Cameron Winklevoss, along with his brother, is famous for suing Mark Zuckerberg after being cut out of Facebook’s financial upside. Now, he’s threatening litigation against another tech CEO after being left on the hook for massive financial losses.
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. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
[tl;dr]
Gemini floats “final” repayment proposal to Genesis and DCG
East Asian countries install investor protections for crypto
BlackRock refiles Bitcoin spot ETF application with SEC
[Gemini’s ‘Final Offer’]
The Winklevoss twins 👬, co-founders of cryptocurrency exchange Gemini, have proposed a payment plan to square money owed to it by Genesis, the trading firm owned by Digital Currency Group (DCG) that went bankrupt after partnering with Gemini on its Earn program. The proposal includes $275 million in forbearance, a $355 million debt payment due in two years, and an $835 million debt tranche due in five years.
What Gemini Said: Give us the money you owe us! In his open letter ✉️ to DCG CEO Barry Silbert, Cameron Winklevoss claimed there are 232,000 Earn users with a collective “$1.2 billion of assets trapped in Genesis” and implied that Silbert engaged in a court-ordered mediation process in bad faith. But this has gone on too long, Winklevoss said: "I write to inform you that your games are over.” An inability to accept the offer by July 6, he stated, would result in legal action that would put DCG in default ☠️.
What Journalists Said 🧑💻:Blockworks’ Sebastian Sinclair gave a quick refresher on how the erstwhile partnership soured: “Gemini Earn offered customers up to 8% interest for crypto loans to borrowers, specifically Genesis. Gemini halted Earn withdrawals after the FTX debacle last November, as Genesis itself was crippled by contagion.”
Since then, wrote Sunil Jagtiani of Bloomberg, “Genesis, DCG and creditors including Gemini have been locked in court-appointed mediation talks. In early June, a bankruptcy judge gave them more time to come up with a revised payout proposal. DCG in mid-May missed a $630 million payment💸 that was due to Genesis.”
Winklevoss has threatened legal action 👩💼 against Silbert and DCG before, pointed out Protos. “Right before Genesis filed for Chapter 11 bankruptcy, Winklevoss accused Silbert of ignoring his attempts to settle the amount owed to Gemini Earn users — calling his behavior ‘bad faith stall tactics.’”
Why It Matters: DCG owns a massive portfolio, including CoinDesk (which quietly laid off staff in May) and asset manager Grayscale. A financial blow to DCG would have ripple effects across the industry. Regardless, it underlines ongoing concerns about the stability of the cryptocurrency market.
[Asia Lays Down the Law]
A trio of Asian countries — Singapore, South Korea, and Thailand — took preventative measures this week to mitigate consumers’ exposure to another FTX-level catastrophe. The Monetary Authority of Singapore (MAS) says crypto companies need to place customer assets in a statutory trust; it also prohibited exchanges from offering lending or staking programs. Thailand also banned crypto exchanges from offering lending programs, while South Korea passed comprehensive legislation to regulate service provider activities.
What the Regulators Said👩💼 MAS declared in a July 3 press release that the measure “will mitigate the risk of loss or misuse of customers’ assets, and facilitate the recovery of customers’ assets in the event of a…service provider’s insolvency.”
A Thai SEC press release mandated that crypto companies warn customers about the risks associated with crypto trading—including that “you may lose all your investments.”
What Journalists Said 🧑💻: CoinDesk’s source, a former MAS regulator, suggested that “Singapore’s requirements are identical to other payment service providers and are not as strict as Hong Kong's rules.” According to reporter Amitoj Singh, “Singapore's commitment towards supporting technologies of the industry to improve existing traditional financial systems goes hand in hand with its stated objective of being ‘brutal and unrelentingly hard’ on bad behaviour in the crypto industry.”
The Singapore and Thailand moves are clearly aimed at preventing another bad-faith exchange from gaining traction in East Asia, said Decrypt’s Tim Hakki. “Although the dust has settled, regulators across the world are referring to the FTX incident as a case study of what to look out for when regulating the activities of exchanges.”
Why It Matters: Hong Kong 🇭🇰 has been touted as a hot new destination for crypto firms, but other East Asian countries are serious about laying down clear rules of the road, which may attract companies looking for regulatory clarity.
[BlackRock Names Names 🪨]
BlackRock has refiled its application for a Bitcoin exchange-traded fund, adding details in an effort to convince the Securities and Exchange Commission to approve the first-ever crypto spot ETF in the US. 🇺🇸
What Journalists Said 🔎: When BlackRock filed its original application in June, it had a plan to overcome previous the SEC’s repeated rejections of other crypto ETF applications: It incorporated a surveillance-sharing agreement.
But “the regulator reportedly had concerns over the initial filings by Nasdaq as being unclear and incomplete. It had flagged similar concerns to Cboe related to a filing from Fidelity,” reported Reuters. In response, both Nasdaq and Cboe officially named Coinbase as a surveillance partner. 🔎
“The sponsor of a bitcoin trust must enter a surveillance-sharing agreement with a regulated market of significant size to secure a go-ahead from regulators, based on a reading of…the SEC's previous rulings,” wrote CoinDesk’s Elizabeth Napolitano. 📚
Why It Matters: Crypto firms have been trying to crack the code on a Bitcoin ETF for a decade. If BlackRock or Fidelity are successful, it would provide a roadmap to other companies—and make BTC exposure more accessible for traditional investors.
[Tweet of the week]
[Money, Ownership and Identity 💸👑🆔]
Welcome to the seventh episode of season 3 of YAP Cast! In this instalment, Samantha Yap sits down with the brilliant mind behind Ethereum Name Service (ENS), Nick Johnson. ENS is all about making Ethereum addresses more user-friendly by allowing people to register, human-readable names like nick.eth, much like email addresses but for Web3 instead. During our chat, Nick takes us on a journey into the future of digital identities. We’ll explore how ENS has the power to completely transform the way we engage with money.
[Tidbits]
“Starknet, a layer 2 to the Ethereum blockchain, said a major upgrade known as “Quantum Leap” is now about a week away from being deployed on its main network.” Story by Margaux Nijkerk (CoinDesk)
“In the latest instance of a compromised airdrop, hackers hit AzukiDAO’s distribution of tokens to holders of the Anime-themed Azuki NFTs.” Story by Osato Avan-Nomayo (DLNews)
“Activity on Avalanche, a proof of stake Layer 1 blockchain, has more than doubled this year, marking a resurgence for the network.” Story by Samuel Haig (The Defiant)
[Events]
ETH Barcelona | 5th - 7th July 2023 | Barcelona, Spain
Crypto Week Madrid Summit | 7th - 8th July 2023 | Madrid, Spain
BlockDown Festival | 10th - 12th July 2023 | Al Garve, Portugal
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: “Fraud Proof” by Alice Li.
Fraud proof is a technical method in blockchain that enables scalability through sharding or larger blocks and ensures the accuracy of on-chain data. It uses Optimistic Rollups (ORs) to reduce costs and latency for decentralized applications.Sequencers processing ORs provide fraud proofs and face rewards or penalties based on consensus rules.
The primary challenge with state transition fraud proofs is their reliance on complete blockchain data, even if a fraction of the data is missing, it can impede the block's validation, which demands complete data. While Zero-knowledge proofs can confirm correctness, scammers might publish inaccessible blocks,hindering validators' computation and block communication.
Fraud proofs, along with erasure codes,allow light nodes to independently reject blocks and pinpoint incorrect state transitions, scaling blockchains without relying on trustworthy full-nodes. Their advantage lies in their deployment only in response to issues, thereby reducing the demand on computing resources, and fitting well in scalability-constrained scenarios. However, they establish dialogue/interaction between protocols that can be disrupted, particularly by the party alleging fraud.
The team: founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Andrew Wickerson, Tiffany Mac Sherry, Becky Corbel and Delon Chan. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and Web3 brands through impactful storytelling. Find out more about us here.