They’re coming after Binance

Digital cartoon of Chanpeng Zhao "CZ". CEO of Binance, in a court chair.

By EdgyJune 26, 2023

Alright, it looks like theΒ gloves are off. The U.S. government’s launching a full-on assault on Crypto. If they’re not careful, they may drive all Crypto innovation offshores to more friendly jurisdictions.
Places like Dubai, Hong Kong, and Singapore aim to become Crypto hubs.​

Here’s what we got today:

  • Binance under attack: CFTC sues Binance.
  • Operation Chokepoint 2.0. Regulators are targeting crypto.
  • Latest narrative: The zk-EVM season. Polygon and Zk-Sync launched their zkEVMs.
  • Around the Web. Double Your Defi enrollment is open, Do Kwon arrested, and more.

Reading time: ~9 minutes

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Here’s your Edge πŸ—‘οΈ!


weekly numbers​

Sources: CoingeckoDeFiLlamaFear & Greed Index​

β€œThe most contrarian thing of all is not to oppose the crowd but to think for yourself.” – Peter Thiel

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The CFTC Sues Binance

Last week, the SEC issued a Wells Notice to Coinbase. This week, the CFTC (U.S. Commodity Futures Trading Commission) sued Binance and its founder Changpeng Zhao.​

Here are some of the charges:

  • Illegal off-exchange commodity options.
  • Violating laws around offering futures transactions.
  • Failing to register as a futures commissions merchant.
  • Not implementing know-your-customer (KYC) or anti-money laundering (AML) processes and having a poor anti-evasion program.

The suit alleges that Binance has employed a variety of methods to escape restrictions placed on U.S.-based customers, including that the exchange:

  • Encouraged U.S. customers to use a VPN, and
  • Directed important customers, such as trading firms, to set up shell companies in locations like Jersey and the British Virgin Islands.​

What Happened Next?

The news caused panic among Binance users, leading to a significant fund outflow. Over $1b left Binance within 24 hours, according to DeFiLlama.

CEX Transparency​

Binance knew that this suit was coming their way eventually. So, their legal team has prepared for battle and is ready to pay any fines. In contrast, CFTC is likely to permanently remove Binance from the U.S. market.​

In their suit, CFTC called $ETH, $BTC, and other stablecoins commodities. But the SEC wants crypto tokens to be securities. That means there’s a jurisdictional war going on between these two regulators.

Read more:

  1. ​Coindesk coverage​
  2. ​CFTC press release​
  3. ​The PDF of the complaint​


Asymetrix is Making ETH Staking Exciting

Large ETH stakers are attracted to the 5% yield that ETH staking offers, but for the rest of us, it’s not too fascinating…​

Introducing Asymetrix, a decentralized and non-custodial protocol for asymmetric distribution of yield generated from staking.​

The process is simple.

  1. Users deposit their staked ETH (stETH) into a common pool
  2. The common pool generates yield
  3. The yield is distributed by the protocol between pool participants randomly & asymmetrically.

But how much yield can a pool participant earn? πŸ€”

The yield distributed can be up to 999% in stETH (with additional $ASX tokens too)!​

Currently, the protocol is on the Goerli testnet and awaiting a final audit from Haken. Their launch will be in the second week of April.​

Are you ready to break the normie routine of ETH staking? β€‹β€‹

Test out the product with your stETH on Asymetrix now to make staked ETH yield generation more exciting!​

P.S. Remember to stay in the loop so you don’t miss their official launch in the 2nd week of April.

Operation Chokepoint 2.0: Regulators Target Crypto

Do you know what I find suspicious? All these lawsuits and regulations happening right now from the U.S. Gov. It’s almost as if there’s a coordinated attack on the Crypto industry.​

The Washington D.C. law firm Cooper & Kirk agrees with us. They have published a paper titled “Operation Chokepoint 2.0: The Federal Bank Regulators Come For Crypto.” Cooper & Kirk is the same firm that successfully sued federal regulators in the original “Operation Chokepoint’.” So they know what they are talking about.

For context, the O.G. Operation Chokepoint was the Obama administration’s effort to use informal regulatory pressures and backroom threats to cut off payday lenders, gun and tobacco dealers, and other politically unpopular businesses from the modern financial system.

What evidence is there for “Operation Chokepoint 2.0“?

  • Regulators have published informal guidance documents that single out cryptocurrency and cryptocurrency customers as posing a risk to the banking system.
  • Signature Bank, a solvent, crypto-friendly bank, was forced to shut down, including its crypto division.
  • Crypto businesses are losing their bank accounts or access to the ACH network without any explanation from bankers.

These are not isolated events. There is a clear pattern of events. This is a targeted attack on the crypto industry.​

Cooper & Kirk provides several reasons why “Operation Chokepoint 2.0” is illegal. Here are just a few of them:

  • It deprives businesses of their constitutional right to due process.
  • It violates constitutional protections against the arbitrary exercise of governmental power.
  • Imposing binding requirements on the banking industry through informal guidance documents is undemocratic.

Cooper & Kirk makes several more points in their publication that are worth reading in detail. You can read it here.
Here’s a great piece by Nic Carter on the subject.
So what’s the end goal? Control. It’s not a secret that the U.S. government wants to introduce CBDCs (Central Bank Digital Currencies) eventually. They can try to force adoption by making life harder for Crypto users in the states.

Right now, we are in a regulatory war. But you can help. Learn how to do so.

The Zk-EVM season is Starting

Arbitrum has been in the spotlight over the past couple of weeks. But now there’s a new craze: zkEVMs.

What are zkEVMs? The term derives from a mix of two words: zero-knowledge (zk) and Ethereum Virtual Machine (EVM).​

Zero-knowledge proofs are a special kind of cryptographic tool. Zero-knowledge proof is a way for someone to prove that they know a piece of information, such as a password or a secret, without revealing what that information is.
Zk-rollups use zk-proofs to demonstrate to the Ethereum mainnet that transactions have been executed.

The EVM is, as the name suggests, Ethereum’s Virtual Machine. Zk-rollups can run many types of virtual machines, and the ones that do are called zkEVMs. zkEVMs are a specific type of zk-rollups.​​

Why are they important?

  • Developer adoption: If L2s use a different language, then devs have to learn that new language.
  • Existing Ethereum smart contracts can easily be deployed on zkEVMs without much change.
  • There’s a whole developer ecosystem surrounding the EVM. With zkEVMs, they can tap into this.

Why are they hot right now?

Until now, zkEVM was this holy grail of the far away future. Last week, the promise was (kinda) fulfilled.

  • ​zkSync era mainnet alpha was launched.
  • ​Polygon zkEVM mainnet beta was launched.
  • ​Taiko zkEVM alpha-2 testnet went live.
  • Consensys launched public testnet of Linea, another zkEVM.​

These aren’t fully ready yet. However, now is the time for early testers to experiment with these chains, which might also qualify you for potential airdrops.

Early Enrollment for Double Your DeFi is Open

​Have you heard? Our first cohort for Double Your DeFi in November 2022 was a massive success! And we’re excited to keep the momentum going with our upcoming Cohort #2.​

But we didn’t want to stop there. We’re committed to continuous improvement and providing our students with the most up-to-date information.
That’s why we’ve been hard at work improving the program based on feedback from our previous students.
​Here are a few exciting changes we’ve made:

  • We’re expanding the program from 4 to 5 weeks to provide even more value and depth of knowledge.
  • We’ve added a brand new Bootcamp week to help you prepare for the intense live training and research sessions.
  • We’re introducing two modules on Onchain Analysis/ Whale Wallets and Pumpamentals, to give you even more tools to succeed.
  • We’re expanding our key modules, including Evaluating Protocols, which will now have 2 sessions to dive even deeper into the topic.
  • And we’ve added new bonus sessions, including The Unofficial DeFiLlama Masterclass by Patrick and Mental Mastery by Edgy, to help you level up even faster.

These improvements are designed to help you level up your DeFi game without the pain and shorten the learning curve before the next bull run.
By the way, we’re doing an early bird discount ofΒ $250Β to incentivize you to take action – this is only for the first 25 people who sign up.
We’re down to a few spots left for the special pricing. Click the link below for more information.

πŸ“Š What Did People Do with Their Arbitrum Airdrops?

Arbitrum airdrop behavior​

Last week, Arbitrum airdropped over $1b worth of its native $Arb tokens (used for governance). Some people walked away with thousands of dollars of free Arb tokens.
The question is: what did everyone do with it? We have some clues from this Dune Dashboard.

  • The percentage of HODLers sits at 11.7% (73,238).
  • Only 1.6% (9,319) of recipients bought more $ARB.
  • 17.1% (106,613) of recipients decided to partially sell their $ARB.
  • 12.6% (78,691) of recipients didn’t claim their $ARB. While some might have decided to leave money on the table, most probably lost access to their wallets.

Analyze Arbitrum, Optimism, and other airdrops to look for patterns. That’ll give you clues on the optimal ways to play future airdrop situations.

The vast majority of recipients, 57% (357,199), decided to dump (or transfer) their new coin. If we assume this percentage of people is low, we have confirmation for default airdrop behavior: People will choose to dump their tokens.

🌎 What’s happening?

πŸ“° Industry News

Do Kwon was arrested in Montenegro. He is the infamous founder of the Terra-Luna ecosystem, which suffered a $40 bn crash.​

Ripple Lab’s judgment in the SEC’s case against them can be expected anytime now. It would clarify the regulatory stance and impact the price of XRP & other cryptos.

Nasdaq aims to launch its digital asset custody services by the end of Q2. This move of the TradFi giant into crypto is significant.

Sam Bankman-Fried has allegedly bribed one or more Chinese officials with $40 million. The goal was to unfreeze Alameda Research accounts.

European Parliament passed the Crypto anti-money laundering regulation. They hope to make crypto platforms compliant alongside TradFi firms.

🍿 DeFi Bites

Notional Finance announced Notional V3. They are a protocol that offers fixed-rate borrowing. V3 upgrade introduces the prime money market and other features.

Goldfinch Finance announced a $2M deal with Fazz Financial. It will offer a 13% fixed USDC APY with a 90-day call feature.​

MakerDAO ratifies the Maker Constitution. It sets up the foundation for the Endgame Plan.​

Avalanche C chain stopped producing blocks for over 50 minutes. Chain halts are a major deal breaker for layer-1 chains.

ROOK DAO discusses the dissolution of the DAO. The proposal suggests the distribution of the treasury to the $ROOK holders, in a pro-rata format.

Euler Finance hacker(s) returned around 84% of the stolen funds. He revealed himself as Jacob and asked for forgiveness in an on-chain message.

CamelotDEX announced a $1M incentive program to boost $ARB liquidity. The incentives will be in $xGRAIL & $GRAIL.

🧠 Twitter Alpha

πŸ˜‚ Meme