News: SEC suits, Suspect L2s, Coindesk sale, Oh My!

Crypto is 100% back, in all its messy, degenerate glory.

It has been a hell of a week, and it’s only Tuesday. The bizarre news cycle kicked off last Friday with the unrest at OpenAI. I dug into the ideological background of that fight yesterday, detailing the split between “accelerationists” and “AI doomers.”

Then came another torrent of fascinating, important news - and it’s mostly very good for crypto markets in the medium term. Above all, a pair of legal challenges came in much, much cooler than feared.

Here’s what we’re covering today:

• Binance offered settlement by DOJ. Pay us $4 billion, and we’ll get out of your hair, sir.

• Blast is Ethereum’s Newest Layer 2. But is it a pyramid scheme?

• The SEC Sues Kraken. The crypto market could not care less about this wet fart. SEC chief Gary Gensler is wheezing in the home stretch of his misfired career.

• Javier Milei Wins in Argentina. The hard-money libertarian has understandably captured Bitcoiners’ attention. Is he for real?

• Coindesk acquired by Bullish. Which is really Block.One, which is really EOS, which is a tire fire down by the river. It’s a bad result for my former employer.

• Also Bittrex is shutting down? An event about which I currently have no thoughts whatsoever.

So marketing, much wow

Binance: The Cost to be the Boss is $4 billion

The deep irony of crypto is that while it’s supposedly about “trustless” transactions, at certain points knowing the track records of individuals, and knowing them well, becomes key. Specifically, those of us who’ve followed the growth of Binance and its founder, Changpeng Zhao, were always fairly skeptical that an ongoing investigation by the U.S. Department of Justice would lead to anything truly catastrophic. I’m a person who made my bones investigating fraud in crypto, and CZ simply never had the makings of a fraud, or systematic criminal, to me.

That intuition seems to have been confirmed, sort of, by news that the DOJ is effectively offering Binance a settlement - albeit a massive $4 billion one, acording to Bloomberg. That’s about twice the fine HSBC was hit with in 2012 in a money laundering scandal, so one could deduce similar underlying crimes: basically, local subsidiaries engaging in money laundering.

This is obviously something I hate when a bank does it, and it is unambigously bad that Binance is in the same boat. But from a purely mercenary perspective, money laundering is not an ecosystem threat in the same way that financial fraud might have been. Binance will enter into an agreement to clean up its act, will hopefully actually do so, and the DOJ can move on to other business.

That’s why the market has been basically steady to up over recent days - with regard to both this and Kraken, things could have been much, much worse.

New Blast L2 Drops

A new Ethereum L2 was announced yesterday, with one interesting core feature … and a lot of questions.

Blast’s primary pitch is that it builds Ethereum staking rewards into its protocol. Let’s unpack that.

Ethereum now has a “risk-free” rate of return, thanks to the shift to proof of stake. (It’s not really risk-free, because while it’s a 3-4% return on ETH, the underlying dollar value isn’t guaranteed.) On ETH mainnet, you can get that reward even if you’re not a full-node staker by depositing in intermediaries, primarily Lido, which currently holds about $18B worth of ETH.

Blast proposes to let ETH bridged to it collect rewards much like Lido, but on an L2 where there are advantages like lower fees. I’m not taking a deep dive yet, but this seems fundamentally … fine? As a concept? And Blast is backed by serious VCs, particularly Paradigm. So it doesn’t seem like a scam - people are taking it seriously.

But there are also serious questions.