filings happened when we were ready to open the fund. The fund actually opened on Tuesday, and on Wednesday was yesterday was where we issued the first tokens after the first money came into the fund. And then I guess some crypto people don't have anything better to do that monitor the SEC website to see what BlackRock is doing

Starting point is 00:21:36 because, you know, somebody picked it up and put it on Twitter and it went by on Twitter first. Obviously, like, shortly after they found out where our smart contract was and we actually had two different ones because we used like a test one and the actual one so people didn't know which one was. You know, then of course the blog and CoinDisc picked it up and ended up being in Bloomberg.

Starting point is 00:21:56 So yesterday we basically went with our own official story at the OSCE Journal and now taking a little interviews a lot. We were going to wait a few days. It just happened a little bit faster. That's what it is. I'm just part of the fun of the crypto space. Yeah, well, this might be a little less fun from their perspective. As you probably also know that after the Biddle Fund was deployed on-chain,

Starting point is 00:22:22 trolls sent Tainted ETH from Tornado Cash over to that address. They also sent meme coins and NFTs like Pepe, Mogcoin, Egg, Goblin Town, some others that I'm not going to name on the show. So let's actually just talk about the sanctioned funds from Tornado Cash. How does your company in BlackRock? How do you guys deal with that? I don't know. I like, look, there's a lot of speculation about what the wallet is and nobody knows what it is

Starting point is 00:22:54 and I'm not in pretty close anything about it at the moment. So I don't know going to talk about that implication. I think that, look, the crypto industry is what it is, right? There is a lot of really smart, serious people building products to, you know, improve capital markets and the financial system. But there is also a lot of people that take it as a, you know, playground to entertain themselves with mincoins and NFTs and other stuff. And unfortunately, that's what it is.

Starting point is 00:23:19 The two sides of the crypto space overlap. And if you're going to be in crypto, you have to be ready to suffer these problems, right? So I don't know how to put it. There's some blockchings actually that implemented a permission model where unless you accept your proven asset, you can't actually receive it. Unfortunately, Ethereum doesn't have that. So these things happen in Ethereum. They don't necessarily happen in other chains.

Starting point is 00:23:39 So maybe this is something for the Ethereum community to think about whether there should be a model where you put a wallet or a smart contract and you can turn off a version where only permissions, so only assets you've approved can actually be deposited there. Because that will solve the problem. Because this is a problem. Of course, if somebody sends you some, you know, If that has been in through tornado cars, then your wallet is going to have huge, you know, ranking, negative ranking on TRM, the tool that we're using for ranking the wallets and even though you haven't done anything bad, right? Somebody else did it to you.

Starting point is 00:24:14 So I think that this is a tech problem in my, it's an industry problem that can be solved with tech, right? So I encourage people working on Ethereum to figure out a model where this can be prevented. It's just simple as what I mentioned, right? So you have to permission an asset before you accept getting your own. Yeah, I mean, even your firm probably could submit an Ethereum improvement proposal. We could. Yes, we're just not. Yeah.

Starting point is 00:24:38 Yeah, we're more of an application provider although. We write on Ethereum and create smart contracts and stuff like that. I think there's a lot more quantified people out there probably to be able to do that. But somebody needs to do it because obviously this is problematic, right? Especially now that the regulators are more at the top of the space and trying to monitor that bad things to not happen on crypto because I think we've had quite a lot of bad things in the past few years. and we're in a good spot now, I believe, with the community approved, with this launch, etc.

Starting point is 00:25:04 So I think that collectively as an industry, we need to be very careful not to destroy what has taken so long time to build in terms of tradability. And as for the NFTs and the meme coins that were thrown into that address, do you have plans for what to do with that? Because, you know, obviously some of that has value. I would operate on trade those NFTC as I can make some money inside.

Starting point is 00:25:27 Well, I don't know if you could set up some policy, where the investors in this actually do some of their dividends come from stuff like that. Like, I don't know. I don't think so. I don't think anybody would want to get a dividend on a institutional grade black drug tokenized money market fund with the, you know, Pepecoin, right? So they also, this is the people that are doing this to get attention. The value of what they're sending is ridiculously low. So it's really not, it's the dead doing it because they know they need some chain and people see it.

Starting point is 00:25:58 And then there is like people posting their all black rock has bought every coin, and then they, you know, pump and down the price of that, whatever coin is there. So. Okay. And I also saw that on Tuesday, I guess this was when the news was leaked, crypto auditor Charles Wong tweeted, quote, currently the funds contract is controlled by an externally owned account rather than a multi-signature wallet. And obviously, I'm sure you're well aware. And my listeners probably know that that setup has the risk of being a single

Starting point is 00:26:28 point of failure. So has the contract been upgraded and generally, like, how does securitize approach security for an institutional investment type product like this? So first, that guy looked at the wrong contract. As I mentioned, we had two contracts on chain, the one with testing and the actual one. The actual one, now EtherScan has listed the right one. So if you search and this, this contracts, by the way, were people going directly on chain to find it because it was not even indexed by Ether scan because we were not planning on it. So now the French of EtherScan that's been very diligent on making sure

Starting point is 00:27:02 when you search for a video download BlackRock, the one that comes out on EtherScan is the white one. That actually is managed with a very robust key management system for my friends at fireblocks. That's what we use for them and they're about doing an announcement

Starting point is 00:27:17 without explaining the role in the project. So I think that from a security perspective, we're pretty robust and we know how to manage these things for years. And also, as you can imagine, BlackRock has also reviewed all our procedures, how we manage keys and stuff like that to make sure this is robust. So I don't think we're going to have any problem.

Starting point is 00:27:34 All the contracts are audited and maybe we audited before this project. So hopefully everything is bad. Okay. And BlackRock also made an investment in securitized. So I'm assuming that there will be more things that you guys are working on together. Can you give us a hint on what those things might be? So, yes, so BlackRock for us and I just, BlackRock, this is a very close strategic relationship. I think it, there was a lot of

Starting point is 00:28:03 working both in both parts to get to the point that we were ready to work with each other. So I think at this point in time, hopefully we're going to be doing many things for BlackRock for the foreseeable future. And I think BlackRock also wanted to get close to our company, to have, be able to influence our direction to some extent, but also to help us to make sure we're in business, that we're all funded. So we continue serving them. So yes, there is a roadmap. There's all projects coming. We've just announced this on Wednesday, so for the time,

Starting point is 00:28:31 we don't want to focus on the one that is out there. But, yes, this is not a, hopefully this is not a one else, you know, relationship or situation at all. All right, Carlos. Well, it's been such a pleasure. Thank you so much for coming on Unchained. Thanks for you, my name is so quickly, Lola.

Starting point is 00:28:48 Don't forget, next up is the weekly news recap. Today, presented by Unchained contributor, Megan Christensen. Stick around for this week in crypto after this short break. Did you know you can buy and sell crypto with tax benefits in an individual retirement account? I trust capital makes this possible. But what does this mean? When you buy crypto outside an IRA, like on an exchange, you face taxes on gains. But in an IRA, like a Roth IRA, gains can be tax-free.

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Starting point is 00:29:56 Thanks for tuning in to the weekly news recap, written by Juan Aronovich and edited by Jacob Oliver. I'm Megan Christensen. Let's dive right in. This week reports emerged that the Ethereum Foundation is under investigation by the SEC following Ethereum's transition to a proof-the-stake model. This scrutiny could stem from concerns that Ethereum's new model aligns more closely with the characteristics of the security. Notably, the Foundation's website removed the language in February, indicating it had not been contacted by government agencies in a manner requiring confidentiality, sparking speculation about regulatory inquiries. Fortune's investigation suggests that the SEC's interest was peaked shortly after Ethereum's shift to proof of stake,

Starting point is 00:30:42 probing how this governance model impacts its legal classification. The removal of the Ethereum Foundation's quote, warrant canary, end quote, and confidentiality language coincides with Fortune's report of U.S. companies receiving subpoenas related to Ethereum, hinting, and an extensive review by the regulator. The potential classification of Ethereum as a security by the SEC carries significant implications for the cryptocurrency's ecosystem and for pending Ethereum ETF applications by major financial institutions. Bloomberg ETF analysts, James Seyfer, and Eric Belhounis have adjusted their outlook

Starting point is 00:31:19 on the approval of Spot Ether ETFs by the SEC, now predicting a likely rejection. The analyst assessment is based on the absence of recent communications between fund issuers and the SEC, which is a critical indicator of the regulatory body's engagement and intent. The final decision deadline set by the SEC for the first ETH ETF application is May 23, 2004. Amid the uncertainty, some industry figures suggest that delaying Ethereum ETF approvals could benefit the crypto sector. Bitwise, CIO, Matt Hogan, and a pay. panel at the Digital Ascet Summit in London, said that a delay until December could allow the market

Starting point is 00:32:00 more time to adapt to the recent introduction of Bitcoin ETFs. Continuing with more SEC news, the commission was sanctioned this week by U.S. District Court for misleading the court in a lawsuit against crypto firm debt box, marking a significant rebuke for the regulator's handling of the case. Judge Robert J. Shelby criticized the SEC for presenting misleading evidence and engaging in a, quote, gross abusive power, end quote, an action that is further field discussions about the SEC's approach to cryptocurrency regulation. Simultaneously, Senators Jack Reed and LaFonsea Butler have expressed reservations about the SEC's recent approvals of Bitcoin ETPs, highlighting concerns over inadequate risk disclosures. In a letter to SEC Chair, Gary Gensler, the senators argue that the

Starting point is 00:32:51 distinctions between ETPs and ETFs leaves significant gaps in investor protections, urging the SEC to halt further approvals of crypto ETPs. U.S. prosecutors have recommended a prison sentence of 40 to 50 years for Sam Bankman-Fried, the founder and former CEO of the Cryptocurrency Exchange, F.T.X, highlighting the unprecedented scale of his alleged financial crimes. The recommendation was made to Judge Louis Kaplan, ahead of Bankman-Feed sentencing hearings, scheduled for March 28, 2024. The prosecution's letter to the judge outlined the multifaceted nature of Begman-Fried's offenses, which include defrauding customers and investors, fabricating financial

Starting point is 00:33:33 documents, making illegal political donations, and engaging in bribery. The defense, seeking leniency, propose a considerably lighter sentence of six years, citing the potential for FTS customers to be fully reimbursed through ongoing bankruptcy proceedings. However, the prosecutor, The prosecution argues that the severity and complexity of Bankman-Fried's actions, which affected tens of thousands globally and involved over $10 billion in losses, justify a lengthy sentence. They also argued that Bankman-Fried poses a continuous risk of re-offending, emphasizing the need for a punishment that reflects the gravity of his crimes and deter similar future offenses. Bankman-Fre's legal team has criticized the prosecution's stance, describing it as excessively harsh, and likening it to a quote, death-in-prison sentence. They argue that their client has been unfairly portrayed as a villain, insisting that financial recovery for affected parties is feasible and that no real losses occurred.

Starting point is 00:34:33 The final decision on Bankman Fried's sentence will be made by Judge Kaplan on Thursday next week. Stay tuned for our live coverage of that. Alexei Perzev, the developer of the cryptocurrency mixing service tornado cash, is slated for trial in the Netherlands on March 26th, facing allegation. of laundering over $1.2 billion. The Dutch prosecutor's indictment, meticulously detailing 36 suspect transactions, accuses Pertsseb, of facilitating money laundering through tornado cash, a platform designed to obscure the origins of digital assets. The largest transaction highlighted involved more than 175E from the Rodin Bridge exploit, linked to the infamous $625 million

Starting point is 00:35:15 hack attributed to the North Korean cybergroup Lazarus. Pertson, arrested in August 22 and subsequently placed under house arrest with GPS monitoring, has consistently denied any rounddoing. His legal representation, led by Keith Chang, challenges the indictment's lack of specificity regarding Pertsov's alleged criminal actions. The case has ignited a firestorm within the crypto community, with supporters decrying what they see as an overreach into the realm of software development and coding. Influential voices, including Coinbase, and the Blockchain Association have rallied to Perthsev's defense, arguing that the near act

Starting point is 00:35:55 of developing software should not be conflated with criminal activity. Dutch prosecutors, while acknowledging the legality of cryptocurrency mixing services in principle, emphasize that the laundering and concealment of criminal proceeds remain punishable offenses. This trial is not only a pivotal moment for Pertsev, but also a potentially precedent-setting case for the broader crypto and open-source communities. Arrington Capital, an investor in the Etherfi liquid-staking protocol, has drawn attention and criticism from the crypto community for offloading nearly $700,000 worth of freshly airdrop E-Fi tokens to finance, sidestepping the intended investing schedule. According to blockchain

Starting point is 00:36:36 analytics firm Nansen, Arrington Capital distributed 5,000 E-Eth, the liquid-staking token of Etherfi, across 10 wallets to claim 200,498 ETH5 tokens, which were then consolidated and sold on the exchange. This maneuver raised eyebrows for potentially exploiting the airdrop mechanism, as distributing assets just below the threshold allowed Arrington to avoid the vesting schedule set for holdings above 25,000 tokens. Critics, including on-chain sleuth, Zach XPT, labeled the action as a simple attack, suggesting a deliberate attempt to secure a larger allocation by using multiple addresses. Etherfi and Arrington Capital have both stated that the investment firm was unaware of the 25,000 token threshold for vesting at the time of the airdrop.

Starting point is 00:37:24 Eitherfai acknowledged being informed about the use of multiple wallets by Arrington, but did not consider it a simple attack. They admitted an oversight in not abrogating wallets belonging to the same entities for vesting purposes, attributing it to the rapid launch process. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to Unchained Crypto.substack.com. That is Unchained Crypto.com. And sign up for our free newsletter so that you can stay up to date with the latest in crypto.

Starting point is 00:37:55 Unchained is produced by Laura Shin with help from Nelson Wang, Matt Pilcherd, Juan Aronovich, Megan Gabbas, to Shank and Margaret Korea. Thanks so much for listening. Unchained is now a... part of the Coin Desk Podcast Network. For the latest in digital assets, check out markets daily five days a week with host Noel Atchison. Follow the CoinDesk Podcast Network for some of the best shows in crypto.

Unchained - How BlackRock’s New Fund on Ethereum Got a Very Crypto Welcome - Ep. 623

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