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How Trump Can Help Crypto on Day One

A simple executive order issued on Jan. 20 would pave the way for the crypto sector’s resurgence in the U.S.

Dear President Elect Trump,

As the co-head of a major law firm’s digital assets practice, I am hopeful that your nominee to chair the Securities Exchange Commission (SEC) will make much-needed (and long-overdue) reforms to the way the SEC approaches crypto market regulation in the United States.

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However, as you know, it will take some time for your nominee to be confirmed as SEC chair, and for him to formulate new SEC guidance and rules for the crypto industry. Bearing that in mind, I write respectfully to propose an Executive Order that you can issue—on Day One of your Presidency—to help restore American leadership in the burgeoning crypto financial system.

While other countries have raced to create regulatory clarity for crypto entrepreneurship to thrive, U.S. lawmakers and regulators have thus far refused to mold and modernize decades-old rules that were never meant to apply to this groundbreaking technology, leaving U.S. market participants adrift in a sea of regulatory ambiguity. All the while, the SEC under its current chair, Gary Gensler, has teed up case-after-case against crypto companies, projects and founders based on allegations that they violated these outmoded and anachronistic requirements, even where there are no allegations of fraud or actual harm to investors.

It should be no surprise that this regulation-by-enforcement approach has chased many of the leading innovators and businesses in the digital assets sector offshore, jeopardizing America’s leadership position in the global economy.

How to find our way again

The good news is that it’s not too late to turn things around. The current moment presents a once-in-a-generation opportunity to make America the crypto capital of the world, and harness the transformative promise that digital assets and blockchain technology hold for our country. While there are many legislative, regulatory and tax reforms that will be needed to seize this opportunity, there is one immediate action you can take—on Day One of your Presidency—to pave the way for the crypto sector’s resurgence in America.

You can issue an Executive Order on January 20 directing all federal agencies to:

1. Immediately stay all investigations, enforcement actions and prosecutions of crypto companies, projects and founders unless they involve credible allegations of (a) acts of fraud or other intentional misconduct that harms investors or other victims, or (b) conduct that threatens our national security.

2. Provide a written report to the Office of the President within 180 days detailing why the relevant agency should not immediately terminate such proceedings.

3. Promptly terminate all investigations, enforcement actions, or prosecutions of crypto companies, projects or founders that do not warrant continued prosecution.

What the proposed executive order would accomplish

This proposed Executive Order would be vitally important to undo the chilling effect on the digital assets industry that has been caused by the explosion in recent years of government enforcement litigation, including actions brought against good actors who at most did not follow outdated and inapplicable rules without causing harm to a single investor. The SEC, most notably, has extracted billions of dollars in disgorgement—a financial penalty which, several courts have held, should be used only in cases where an alleged violation of law caused pecuniary harm to victims—in victimless crypto enforcement lawsuits.

Many of these lawsuits have sought to impose draconian sanctions against legitimate crypto market participants that are providing the digital infrastructure needed for these markets to flourish in the United States. The time has come to rethink this blunderbuss approach to enforcement. The proposed Executive Order can achieve this on Day One of your Presidency.

To be clear, you have ample authority to do this. Article II of the Constitution gives the President the power to unilaterally issue such Executive Orders without legislation or regulatory rulemaking. The Justice Department’s own Office of Legal Counsel has opined that Article II empowers the President to compel all federal agencies—including independent regulatory agencies such as the SEC—to comply with executive orders, such as the one proposed here, that would apply generally to all Executive Branch agencies.

You can make America the center of the global crypto economy. The proposed Executive Order can be your first step, on Day One of your Presidency, towards achieving that goal.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

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Revolut to Strengthen Crypto Fraud Protections With Added Security, Risk Scores

The Revolut Pay enhanced due diligence API will be rolled out to crypto customers from start of 2025.

Fintech giant Revolut plans to extend its battle-tested security wrapper, Revolut Pay, to crypto customers from the start of 2025 to improve protection against fraudulent attacks.

As it stands, Revolut says, there is limited visibility into card transactions and bank transfers its crypto customers make with exchanges, potentially exposing them to higher levels of fraud due to card mechanisms having limited anti-scam protections.

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A 12-month pilot of firms using Revolut Pay’s enhanced due diligence, direct API integration and end-to-end control over the payment process showed crypto customers were exposed to about 50% fewer attempts to defraud them, Revolut said in a statement.

These enhancements include know-your-customer (KYC) name matching, fraud warning screens, proof of crypto delivery and the ability for crypto merchants to receive transaction risk scores.

Crypto has more than its fair share of fraudulent activity and scams, whether that involves identity theft, phishing scams and even the involvement of AI deep fakes and so on.

“In the crypto space, there’s a little bit of an issue with fraud outcomes,” said Alex Codina, general manager for merchant payments at Revolut in an interview. “Now, crypto firms, either exchanges or on-rampers, can integrate Revolut Pay as a payment method and by doing that we allow our users to directly buy crypto on those checkouts in a safer manner.”

Match your customer

Under the hood, the integration with third-party exchanges or on-ramps starts with KYC matching, so validating that the person who is buying on Revolut side is the same person who is KYC’d on the exchange’s side.

“If those names don’t match the transaction is rejected. In the card world, this would be the equivalent of a stolen card or something like that,” Codina said.

Beyond that, firms are in a running battle to combat a sophisticated array of investment scams, whereby customers are duped into thinking they need to perform some transaction or other to qualify for a fictitious reward of some kind, he added.

“These are the hardest ones to deal with,” Codina said. “Basically what we do is assess the risk score of the transaction based on information on our users, like if they have traded crypto in the past or not with Revolut, with a third party, and assess the probability of that transaction being part of an investment scam.”

Obviously, a balance has to be struck when it comes to user experience and safety, Codina said. The safety measures put in place by Revolut could be a question or two about the transaction, or in some cases the customer could be referred to a customer services manager to briefly chat about the transaction.

“We have a pretty robust model and framework where we can add some friction, depending on how risky we think the transaction is,” he said.

How MicroStrategy and Others Are Taking on Billions in Debt to Buy More Bitcoin

Michael Saylor has raised $6 billion in convertible bonds, with $18 billion more to come. His strategy is unprecedented — here’s how it works.

Have Michael Saylor and MicroStrategy (MSTR) stumbled onto an infinite money glitch?

It would be hard to blame anyone for thinking so. While the Saylor-led company began buying bitcoin (BTC) more than four years ago, over the past 10 months MicroStrategy has used a unique strategy to raise over $6 billion for the express purpose of adding more bitcoin to its balance sheet, which as of Dec. 15 footed to 439,000 tokens worth $46 billion at the current price of about $106,000.

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MicroStrategy did not raise these funds by taking out loans or by issuing more company shares (though it has separately issued billions of dollars worth of equity). Rather, the firm sold convertible notes — debt securities which can be converted into equity on specified dates or under special conditions. And it’s not done yet: Saylor and company intend to raise at least another $18 billion through such bonds over the course of the next three years, according to a plan laid out in October.

Demand for this convertible paper has been so high that other companies, bitcoin miner MARA Holdings (MARA) among them, have adopted a similar playbook to raise billions to add to their own stacks.

But that raises a question: Could issuing so much debt eventually become dangerous for these firms, and for the crypto market at large?

“If bitcoin faces a prolonged period of low/declining prices, [the companies] could have to issue more equity and dilute shareholders at an inopportune time … [or] sell the bitcoin for less than they bought,” Quinn Thompson, founder of crypto hedge fund Lekker Capital, told CoinDesk. Thompson added, though, that he doesn’t expect the companies to become insolvent.

How convertible notes work

Convertible notes are a financial tool that allows companies to quickly raise funds without needing to provide collateral (as they would for a loan) or to immediately dilute their stock. These bonds are priced based on the interest rate baked into them, the firm’s underlying stock, the volatility of that stock and the firm’s credit worthiness.

For example, in November bitcoin mining firm Bitdeer (BTDR) raised $360 million by issuing convertible notes with an interest rate of 5.25%. These will mature on Dec. 1, 2029 at a price of $15.95 per share — which is approximately 42.5% higher than what these shares were trading for on Nov. 21 when the convertible notes were priced.

In other words, instead of simply buying the company’s shares on the open market, investors can earn a solid yield by holding these notes while also benefitting if the stock surges. Even better, convertible notes come with downside protection. On specific dates, such bonds can be redeemed in cash for an amount equal to the original investment plus interest payments. Put differently, investors are almost guaranteed to get their money back even if the stock plunges before the note matures.

But MicroStrategy’s situation is rather unheard of in that the firm has found demand for convertible bonds at a 0% interest rate even though benchmark U.S. interest rates are closer to 5%. Why? Volatility. Being essentially a leveraged play on bitcoin, MicroStrategy common stock most recently has been trading with a 30-day average implied volatility of 106 and prior to that even higher. For comparison, the S&P 500 usually trades at roughly 15 in implied volatility, and bitcoin at 60.

The stock volatility affects price action in MSTR’s convertible bonds and sophisticated market participants are able to score sizable profits by trading that volatility in a market neutral fashion. “I was on the phone with a convertible note [arbitrage] trader… just to sort of understand what he’s going through with all of this,” Richard Byworth, a convertible bond expert and managing partner at asset management firm Syz Capital, told the On The Margin podcast. “He said ‘Rich, I’ve become a degen crypto trader. … It’s insane. I go to the bathroom, if I haven’t tightened up all my deltas and at least left some limits, I can come back and have millions of dollars of exposure.’ This stuff is whipping around like crazy.”

There’s thus a huge demand for MicroStrategy’s convertible notes, and that has allowed the firm to sell a ton of them — five issuances in a year, which is unprecedented. At press time, the company had six outstanding convertible notes, with maturations between 2027 and 2032. Two of these have 0% interest rates, while two others yield 0.625%, a fifth 0.875% and the last one 2.25%. Because these rates are so low, MicroStrategy is managing to sell equity at a massive premium compared to its current stock price, while only paying a blended 0.811% interest rate on its debt, or $35 million annually, an amount easily covered by the firm’s revenue.

“Should implied volatility remain high, I bet MSTR sells more and more convertible bonds… meaning they buy more and more bitcoin,” Greg Magadini, director of derivatives at crypto data firm Amberdata, told CoinDesk. “To me the first sign of a bitcoin rally “TOP” will coincide with a drop in MSTR implied volatility.”

Convertible notes mania

In addition to the above-mentioned bitcoin miners, there’s medical device company Semler Scientific (SMLR), which made public its bitcoin treasury strategy in late May. While the firm to date has only purchased bitcoin with cash already on its balance sheet and capital raised through share sales, its stock was granted an options market on Tuesday, which will make note offerings much more attractive to investors and traders looking to profit in similar fashion to that of MicroStrategy’s debt.

Bitcoin miners took on roughly $5.2 billion in debt from June to Dec. 5 alone, according to the MinerMag. Some of these convertible notes have been issued with 0% interest in the case of MARA and Core Scientific, while others like Bitdeer, IREN (IREN) and TeraWulf (WULF) have issued them at rates ranging from 2.75% to 8.5%.

Not every company is employing the strategy for the same reasons, however. MARA and Riot Platforms (RIOT) are walking in MicroStrategy’s footsteps by using the proceeds from the convertible notes to add more bitcoin to their balance sheet, but Core Scientific, for example, wants the funds for operating expenses, capital expenditures, and potential acquisitions. Bitdeer, meanwhile, said it aimed to further develop its mining rig manufacturing business.

Bill eventually comes due

Convertible notes, however, are not free money. As mentioned previously, once the notes reach full maturity, holders can decide to convert them for equity at an agreed-upon price per share, or redeem them for cash if the stock has underperformed expectations.

The danger, then, is that the stock prices of these various firms could drop significantly over a long period of time, incentivizing holders to redeem their notes for cash instead of shares. In MicroStrategy’s case, that could compel the company to sell some of its bitcoin holdings to pay investors back, while bitcoin mining firms could be forced to sell off various mining assets. In a worst case scenario, firms could end up facing bankruptcy.

Forced selling of bitcoin isn’t necessarily the end of the world, at least as long as the company’s average purchase price is lower than the price it sells at. MicroStrategy’s stash, for instance, was acquired for $61,725 per bitcoin on average, which gives the firm a certain amount of breathing space. The trouble is bitcoin is well known for plunging 80% every few years. Just this year — in the middle of a bull market — the price declined nearly 40% at one point, so there’s no guarantee the top cryptocurrency won’t ever sink lower than MicroStrategy’s average purchase price.

Even so, MicroStrategy’s bonds are staggered, meaning that they all have different maturation years. That reduces the company’s risk because it won’t need to repay all of that debt all at once. In other words, bitcoin and MSTR would need to stay down for a significant number of years for the firm’s situation to get really dicey. The fact that most of MicroStrategy’s notes already meet the requirements for conversion is another point in the company’s favor, and it always has the option of rolling over its debt by issuing new convertible bonds, even if they wouldn’t be on such favorable terms.

In a sense, MicroStrategy is a grizzled veteran of this strategy. It’s possible the newcomers like the bitcoin miners and maybe Semler (if it does choose to issue debt) — whose average bitcoin purchase prices will be far higher — could find themselves far more exposed, having taken on large liabilities closer to a potential cycle top.

Next U.S. Senate Banking Chair Calls Crypto ‘Next Wonder’ of World

Senator Tim Scott said the Senate will tackle crypto bills, and the incoming chair of the House Financial Services Committee said he hopes to pass them in 2025.

WASHINGTON, D.C. — The crypto industry got a promise for action Tuesday from the Republican U.S. lawmakers who will have the authority to move digital assets legislation, with key members of the Senate and House of Representatives saying the sector will finally get what it’s awaited for years.

The incoming Republican chair of the U.S. Senate Banking Committee, Senator Tim Scott, and his counterpart on the House Financial Services Committee, Representative French Hill, were welcomed with enthusiasm by a Blockchain Association crowd in Washington, in sharp contrast to the uncertain tone of the same event last year. The two lawmakers said at the policy event that both chambers of Congress and the administration of President-elect Donald Trump will all be pulling in the same direction to make legislation happen.

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The two starting points, they said, will be the Financial Innovation and Technology for the 21st Century Act (FIT21) — the bill to establish comprehensive crypto market guardrails that cleared the House this year by a wide bipartisan margin — and a stablecoin bill that was close to a bipartisan deal but ground to a halt over a few sticking points around the role of the federal and state governments.

“Congress needs to do its job, find a compromise and put things right,” Hill said, suggesting his aim is to get passage of crypto market-structure legislation — something “like FIT21” — in the first few months of the session.

That’s a familiar message from the House side of Congress, but it’s the Senate that had long been the source of resistance. Senator Scott will soon arrive in his committee chairmanship with a stark reversal of Democrat predecessor Senator Sherrod Brown’s crypto suspicion.

“In my opinion, it is the next wonder of the world,” he said, also promising that his panel would have a crypto offshoot. “I’m going to be the chairman that creates a digital assets subcommittee for the first time.”

Senator Brown, the current chairman, lost his Ohio Senate race in November, overcome by Republican Bernie Moreno, a blockchain businessman. Brown had been a key constraint to crypto progress in the Senate, though the new top Democrat of the committee will be Senator Elizabeth Warren, the progressive firebrand from Massachusetts, who is expected to loudly criticize crypto from the sidelines in the next couple of years.

Scott acknowledged, “She’s very good at what she does.”

But he said, “I think the future’s incredibly bright,” and he said he’s already started conversations on crypto policy.

Hill argued that crypto legislation can’t properly happen without wide bipartisan support.

“To win, ultimately, you need 60 votes in the Senate,” he noted. “You need to build consensus.”

Most Republicans have drifted into the crypto camp over the years, a trend that accelerated since last year. But some Democrats — often younger lawmakers — have joined them, culminating in 71 Democrat votes for FIT21 in the House. But the Senate will be closely divided, with 53 Republicans to 47 Democrats, so both parties must be involved in any major initiative.

SEC’s role

Also at the Blockchain Association Policy Summit on Tuesday, the U.S. Securities and Exchange Commission’s two Republican commissioners — Mark Uyeda and Hester Peirce — spoke about the changes they expect at the agency next year.

Uyeda criticized the agency’s crypto accounting standard, the controversial Staff Accounting Bulletin No. 121 (SAB 121), which he said had “very, very wide-ranging ramifications” for a policy that didn’t go through the proper channels.

Peirce said that while the regulator awaits new digital assets laws from Congress, “we can say some of this stuff is just outside our jurisdiction.”

“We can certainly work closely with the CFTC,” she said. “We stand ready to work on things once that’s a possibility. … I think there are a lot of places for us to help.”

Custody Firm Taurus Partners With Temenos Bringing Crypto Wallets to Thousands of Banks

Banks that use Temenos core software can now easily create crypto wallets and have exposure to any type of digital assets they want

Swiss cryptocurrency custody specialist Taurus is collaborating with Temenos, a firm that provides core banking software to many of the world’s largest financial institutions, allowing those banks to quickly and easily create crypto wallets and transfer a wide range of digital assets.

This collaboration is important as the Geneva-headquartered Temenos is quite big: the firm has 67 offices in 40 countries and serves over 3000 banks and financial institutions. Taurus, whose crypto custody clients include the likes of Deutsche Bank and State Street, says it is the first digital asset custody platform to fully integrate with Temenos.

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The integration means banks using Temenos can avail themselves of one-click crypto wallets that seamlessly connect with traditional accounts, as well as automated deposit, transfer, and withdrawals, and real-time booking, reconciliation and regulatory reporting for digital assets, according to a press release.

“It means banks using Temenos can have exposure to any type of digital assets they want,” Taurus co-founder Lamine Brahimi told CoinDesk in an interview. “That could be cryptocurrencies, tokenized securities, stablecoins, even memecoins if they wish and their risk department is open to it.”

It’s good timing, Brahimi said, given the imminent arrival of a pro-crypto administration in the U.S., as well as Europe going live with the markets in crypto assets regulation (MiCA).

“Everybody is preparing for regulatory clarity in the U.S.,” Brahimi said. “America is a big market for Temenos and they have a lot of their C suite there. So, we are making ourselves ready, not just in the U.S., but everywhere; hopefully to start in Q1 of next year.”

Trump Administration Has Already Unlocked ‘New Era’ for U.S. Crypto: JPMorgan

The worst regulatory environment for crypto markets is behind us, the report said.

Donald Trump’s victory in the November presidential election is already ushering in a new era for crypto in the U.S., JPMorgan (JPM) said in a report Wednesday, noting that the total cryptocurrency market cap has jumped about 65% since his reelection.

“Not only does this new administration bring a sense of crypto friendliness, but it also has shown an eagerness to promote the asset class,” analysts led by Kenneth Worthington wrote.

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The incoming administration has shown a willingness to talk about crypto market regulation and about how to keep future development in the U.S., the report said, adding that the president-elect has already nominated a number of people who will take part in the formulation of crypto policy and enforcement.

This means a floor has been established, in that the “worst regulatory environment for crypto” is in the past, the report said. The ecosystem is now expected to become a “safer, more transparent, and more productive industry (from a regulatory perspective) from this point.”

Still, these positive tailwinds could take some time to have an effect. JPMorgan cautioned that the market might not see policy impacts for at least nine to 12 months into Trump’s term.

Trump’s nomination for the Commodity Futures Trading Commission (CFTC) chair is one piece missing from the administration’s pro-crypto agenda, the Wall Street bank said. The position is important because of its likely role in regulating bitcoin (BTC) and ether (ETH).

A more productive regulatory environment would lead to the listing of more tokens by exchanges and brokers, and would also encourage more product innovation, the report added.

The Protocol: Solana’s Allure for Devs; Avalanche’s Big Upgrade

Also: ENS picks tech for its L2; Bitcoin’s Runes Get an AMM

Welcome to The Protocol, CoinDesk’s weekly wrap-up of the most important stories in cryptocurrency tech development. I’m Marc Hochstein, CoinDesk’s deputy editor-in-chief for features, opinion and standards.

In this issue:

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Solana was the biggest draw for new crypto developers in 2024
No wonder: Solana’s transaction volume is off the charts
Coinbase alums take next step toward no-code blockchain development
Kraken’s ‘Ink’ layer-2 goes live
Avalanche activates biggest-ever upgrade
Ethereum’s ENS picks Consensys’ tech for its L2
Bitcoin’s Stacks L2 gets an automated market maker for Runes
Most Influential 2024: EigenLayer’s Sreeram Kannan

This article is featured in the latest issue of The Protocol, our weekly newsletter exploring the tech behind crypto, one block at a time. Sign up here to get it in your inbox every Wednesday.

Network News

NEW DEVS ❤️SOLANA: The Solana ecosystem, ground zero for the memecoin craze, was the most popular blockchain among new developers this year, according to a report released last week by Electric Capital. In July, this community became the first since 2016 to bring on board more devs than Ethereum. Solana attracted 7,625 new developers in 2024, the most of any chain and a little over 1,000 more than Ethereum. The results underscore the challenge Ethereum faces as rival smart contract platform Solana’s low fees and fast transactions attract investment and talent. Read more.

SPEAKING OF SOLANA: Solana’s network activity has lit up as the Pudgy Penguins NFT project debuted its native token, PENGU, on the programmable blockchain. Solana registered a total transaction tally of 66.9 million Tuesday, the highest daily volume since its inception in 2020, according to data source Artemis. To highlight how busy it was, Solana’s transaction count eclipsed the total of all other major chains combined. Read more

THE INK IS DRY: Kraken, the seventh-largest crypto exchange, said its layer-2 rollup network, built on top of the Ethereum blockchain, has gone live. The network, called Ink, is Kraken’s answer to Base, the highly successful blockchain launched by rival exchange Coinbase. Like Base, Ink is based on the OP Stack, a customizable framework that lets developers build their own rollups using Optimism’s technology. The team had originally planned for Ink to go live in early 2025, so the launch of its main network is ahead of schedule. Read more

AVALANCHE UPGRADE: Avalanche, a layer-1 blockchain launched in 2020 that’s now the tenth-largest by total value locked (TVL), activated its highly anticipated Avalanche9000 upgrade Monday, marking the ecosystem’s biggest technical changes to date. The network has been prepping for these changes for months, with new features that will cut the costs for sending transactions, operating validators and building applications on the network. Leaders at Avalanche previously said that part of the goal with the upgrade is to attract developers to Avalanche and encourage them to create customized blockchains using its technology, known as subnets, or “L1s.” Read more.

A BOON FOR RUNES: Crypto degens have a new – and, if all goes according to plan, faster, cheaper and safer – way to trade Runes, the Bitcoin ecosystem’s answer to memecoins. An automated-market maker (AMM) for the Runes protocol went live on Wednesday on Stacks, following the unveiling of the layer-2 network’s native BTC-backed asset sBTC on Tuesday. It’s the first AMM for such tokens on Stacks. The teams behind decentralized exchange (DEX) Bitflow Finance and Bitcoin bridge Pontis developed the AMM. Runes launched in April and spurred a flurry of activity, paying 78.6 BTC ($8.18 million) in fees in the first 90 minutes. However, less than a month later, this excitement waned considerably, with fees dropping more than 50%. Bitflow’s aim is for its AMM to help Runes scale and address some of the shortcomings holding it back. Read more.

ENS PICKS L2 TECH: ENS Labs, the company behind the Ethereum Name Service, has picked Linea’s technology to build its upcoming layer-2 network, Namechain. Linea is a zero-knowledge rollup that came out in July 2023 and was built by Ethereum infrastructure giant Consensys. It is the seventh-largest rollup network, according to L2Beat, with $1 billion locked in its ecosystem. Rollups are a special type of blockchain where one can transact faster and at a lower cost. There are two kinds of rollups: optimistic and zero-knowledge. Optimistic rollups use optimistic proofs, which have a seven-day window to dispute transactions before they are finalized. Zero-knowledge rollups, by contrast, finalize proofs within minutes. ENS has been described as “the phone book for Web3,” but a more precise analogy is the web’s domain name service (DNS). The domain name “CoinDesk.com” is easier to remember and type than a numerical IP address. Similarly, ENS handles like parishilton.eth, which the namesake heiress acquired in 2021, are more relatable than the strings of letters and numbers that make up Ethereum wallet addresses. For this service, “we need fast finality,” said Nick Johnson, the founder and lead developer of ENS. That’s because “you want to be able to update your ENS name and have the chain reflect it in the smallest interval possible. And to do that and have it remain decentralized and secure, we need fast finality, and optimistic roll-ups can’t deliver that.” Read more.

NO CODE, NO PROBLEM? Patchwork, a startup focused on simplifying blockchain and smart-contract development founded by former Coinbase employees, has released the next version of its low-to-no-code tools for building decentralized applications (dapps). Currently linked to Coinbase’s Base and backed by Coinbase Ventures, the “Create-Patchwork” picks-and-shovels approach lowers the barriers to building blockchain applications and attaching data to them. Following the trend toward easily generated content, the complex world of blockchains and smart-contract design is on a path to no-code applications, or a “text-to-app” experience. Create-Patchwork is the first of several features the team plans to roll out in early 2025 and a foundational step to enable creators to generate contracts and applications in seconds using natural language inputs. “Patchwork is an Ethereum protocol that makes it really easy to build dynamic on-chain applications,” co-founder Kevin Day said in an interview. “It lets on-chain things own other on-chain things, and it allows anyone to attach programmable data to on-chain things.” Read more

EIGENLAYER’S SREERAM KANNAN: KING OF THE PROFESSOR COINS

For a crypto founder who’s attracted so much controversy, Sreeram Kannan is surprisingly sanguine.

In a wide-ranging interview after his selection as one of CoinDesk’s “Most Influential” figures in crypto for 2024, the EigenLayer founder was generous with his time, chatting more than an hour beyond our scheduled slot. I was surprised at his openness because the last time we spoke, a colleague and I had just published an investigation into potential conflicts of interest at his company, Eigen Labs, and in the interim Kannan had disavowed our reporting point-by-point on a Blockworks podcast.

This time, Kannan emerged in a different light. Whatever his misgivings about CoinDesk’s past coverage, they didn’t seem top-of-mind.

What emerged wasn’t the portrait of a defensive tech founder, but rather that of a driven, thoughtful academic-turned-entrepreneur still adjusting to a spotlight few in this industry ever enjoy. Instead of bitterness or evasion, I found ambition, reflection and a quiet kind of excitement.

Kannan seemed as astonished as anyone by how swiftly EigenLayer had transformed from a concept into one of crypto’s most talked-about experiments, telling CoinDesk that he continued to view EigenLayer as a “scrappy startup.”

Over the past 12 months, EigenLayer — which allows emerging blockchain applications to borrow Ethereum’s robust security — went from a relative unknown to an industry heavyweight. The platform raised more than $100 million from venture firms including Andreessen Horowitz and, before even fully launching, drew hundreds of millions of dollars in deposits from crypto users seeking extra yield. Many were incentivized by a viral points program that investors hoped would translate into a lucrative future token airdrop.

EigenLayer’s success during the bear market was striking, and Kannan may have played a larger role than any other entrepreneur in revitalizing decentralized finance on Ethereum. But not everything went according to plan. Industry critics took issue with the EIGEN token distribution plan — which locked up tokens for months and barred claimants from certain geographies — as well as the platform’s slower-than-expected feature rollout and concerns about “rehypothecation,” or the reuse of collateral for multiple purposes. In August, the CoinDesk investigation (that Kannan disputed in the podcast) raised questions about EigenLayer’s conflict-of-interest policies, which may have allowed employees preferential access to tokens powered by its platform.

None of this seemed to derail Kannan’s intellectual ascent. Beyond running Eigen Labs, he still holds a position as an affiliate professor of electrical and computer engineering at the University of Washington, and his theory of “restaking” — letting people reuse staked Ethereum assets to secure other networks — has sparked a wave of innovation and copycats. He’s become a familiar face on the conference circuit, where he unpacks his vision of blockchains as tools for solving humanity’s endless “coordination problems.”

Blockchains, Kannan says, “are the biggest upgrade to human civilization since the U.S. Constitution.”

CLICK HERE FOR THE FULL PROFILE BY COINDESK’S SAM KESSLER:

Money Center

‘Wrapped’ in intrigue

Coinbase Says It Nixed wBTC Because Justin Sun Posed ‘Unacceptable Risk’
WBTC Episode ‘Reopened Old Wounds’ of Centralized Failures: Bitcoin Builders Association

Deals and grants

Stablecoin Payments Platform BVNK Raises $50M to Fuel U.S. Expansion
RWA-Focused Plume Raises $20M from Brevan Howard, Others Ahead of Mainnet Launch
Custody Firm Taurus Partners With Temenos Bringing Crypto Wallets to Thousands of Banks

Regulatory and policy

Next U.S. Senate Banking Chair Calls Crypto ‘Next Wonder’ of World

Calendar

Jan 9-12, 2025: CES, Las Vegas
Jan. 15-19: World Economic Forum, Davos, Switzerland
January 21-25: WAGMI conference, Miami.
Jan. 24-25: Adopting Bitcoin, Cape Town, South Africa.
Jan. 30-31: PLAN B Forum, San Salvador, El Salvador.
Feb. 1-6: Satoshi Roundtable, Dubai
Feb. 19-20, 2025: ConsensusHK, Hong Kong.
Feb. 23-24: NFT Paris
Feb 23-March 2: ETHDenver
March 18-19: Digital Asset Summit, London
May 14-16: Consensus, Toronto.
May 27-29: Bitcoin 2025, Las Vegas.

Bitcoin Dips Below $98K While CoinDesk 20 Plunges 10% Amid Fed-Spurred Rout; SOL Surrenders Post-Election Rally

Fed Chair Jerome Powell’s hawkish comments Wednesday on rate cuts have rattled investors across asset classes.

Crypto asset prices slid on Thursday, building on Wednesday’s market-wide selloff spurred by Federal Reserve Chair Jerome Powell disappointing investors with his comments on U.S. interest rate cut expectations for next year.

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Bitcoin’s (BTC) attempt to bounce back above $100,000 quickly faded earlier during the day and slid to the low-$97,000s during the U.S. day. Recently, it modestly recovered to around $98,000, but was still down 4.8% over the past 24 hours.

Altcoins fared much worse, with the broad-market CoinDesk 20 Index diving more than 10% during the same period. Ethereum’s ether (ETH) dipped 10.8% to below $3,500, while Cardano’s ADA, Chainlink’s LINK, Aptos’ APT, Avalanche’s AVAX and Dogecoin’s DOGE all suffered 15%-20% losses. Notably, SOL sank to its weakest price since Nov. 7 — nearly erasing its post-election rally following a 26% plunge from its record high hit less than a month ago.

Over the past 24 hours — roughly since yesterday’s rate decision by Fed policy makers — nearly $1.2 billion worth of leveraged crypto derivatives trading positions have been liquidated across all assets, CoinGlass data shows. Over $1 billion of those were long positions, or bets that prices would rise.

In traditional markets, U.S. stock indexes slightly bounced from Wednesday’s lows but gave back part of the pre-market gains during the session. The S&P 500 and the tech-heavy Nasdaq were 0.5% up from the Wednesday close.

Crypto prices rose almost vertically since Donald Trump’s presidential election victory in early November, buoyed by hopes of pro-crypto policies from his incoming administration. Wednesday’s Fed projection of a slower pace of rate cuts for next year and Powell’s hawkish tone on rising inflation expectations caught many investors offside, triggering a broad-market selloff across crypto, equities and even gold.

The U.S. dollar index (DXY), a key strength gauge against a basket of foreign currencies, surged above 108, its strongest level since November 2022, while 10-year U.S. Treasury yields also rose sharply above 4.6%, the highest since May.

“The crypto market has already been on pins and needles around the possibility for a correction following the record run in the price of bitcoin through $100,000,” Joel Kruger, market strategist at LMAX Group, said in a Thursday note. “We got that catalyst from the world of traditional markets. … Fallout from Wednesday’s Fed decision was simply too much to ignore.”

“When you zoom out and consider the year-over-year growth, a pullback like this feels healthy,” Azeem Khan, co-founder and COO of layer-2 network Morph, said in an email shared with CoinDesk.

“It’s also worth noting that, historically, year-end selloffs in securities can occur as investors offset losses against gains to lower their tax liabilities,” Khan added. “While it’s hard to say how much of this is driving the current trend, it could be a contributing factor.”

Luuk Strijers: Pioneering Bitcoin Options

The CEO at Deribit, has shown years of transformative leadership in the crypto derivatives space.

In Prague, where Kafka once dreamed of metamorphosis, another transformation is taking shape. The city’s ancient stones whisper of bureaucratic labyrinths transcended, just as cryptocurrency now defies traditional financial boundaries.

Meeting Luuk Strijers in the VIP lounge of the Prague Congress Center, during The Block’s recent Emergence event, feels like stepping into this intersection of rebellion — where Kafka’s struggle against systemic constraints echoes in today’s digital asset revolution.

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Below, a city that birthed both surreal literature and crypto pioneers like SatoshiLabs stretches toward a horizon where Gothic spires mirror the ascending graphs of Bitcoin options. Hours earlier, the Czech Republic had passed legislation exempting digital asset profits from income tax if held over three years — another wall between old and new finance crumbling.

With two decades of experience in listed products, ETFs, warrants, equities, and derivatives, Strijers brought deep traditional finance expertise when he joined Deribit as Chief Commercial Officer in 2019. His previous role at the Singapore Exchange (SGX), where he oversaw listed products, gave him insight into both the limitations of traditional exchanges and the potential for innovation in crypto derivatives.

For his leadership in the crypto derivatives space, Strijers has earned a spot on CoinDesk’s Most Influential 2024 list.

Under Strijers, Deribit has solidified its position as the dominant force in crypto derivatives, commanding 80% of the global crypto options market. Daily volumes exceed $1.3 billion, dwarfing competitors like Binance, OKX and CME. Now, with Bitcoin touching $100,000 and institutional adoption surging, the platform’s specialization in options trading has proven prescient.

“Our infrastructure isn’t just about processing trades,” Strijers said. “When bitcoin moves, we’re updating hundreds of strikes across multiple expiries simultaneously. Traditional exchanges might update two quotes — we’re managing thousands of instruments in real-time.”

This complexity has kept many competitors at bay. Having worked at SGX since 2014, Strijers understands firsthand why traditional exchanges struggle to adapt. “In traditional finance, you have layers of intermediaries — brokers, clearing members, central counterparties. Changing that system to accommodate crypto assets isn’t just difficult; it’s nearly impossible without starting from scratch.”

2024 has been a watershed year for Deribit, with total trading volumes surpassing $1 trillion. The platform has expanded its collateral options, now accepting everything from Bitcoin to tokenized gold. This innovation in collateralization sets them apart from traditional venues that only accept fiat currency.

Looking ahead to 2025, Strijers is focused on regulatory expansion. With a VARA license in Dubai becoming active and MiFID approval pending in Europe, Deribit is building what he calls a “hub-and-spoke” model. “We’re creating a global network where clients can onboard locally but execute through regulated hubs,” he said. “It’s about making institutional access as seamless as possible.”

The return of Donald Trump to the White House could accelerate institutional adoption. “There’s a strong belief that the first 100 days of a Trump administration would bring crypto-friendly regulations,” Strijers says. “While this would primarily benefit the U.S. market, it would likely create a domino effect globally.”

New products are on the horizon too. While bitcoin and ethereum options dominate current volumes, Strijers hints at expansion into other assets. “We’re seeing growing interest in Solana and XRP derivatives. But we’re selective — we need to ensure sustainable liquidity, not just today but months into the future when those options mature.”

Drawing on his extensive background in exchange trading and corporate finance, Strijers has helped transform Deribit into an institutional cornerstone of the digital asset ecosystem. As trading volumes continue to surge and new institutional players enter the market, his vision of a mature, regulated crypto derivatives market is becoming reality.

Under his leadership, Deribit looks set to maintain its dominance in the crypto options space, continuing to bridge the gap between traditional finance and digital assets while fostering deeper liquidity and institutional participation in the years ahead.

This profile is part of CoinDesk’s Most Influential 2024 package. For all of this year’s nominees, click here.

EigenLayer’s Sreeram Kannan: King of the Professor Coins

Kannan may have played a larger role than any other entrepreneur in revitalizing DeFi on Ethereum. But not everything went according to plan.

For a crypto founder who’s attracted so much controversy, Sreeram Kannan is surprisingly sanguine.

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This time, Kannan emerged in a different light. Whatever his misgivings about CoinDesk’s past coverage, they didn’t seem top-of-mind.

Industry critics took issue with the EIGEN token distribution plan — which locked up tokens for months and barred claimants from certain geographies — as well as the platform’s slower-than-expected feature rollout and concerns about “rehypothecation,” or the reuse of collateral for multiple purposes. In August, the CoinDesk investigation (that Kannan disputed in the podcast) raised questions about EigenLayer’s conflict-of-interest policies, which may have allowed employees preferential access to tokens powered by its platform.

None of this seemed to derail Kannan’s intellectual ascent. Beyond running Eigen Labs, he still holds a position as an associate professor of electrical and computer engineering at the University of Washington, though he is currently on leave, and his theory of “restaking” — letting people reuse staked Ethereum assets to secure other networks — has sparked a wave of innovation and copycats. He’s become a familiar face on the conference circuit, where he unpacks his vision of blockchains as tools for solving humanity’s endless “coordination problems.”

Blockchains, Kannan says, “are the biggest upgrade to human civilization since the U.S. Constitution.”

Academia

Kannan grew up in Chennai, in southern India. At first, he was drawn to pure math, staying in India for his undergraduate and master’s degrees. He studied telecommunications, a discipline that would later prove relevant to crypto’s distributed systems.

In 2008, he moved to the United States to earn another master’s in mathematics at the University of Illinois at Urbana-Champaign, followed by a Ph.D. in entrepreneurship. Then, postdoctoral stints at Berkeley and Stanford opened his eyes to new academic frontiers.

At Berkeley, a lecture on “Synthetic Genomics” lured Kannan into the intricate realm of reprogramming living systems. “I said, ‘Okay, that seems much more fun than trying to get people to download more and more data on their phones,’” Kannan remarked.

Computational biology became Kannan’s specialty. As an associate professor at the University of Washington, he worked with his students to develop complex mathematical models to study the structure of DNA. Then advances in artificial intelligence blindsided him. One of Kannan’s students proposed using AI for a particularly tricky DNA sequencing problem, and Kannan balked — surely a neural network couldn’t outperform his finely tuned equations. Yet, in just two weeks, the AI beat Kannan’s best benchmarks.

Kannan came to a disturbing realization: “In five or ten years, all the stuff I was doing — the mathematical algorithms — is all gone,” he said. “AI will do everything.”

Pathfinding

Confronted with AI’s relentless rise, Kannan saw two paths: go deeper into AI-driven computational biology or try something new. He chose the latter.

In 2017, a call from his Ph.D. advisor alerted him to Bitcoin’s meteoric rise. Kannan began dabbling in crypto, and a reading of Yuval Noah Harari’s “Sapiens” offered deeper inspiration. Kannan’s takeaway from the bestseller was that “the reason why humans are special is not that we are intelligent,” or “can innovate.” Instead, humanity’s strength comes from our ability to coordinate at scale.

“Coordination is communication plus commitments,” Kannan said, explaining that while the internet had solved global communication, there was still no digital-native way to ensure trust. To Kannan, the trustless architecture of blockchains could fill that void. “If you don’t trust somebody, you’re not going to be able to coordinate,” he said, framing blockchains as the next evolutionary leap in human cooperation.

He dove deeper into Bitcoin, noting its low throughput and inefficiencies. That felt oddly familiar. “This is what I had studied in my PhD: How do you optimize a peer-to-peer wireless network?” Crypto’s bottlenecks and scaling issues seemed like the perfect place to apply his telecommunications expertise.

By early 2018, Kannan had found his purpose in crypto: not just to tinker, but to use his academic experience to address fundamental human coordination and scaling problems. He was ready, as he put it, “to go all in.”

Founding EigenLayer

Kannan’s early path through crypto founderdom included a few less-than-successful pit stops, among them building a short-lived NFT marketplace. “I realized I can only really build things for which I, or some core team members, are also the consumers,“ Kannan said. He shuttered the project in under a year.

He then began shopping around ideas for new blockchain security models, including one that he proposed to Cardano, the blockchain project helmed by Ethereum co-founder Charles Hoskinson. Kannan’s work in this area eventually culminated in an idea that stuck: “restaking” — the technology that would eventually underpin EigenLayer.

Ultimately, Kannan focused on Ethereum, the most widely used smart-contract blockchain, and he formed Eigen Labs, the company behind EigenLayer. The new platform’s goal was straightforward: let emerging blockchain projects “borrow” Ethereum’s security through restaking.

Ethereum is secured by a system in which users “stake” ether (ETH) as collateral, effectively earning interest in return for helping validate the network. Misbehavior – such as misreporting transactions or going offline – risks having collateral slashed.

EigenLayer builds on that structure, allowing stakers to earn additional returns by “restaking” their ETH pledged on the main chain to secure other networks, known as “actively validated services” or AVSs.

It’s unlikely most stakers (or restakers) really understand how this all works under the hood. Most investors stake ETH because they want to earn interest. EigenLayer promised to boost yields with its restaking.

For AVS developers, EigenLayer provides an easy way to tap into Ethereum’s collateral reserves without building a new security framework from scratch. This concept of “shared security” resonated widely and helped propel EigenLayer’s sudden rise.

“It’s a crazy, 100-year project, and it upgrades the human species,” Kannan told CoinDesk.

Growing pains

As EigenLayer soared, the bright lights brought scrutiny. “There was a lot of uncomfortable attention,” recalls Kannan. The attention was “positive, initially,” but it eventually began to sour in some corners.

“I think the first time the negativity hit was after the token launch,” reflected Kannan.

Before announcing the EIGEN token, EigenLayer gave “points” to depositors, a common tactic in crypto to spark early interest. Officially, the points are just an informal tally meant to gamify the system. But people mainly racked up points because they assumed they’d eventually be able to cash them in for EIGEN crypto tokens — speculation that EigenLayer did little to quell.

Entire markets emerged around these points, even though they were not meant to hold intrinsic value and EigenLayer never directly confirmed that it would release a token.

Early enthusiasm surrounding EigenLayer points turned into disappointment once the EIGEN token details finally emerged in April. People who expected easy liquidity chafed at EigenLayer’s plan to lock tokens for several months. Some felt excluded by geography-based restrictions, which Eigen Labs imposed to avoid violating U.S. securities laws. Others criticized EigenLayer’s slow feature rollout and fretted over conflict-of-interest issues, including (but not limited to) those raised by CoinDesk’s investigation.

“We had these features which were coming up. We had more decentralization coming up,” said Kannan. In the EigenLayer founder’s mind, he was “trying to protect the rights of all the people holding tokens” with his conservative regulatory approach, and by blocking transfers until after the platform was ready to release its main features. But, Kannan admits, ”it just blew up in the most negative possible manner.”

Kannan attributes some of the turbulence to his academic roots. He’d stepped into a world rife with hype cycles, tribal spheres, and financialization, and he was still learning its rhythms.

Early on, he realized that building a crypto startup required a more diverse team and skill set than any academic project. In one of his earlier failed crypto ventures, “everybody was similar,” with PhDs from “Stanford, MIT, and the University of Washington.” With EigenLayer, Kannan knew he needed not just brilliant engineers but also clear communicators, community advocates, and savvy business operators.

But Kannan still had to learn how to turn intellectual rigor into practical progress — and how to communicate that progress to a restless audience. The token fiasco exposed a disconnect between Eigen Labs and its community.

Users and developers wanted more transparency, collaboration, and communication. To Kannan, those demands felt extreme even by crypto’s warped, highly financialized standards. But he eventually understood that his perception of EigenLayer, as a scrappy startup, didn’t match how others saw it, as an industry juggernaut.

Kannan recalls being at a crypto conference and having a stranger ask him how the crypto community should address a concerning trend of over-leverage in crypto markets. Kannan was confused. “That doesn’t have anything to do with EigenLayer,” he recalled thinking. “I asked him, ‘Why are you telling me this?’” The answer: “Because you’re an industry leader.”

It was a turning point. Kannan, who once saw himself as “just some startup guy,” began accepting this new reality. Influence comes with responsibility and complexity.

One EigenLayer investor reminded Kannan that as he charted new territory, he would continue facing unexpected hurdles. In founding a startup, Kannan would be forced to reckon with something he was used to from his research days: trial and error. “You will learn,” the investor told him, “So I’m going to let you make your mistakes.”