Hi there, Roslyn and Sam O’Donohoe here, coming to you with another compact edition of the newsletter as our frontman is out of action. Needless to say, the show must go on! This week we explore crypto lenders, the Merge and stablecoins.
The usual disclaimer: This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/web3/NFT land and tries to provide unbiased context. It’s aimed at anyone who wants to keep an eye on the space but isn’t following it too closely, or is on the hunt for story ideas and angles. It’s put together by a team at YAP Global, and doesn’t contain any promotion of our clients (if one is mentioned, we’ll flag that).
This was put together by a team led by founder Samantha Yap, and Jeremy Wagstaff, formerly of the journalism parish. Your feedback is as always welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
[tl;dr]
Crypto lenders in deep waters - is there a saving grace?
Circle, the new king of stablecoins
The Merge - myth or reality?
[Crypto lenders in deep waters - is there a saving grace?]
The recent crash has hit crypto lenders hard with the topic of the moment being prudent risk management. The blow to crypto lenders has seen layoffs and bankruptcy filings but some prominent lenders in the space are still head above water – even offering a lifeline to those who are struggling. Here are some of the latest updates:
On Wednesday, Voyager filed for Chapter 11 bankruptcy - otherwise referred to as “reorganisation bankruptcy” - where businesses want to keep operating but need to restructure their financing. This happened less than a week after suspending trading and withdrawals. As Shalini Nagarajan of Blockworks notes, the announcement comes days after 3AC - which owes Voyager millions - filed for Chapter 15 bankruptcy.
In its bid to press on, Celsius has restructured its board of directors. CryptoBriefing reported that Alan Jeffrey Carr and David Barse will join the board alongside Celsius CEO Alex Mashinsky and other executives. Carr is a noteworthy addition, being CEO of Drivetrain, a firm that manages distressed investments.
Amidst the deluge, Nexo (a YAP client) has started a process to acquire Vauld, another crypto lender. In the absence of a lender of last resort, is it up to liquid industry leaders to offer systemic solutions?
[Circle, the new king of stablecoins]
The dramatic untethering of stablecoins (#18) was well documented, but as the dust settles, is there a new stablecoin in town? In June, Circle, issuer of the dollar-pegged stablecoin USD Coin, launched EUROC, the first stablecoin backed by Euro 1:1. Although, EUROC will only trade in the U.S. for now due to regulatory uncertainty of MiCA in the EU. The launch of EUROC is followed by Circle’s USDC reportedly being on track to topple Tether USDT as the top stablecoin in 2022. But it’s not all about Circle:
Following the resignation on Saturday of Argentina's economy minister Martin Guzmán on the back of an economic crisis, Argentines purchased between two and three times as many stablecoins as they do on a typical weekend, crypto companies in the country told CoinDesk. Interestingly, MasterCard New Payments Index 2022 revealed more than one third of Latin Americans say they have made a payment for an everyday purchase with a stablecoin.
Elsewhere, the UK Treasury – in consultation with other regulatory bodies including the Bank of England (BoE), the Payment Systems Regulator (PSR) and the Financial Conduct Authority (FCA) – will introduce regulatory guidelines on stablecoins. Stay tuned for developments before the August summer break.
[The Merge - myth or reality]
The highly-anticipated Merge has been one of the major talking points of crypto in 2022, but a series of setbacks have led people to question whether the Merge will remain a myth or finally become a reality. Here are some of the latest developments:
On Wednesday, Ethereum developers completed their penultimate testnet trial on the Sepolia public network, bringing them one step closer to the Merge. Although this can be considered a big success, Terrence Tsao, an Ethereum protocol developer, warned that “25-30% of the validators went offline shortly after the Merge”, owing to “wrong configs”.
In other news, Ethereum developers have made the decision to delay Ethereum’s difficulty bomb until mid-September. The difficulty bomb is a mechanism coded into the protocol that increases the complexity of Proof of Work (PoW) calculations and thereby the time and energy taken to complete transactions. In doing so, miners are disincentivised from PoW in favour of environmentally friendly Proof of Stake (PoS).
While it seems as though the Merge is going to happen at some point, there is a lot yet to be done to bring it into reality. Indeed, the delay has divided developers with some labelling it as responsible and others feeling frustrated. Only time will tell how it unfolds…
[Tidbits]
First Solana, and now HTC is launching its new Metaverse phone which includes crypto and NFT wallet.
Meanwhile, Polygon is integrating its web3 technology into the upcoming Nothing Phone in collaboration with tech startup, Nothing.
Meta has begun testing Ethereum and Polygon NFTs on Profiles but will soon add support for NFTs on Solana and Flow.