Here's What You Should Know About the EIGEN Token ๐ธ
Weekly News Recap: ๐จ CZ's prison sentence, ๐ DeFi tokens drop, ๐ฐ Tether shatters profit records, ๐ Stablecoin regulation stalls, and more!
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EigenLayer has been in the news this week after it announced its โstakedrop,โ where it will distribute EIGEN tokens to early users of the restaking platform.ย
Sreeram Kannan, founder and CEO of EigenLayer, and Robert Drost, CEO and executive director of the Eigen Foundation, discuss the launch of the token, a โuniversal intersubjective work tokenโ and how it allows for slashing, or penalizing, for externally observable faults, such as data unavailability. The Eigen Foundation, a non-profit entity based in the Cayman Islands, was also recently established to grow the protocol and assist in creating a decentralized community.ย
They also address criticisms of the tokenโs launch, including geoblocking and the initial non-transferability of stakedrops for the community and explain why they decided to allocate an additional 100 EIGEN tokens for all participants in the stakedrop. Plus, they reveal a target date by when a decision about the token unlock date should be made.ย
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Weekly News Recap
Binance Founder Changpeng Zhao Sentenced to Four Months in Prison
Former Binance CEO Changpeng โCZโ Zhao has been sentenced to four months in prison by a federal judge in Seattle for failing to comply with the Bank Secrecy Act.ย
Judge Richard Jones emphasized the unprecedented nature of the case in terms of the "volume, scale, and massiveness" of the noncompliance, during the sentencing. Despite the prosecution's push for a three-year sentence and the defense's argument for probation, Zhao was ordered to serve time in a low-security federal prison near Seattle.ย ย
The sentence concludes a years-long Department of Justice Binance investigation, which found systemic anti-money laundering failures. Zhao and Binance reached a joint plea deal in November 2023, resulting in a hefty $4.3 billion in penalties for Binance. Zhao personally was on the hook for $50 million. Justin Paperny, a former broker and advisor to white-collar criminals, noted that while the sentence is lenient, Zhao will face significant collateral consequences as a convicted felon.
Steep Decline in Renzo and Kamino Tokens Post-Airdrop
Recent airdrops from DeFi protocols Renzo and Kamino resulted in sharp declines in their respective tokens, which traded far below their initial expectations. Following their debut on Tuesday, REZ plummeted 54%, trading at $0.167, while KMNO fell by 78% to just $0.04, illustrating the challenges facing newly launched tokens.
These drops occurred amidst a broader crypto market downturn, which declined almost 10% in April. Even so, Renzo's total value locked (TVL) grew by over 37%, whereas Kamino experienced a 25% reduction in its TVL.
Experts point to a trend where airdrop recipients quickly sell off their tokens, a strategy favored by short-term traders capitalizing on low initial supplies for quick gains. This behavior reflects broader market skepticism toward the sustainability of high valuations set during launches. Marc Weinstein, a partner at digital assets investment firm Mechanism Capital, noted that โinvestors donโt believe there is upside potential if a project launches with an 11-figure valuation."
Tether Shatters Records With $4.52 Billion Q1 Profit
Tether, the company behind popular stablecoin USDT, announced a record-breaking net profit of $4.52 billion for the first quarter. This impressive financial performance was primarily driven by its substantial holdings in US Treasuries, Bitcoin, and gold, according to an assurance opinion conducted by global accounting firm BDO.
Paolo Ardoino, Tether's CEO, highlighted the company's commitment to "transparency, stability, liquidity, and responsible risk management," noting that Tether's financial strength and stability continue to set industry benchmarks. The company reported an increase in net equity, reaching $11.37 billion through March 31, up from $7 billion at the end of 2023.
Despite these gains, Tether has seen its market share on centralized exchanges decline to 69%, reflecting intense competition within the stablecoin sector. However, the firm maintains a strong liquidity position, with 90% of Tether-issued tokens backed by cash and cash equivalents.ย
Consensys Alleges SEC Shift on Ethereum
Consensys filed a complaint alleging that the U.S. Securities and Exchange Commission (SEC) reversed its previous position that Ethereum was not a security. According to the unredacted complaint, released Monday, the SEC had already begun investigating Ethereum as a potential security in March 2023.ย
In a related development, Rep. Patrick McHenry, chairman of the House Financial Services Committee, accused SEC Chair Gary Gensler of misleading Congress about the agency's view on Ethereum. McHenry highlighted that the SEC was actively investigating Ethereum as a security days before Gensler's appearance in Congress, suggesting a deliberate attempt to avoid disclosure of the Commission's evolving stance.
Hong Kong's Spot Bitcoin and Ethereum ETFs Launch with Moderate Success
Hong Kong's financial markets witnessed the debut of six new spot Bitcoin and Ethereum ETFs, recording over HKD 80 million ($10 million) in traded shares on their first day. This marks Hong Kong as the first market in Asia to allow trading of spot virtual asset ETFs.
The trading volume in Hong Kong pales in comparison to the U.S. counterparts, which saw $4.5 billion on their inaugural day. However, the introduction of these ETFs still represents a considerable achievement, outperforming the region's previous Bitcoin and Ethereum futures ETFs, which had an average daily turnover of HKD 51.3 million ($6.5 million) in the first quarter of 2024.
These ETFs, managed by Harvest Global Investments, China Asset Management, and a partnership between Bosera and Hashkey, offer investors the unique feature of physical redemptions, aligning closely with the practices of traditional ETFs and allowing for direct investment from Bitcoin miners.
A16z Invests $90 Million in Optimism's OP Token
Venture capital giant a16z purchased approximately $90 million worth of Optimismโs OP token.
The purchase includes a two-year vesting period, suggesting a long-term commitment from a16z to the Optimism project. This move coincides with Optimism's increasing adoption, notably by Celo developers who recently selected Optimismโs OP Tech Stack to develop their Layer 2 blockchain solutions, and Coinbaseโs Base, which also chose the OP Tech Stack.ย
U.S. Stablecoin Regulation Efforts Stalled
Efforts to pass U.S. stablecoin regulation encountered another setback as attempts to attach the bill to the Federal Aviation Administration (FAA) reauthorization were blocked by congressional leaders. Advocates for the stablecoin legislation, including House Financial Services Committee Chair Patrick McHenry and ranking Democrat Rep. Maxine Waters, had hoped to expedite its passage by linking it with the must-pass FAA legislation. Despite the setback, there is momentum to find another legislative vehicle for the stablecoin regulations, possibly aligning it with high-profile marijuana legislation.
Simultaneously, U.S. Representatives introduced a separate bill aimed at clarifying the taxation of staking rewards. The Providing Tax Clarity for Digital Assets Act seeks to ensure that taxes on these rewards are only applied at the time of sale, aiming to simplify the current complex taxation landscape and prevent double taxation.
Roger Ver, Known as "Bitcoin Jesus," Indicted for Tax Fraud
Roger Ver, an early bitcoin investor and advocate, nicknamed "Bitcoin Jesus," has been indicted for tax fraud by the U.S. Department of Justice.ย
The indictment alleges that Ver failed to file tax returns and did not pay taxes on capital gains from substantial Bitcoin sales in 2017, totaling about $240 million. Although no longer a U.S. citizen, Ver was still obligated to report and pay taxes on certain distributions from U.S. corporations. He was arrested in Spain, with the U.S. seeking his extradition.
FTX Estate Concludes Second Sale of Locked Solana Tokens
The FTX estate completed its second tranche of locked Solana token sales, with bids averaging around $100 each, following a large initial sale in March. The recent auction saw the disposal of 1.8 million SOL tokens, valued at approximately $232 million. The bids ranged from $85 to $110, with most successful bids over $95, reflecting a discount of 15% to 25% from the current market price. Notable participants included Galaxy Trading and Pantera Capital, the latter securing additional tokens in this second round. The third auction began on Wednesday, targeting both U.S. accredited and non-U.S. investors.
Samourai Wallet Co-Founder Keonne Rodriguez Pleads Not Guilty, Released on $1M Bond
Keonne Rodriguez, co-founder of the privacy-focused Samourai Wallet, pleaded not guilty on charges of money laundering and operating an unlicensed money transmitting business. Arrested in Pennsylvania, Rodriguez was released on a $1 million bond and has been confined to house arrest until his trial. The Department of Justice alleges that from 2015 until the recent seizure of Samourai Walletโs servers, the app facilitated over $100 million in illegal transactions from dark web markets. Rodriguez's next hearing is scheduled for May 14 in Manhattan.
This case parallels the DOJ's actions against Tornado Cash, where developers face similar allegations of facilitating unlawful transactions through their crypto mixing service. Like Rodriguez, Tornado Cash developer Roman Storm is also contesting DOJ claims, arguing that Tornado Cash did not operate as a custodial financial institution. This week, the DOJ challenged Storm's motion to dismiss charges, reaffirming the service's role in money laundering and unlicensed money transmission.