Is cbBTC the Next Big Thing for Bitcoin in DeFi?
Weekly News Recap: 🔥 DeFi sparks Congressional debate, 🚨 eToro settles with SEC, 💸 Friend.tech shuts down, and more!
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Bitcoin Is Worth Over $1 Trillion. How Much Will Coinbase’s New cbBTC Grab?
Coinbase’s new wrapped bitcoin alternative, cbBTC, just launched. Will it challenge the dominance of WBTC in DeFi, or is it just another centralized solution? Coinbase’s VP of engineering, Will Robinson, breaks it all down.
On Thursday, Coinbase unveiled cbBTC, a tokenized version of Bitcoin on its Base layer 2 and Ethereum. This launch follows the recent BitGo controversy about the custody arrangement for Wrapped Bitcoin (WBTC) now involving Justin Sun, sparking concerns within the crypto community.
In this episode, Will Robinson, Coinbase’s VP of engineering, discusses the strategic importance of cbBTC, how it differentiates from other wrapped Bitcoin products, and what this means for the future of Bitcoin within DeFi ecosystems.
Will Coinbase’s reputation as a “trusted custodian” be enough to make cbBTC the go-to choice for Bitcoin in DeFi, or will the industry remain skeptical?
Listen to the episode on Apple Podcasts, Spotify, Pods, Fountain, Podcast Addict, Pocket Casts, Amazon Music, or on your favorite podcast platform.
Weekly News Recap
Congressional Hearing on DeFi Reveals Sharp Partisan Divide
The first Congressional hearing dedicated to Decentralized Finance (DeFi) took place this Tuesday, exposing significant partisan differences. Republicans, led by Rep. French Hill (R-AR), lauded DeFi as a groundbreaking financial innovation that enhances economic freedom by eliminating intermediaries. "DeFi is crucial for maintaining the U.S.'s leadership in global markets," Hill asserted.
In contrast, Democrats expressed grave concerns about the risks associated with unregulated DeFi platforms, emphasizing the potential for fraud, tax evasion, and criminal activities. Rep. Brad Sherman (D-CA) argued that DeFi poses serious threats, benefiting bad actors at the expense of honest citizens. "This system favors criminals and tax evaders," Sherman warned.
The hearing featured testimonies from several industry experts, who advocated for balanced regulation that addresses risks without stifling innovation. However, the discussions highlighted the deep partisan divide over how to manage the rapidly growing DeFi sector, which now boasts a market cap of $67 billion and a total value locked (TVL) of $89 billion.
eToro Settles With SEC for $1.5 Million, Scales Back Crypto Offerings
Financial services firm eToro has settled with the U.S. Securities and Exchange Commission (SEC) for $1.5 million over allegations that it operated as an unregistered broker and clearing agency in its crypto business. Without admitting or denying the charges, eToro agreed to limit its crypto trading offerings to a select few, including bitcoin, Bitcoin Cash, and ether.
Law professor Drew Hinkes wrote on X that this settlement represents “more ammo for the contention that those assets are not securities.” However, he also said that “the SEC is not helping market actors by not naming the securities; we continue to guess which assets the SEC thinks are and are not ‘securities’ and anyone whose token was listed on eToro is now in even more regulatory purgatory.”
The SEC noted that eToro’s decision to remove certain tokens from its platform aligns with regulatory requirements and enhances investor protection as the company continues its operations in the U.S.
Kalshi Wins Court Battle Against CFTC, Launches Election Contracts
Kalshi, a New York-based prediction market platform, has launched its election contracts after a federal judge ruled in its favor against the Commodity Futures Trading Commission (CFTC) challenged Kalshi’s ability to offer election-based betting contracts. The contracts, which allow users to bet on which party will control the Senate and House, went live Thursday after the judge rejected the CFTC's attempt to block them.
The ruling followed a nearly year-long legal battle in which the CFTC argued that such contracts could undermine election integrity. However, U.S. District Judge Jia M. Cobb ruled that the CFTC had overstepped its authority in trying to ban the contracts. Despite the judge's decision, the CFTC swiftly appealed, expressing concerns that the contracts could be manipulated, potentially affecting public trust in elections.
Kalshi’s ability to offer these contracts would give it a significant edge over competitors such as Polymarket, which is currently barred from serving U.S. customers.
However, Kalshi's political prediction markets were halted shortly after launch due to a federal appeals court granting the CFTC's request for an emergency stay.
Friend.tech Creators Abandon Ethereum-Based Social Platform
The creators of the social media Web3 platform Friend.tech have effectively exited the project just four months after launching its token. On Saturday, they transferred control of the platform’s smart contracts to a burn address, indicating that no further development will occur. Friend.tech, which allowed users to buy and sell "keys" linked to Twitter (now X) accounts for access to private chats, saw significant early success, but user activity and token value quickly declined.
The platform generated nearly $90 million in fees since its launch, half of which went to the development team. However, the price of its FRIEND token plummeted by 97% from its peak, reflecting the platform's dramatic decline. While the Friend.tech protocol will continue to operate without the ability to be updated or collect fees, its future remains uncertain. Investors are left grappling with significant losses, although others could potentially revive the project through a fork.
Presidential Debate Features Silence on Crypto, Followed by Memecoin Selloff
During the highly anticipated debate between Donald Trump and Kamala Harris on Tuesday night, neither candidate mentioned cryptocurrency, a topic that some speculated might be discussed. Despite Trump’s previous statements about making the U.S. a leader in crypto, the debate focused on other issues, reflecting the fact that crypto remains a low priority for most voters.
However, the debate had a noticeable impact on the market for Trump-themed memecoins. Following the event, several of these tokens experienced significant selloffs, with PolitiFi memecoins dropping 9% in market capitalization. Notably, tokens such as MAGA and Super Trump saw declines of over 16%, while other Trump-centric tokens plummeted by more than 20%. Analysts attributed this reaction to Trump’s perceived underperformance in the debate, leading to a "sell-the-news" response among investors.
Former Alameda CEO Caroline Ellison Faces Sentencing
Caroline Ellison, the former CEO of Alameda Research, is set to be sentenced on September 24 in New York for her involvement in the collapse of FTX, the crypto exchange that left consumers facing billions in losses. Ellison, who pleaded guilty in December 2022 to multiple fraud charges, including wire fraud and money laundering, has been a key cooperating witness in the investigation.
Her attorneys are pushing for leniency, arguing that Ellison's extensive cooperation with prosecutors, in addition to her role in recovering substantial assets for FTX creditors, justifies a sentence of time served and supervised release. They emphasized that she poses no threat to public safety and has fully accepted responsibility for her actions.
Ellison’s sentencing follows the conviction of FTX founder Sam Bankman-Fried, who was sentenced to 25 years in prison. Other former FTX executives, Gary Wang and Nishad Singh, are also awaiting sentencing later this year.
Speaking of FTX executives, Ryan Salame, who previously accused federal prosecutors of reneging on a plea deal regarding his partner, Michelle Bond, now faces potential sanctions after admitting he lied about the agreement. On Thursday, a federal judge revealed that Salame falsely testified last year, claiming prosecutors promised to cease investigations into Bond as part of his plea deal. The judge, expressing frustration over the deception, indicated that Salame might face consequences for his actions. Salame, who pleaded guilty to campaign finance violations and other charges, is required to report to prison on October 11 while the judge considers the next steps.
FTX Seeks $14 Million Deal Over Robinhood Shares
Last little bit on FTX! The bankrupt crypto exchange has proposed a $14 million settlement with Emergent Fidelity Technologies, an investment firm co-founded by Sam Bankman-Fried. The deal involves Emergent assigning its claims to over $600 million in Robinhood shares to FTX debtors. FTX CEO John Ray III stated that this settlement is crucial to avoiding costly litigation and advancing FTX’s reorganization plan. The agreement, which also addresses Emergent's bankruptcy in Antigua, is seen as a significant step in maximizing creditor repayments.
Crypto Scams Reach Record High as Authorities Crack Down
In 2023, investors lost a staggering $5.6 billion to crypto scams, marking a 45% increase from the previous year, according to an FBI report. The majority of these losses stemmed from investment fraud, particularly “pig butchering” schemes, in which scammers build trust over time with victims before convincing them to invest in fraudulent platforms.
In response to the growing threat, Tron, Tether, and TRM Labs have launched the T3 Financial Crime Unit to combat illicit activity involving USDT, especially on the Tron blockchain, which has been linked to nearly 45% of all illicit crypto transactions.
Meanwhile, the Commodity Futures Trading Commission (CFTC) has partnered with multiple organizations to raise awareness about pig butchering scams. The CFTC’s outreach efforts include developing educational materials to help potential victims recognize and avoid these increasingly common fraud schemes.
PayPal and Venmo Integrate Ethereum Name Service for Crypto Payments
PayPal and Venmo have integrated the Ethereum Name Service (ENS) into their platforms, allowing U.S. users to send cryptocurrency by entering an ENS name instead of a traditional wallet address. Announced by ENS Labs, this feature links ENS names to the correct wallet addresses automatically, streamlining the process of crypto transactions. The integration is expected to help users avoid errors when sending funds and is initially available to users in the United States.
