Words by Maven 11 Venture

March 2023 has been a month of mixed developments for the crypto industry. Even though there were notable advancements, there was also a growing unease about regulatory concerns and the fallout of the U.S. banking crisis. On a more positive note, the Ethereum foundation officially confirmed the date for the Shapella upgrade. The network upgrade is expected to happen on April 12th. As discussed in prior editions of this newsletter, this is a crucial step towards fully implementing Proof-of-Stake, enabling withdrawals. This month also featured the highly awaited launch of the Arbitrum token. The popular scaling solution has seen increased activity over the past months as investors were positioning themselves for a potential airdrop. The ARB token will serve as a governance token to further decentralize the protocol. Finally, both Polygon and zkSync released their zkEVM’s to Ethereum mainnet. These Layer 2 zkEVM’s have been long-awaited as alternatives to their ‘optimistic’ counterparts Optimism and Arbitrum, which have been live for a while now.

The crypto industry faced challenges stemming from the banking crisis and a strict regulatory environment in the United States. Consequently, several crypto-friendly banks like Signature and Silvergate were forced to cease operations, leading to significant difficulties in processing redemptions of stablecoins. Moreover, Silicon Valley Bank (SVB) came under severe stress which temporarily resulted in USDC losing its peg to the dollar. The fears subsided when the U.S. government made an emergency announcement in support of the depositors of SVB. 

This month saw heightened regulatory pressure from the United States. Starting with  Coinbase, who received a Wells Notice regarding an undefined portion of their listed digital assets, their staking service Coinbase Earn, Coinbase Prime and the Coinbase Wallet. A Wells Notice usually precedes formal legal action, but Coinbase believes it is in the right and will fight the allegations in court. Besides Coinbase, the CFTC (Commodities Futures Trading Commission) filed a lawsuit against Binance for conducting unauthorized trading operations in the U.S. This action follows an announcement made a month ago that Paxos, an American cryptocurrency service provider, was under SEC investigation for a stablecoin project jointly managed with Binance.

Amid the U.S. banking crisis and the ongoing efforts to enforce strict regulations on crypto providers. There have also been efforts made by large traditional financial institutions like the Nasdaq and Fidelity to facilitate cryptocurrency trading and custody. The Fidelity Crypto platform, previously available only to institutions and some waitlisted customers, was made available earlier this month. Individual investors can now buy and sell bitcoin and ether and use custodial and trading services provided by Fidelity Digital Assets. Additionally, the  Nasdaq is reportedly looking at Q2 2023 for the release of its custody services for Bitcoin and other cryptocurrencies. These solutions aim to offer increased security for institutional investors interested in adopting cryptocurrencies but have been hindered by inadequate infrastructure.

There were some interesting developments in the NFT and crypto gaming industry this month. Gaming giant Sony filed a patent which allows consumers to use NFTs both inside and outside the Sony ecosystem. This move could be a major boon for the future of web3 gaming as it highlights the intent to make NFTs work across devices such as VR and AR headsets, smartphones, computers and televisions. Secondly, Ticketmaster has launched a new token-gating feature in collaboration with heavy metal band Avenged Sevenfold that allows artists to provide NFT holders with select fan rewards, like early ticket access, custom seat selection and custom travel packages.

This month also witnessed one of the largest exploits in crypto history. Euler Finance, a DeFi lending and borrowing protocol, suffered a $200 million loss in a flash loan attack. The exploiter responded to the ongoing tension via the Ethereum address linked to Euler Finance, initiating to reach a settlement. The hacker expressed remorse for the attack and returned almost all funds to the Eurler protocol.

To close off, our portfolio company Maple Finance revealed exciting developments as the DeFi credit and lending market recovers from last year’s events. The team has been working hard on improving user experience and safety, by creating features such as: streamlined accounting and detailed borrower information. Along with these improvements, Maple Finance will soon launch a revolutionary ‘low-risk’ liquidity pool where investors can access US Treasury Bill yields. Hence, this pool will lead the way in bringing real-world assets onto the blockchain, which is expected to be a major trend in the coming years.