Building Blocks #42

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Birds Eye View (vs Last 7 Days)

?? Overall Crypto Market Cap: $3.64 Trillion (+3.7%)

?? BTC Dominance: 55% (+1.1 PPT)

?? Price Snapshot:

?? Bitcoin: $105426 (+3.1%)

?? Ethereum: $3400 (-0.6%)

? XRP: $3.19 (-3.5%)

?? Solana: $265 (+21.7%)

What ERC-7779 means for Ethereum’s future

With recent developments including Ethereum co-founder Vitalik Buterin asserting complete control over the Ethereum Foundation and rumors about the Trump family developing major ventures on Ethereum, the network has been generating significant buzz within the cryptocurrency space.

In an interview, representatives from key organizations including the Ethereum Foundation, Trust Wallet, Safe, Alchemy, and Rhinestone shared insights about the newly proposed ERC-7779 token standard and its potential influence on Ethereum's ecosystem.

ERC-7779 seeks to expand upon the innovations of earlier Ethereum Improvement Proposals (EIPs) such as EIP-7702, which brought execution abstraction capabilities to Ethereum accounts and enabled the establishment of externally owned accounts (EOAs).

This innovative standard seeks to tackle issues related to Ethereum's developing account infrastructure, proposing a comprehensive framework that enhances compatibility, ensures smooth wallet transitions, and optimizes storage management processes.

ERC-7779 leverages progress made through Ethereum Improvement Proposals (EIPs), particularly EIP-7702, which enhanced externally owned accounts (EOAs) to operate more similarly to smart accounts.

In an interview, Safe co-founder Richard Meissner emphasized that the new token standard's significance lies in maintaining smart account interoperability.

"Smart accounts deliver numerous advantages, including upgradeable logic capabilities. The upcoming Pectra Upgrade extends this functionality to EOAs through EIP-7702," he explained.

Ethereum Foundation's product manager Marissa Posnor outlined the necessity for ERC-7779, highlighting its function in establishing a standardized interface for delegated EOA management and secure redelegation support:

"The timing aligns perfectly with Ethereum's expanding ecosystem and growing user demands for enhanced wallet functionality and interoperability. Moreover, ERC-7779's benefits extend beyond EIP-7702, providing value to various smart accounts," she noted.

The standard additionally focuses on simplifying wallet transfers for everyday users, enabling seamless transitions between different wallets without technical complications or asset access issues.

Trust Wallet's tech lead David Kim commented that ERC-7779 "achieves an optimal balance" in creating a standard that proves "genuinely beneficial and implementable for wallet developers."

Rhinestone co-founder Konrad Kopp clarified that while the new token standard doesn't necessarily streamline the end-user experience, it provides EOA users with enhanced flexibility to navigate between different smart account implementations securely.

The scope of ERC-7779 extends beyond its core interoperability mission, aiming to democratize sophisticated features including transaction batching, automation capabilities, and gas abstraction mechanisms.

In an interview, Alchemy's tech lead Fangting Liu emphasized that the collaborative effort on the new token standard ensures seamless adoption across the ecosystem, enabling developers to efficiently access and validate information across various smart account implementations.

"ERC-7779 presents a robust solution for addressing risks linked to smart account storage management," Liu explained. "It enables both developers and users to seamlessly transition between implementations as their requirements evolve, fostering a more secure and adaptable environment."

These advancements could mark a pivotal moment in Ethereum's ecosystem, allowing users to leverage advanced functionalities within a fortified framework and, as Meissner noted, "make smart accounts superpowers go mainstream."

Crypto.com to launch US institutional crypto investing platform

Crypto.com has unveiled its new institutional trading platform, complementing its existing retail-focused mobile trading application.

According to a January 21 announcement, the platform will support over 300 trading pairs and enable sophisticated trading strategies for institutional clients, signaling the company's deeper push into Wall Street territory.

The digital asset exchange made its entry into the US institutional custody market in December 2024, extending services to qualified high-net-worth individuals in select states.

Crypto.com will enter a growing US institutional crypto landscape. North America remains the world's largest cryptocurrency market, with the United States leading in adoption and value, as highlighted in an October 2024 report from Chainalysis.

The report revealed that North American crypto transactions exceeding $1 million comprised roughly 70% of all activity, the highest proportion among studied regions. This trend stems from multiple factors, including America's substantial wealth and sophisticated capital markets, according to Statista's compiled data.

The newly installed Trump administration is anticipated to enhance the cryptocurrency regulatory environment, following Trump's significant engagement with the sector during the 2024 presidential campaign.

On January 21, one day after Trump's second inauguration, Acting SEC Chairman Mark Uyeda established a specialized crypto task force focused on creating a transparent, comprehensive regulatory framework for digital assets.

While not directly attributing Crypto.com's US launch to the new administration, Victoria Davis, the exchange's spokesperson, expressed positive sentiment about the shifting political landscape.

"Following a period dominated by enforcement-based regulation, we believe the new administration will collaborate with industry stakeholders to establish clear guidelines that protect consumers while leveraging opportunities to establish US leadership in cryptocurrency," Davis explained in an interview.

Crypto.com's institutional platform will vie with services offered by established US cryptocurrency exchanges. Coinbase, Kraken, and Gemini currently provide various institutional-focused solutions.

Major Wall Street institutions including BlackRock and Fidelity entered the crypto space in 2024, launching crypto ETFs and tokenized assets. A more defined digital asset framework would likely increase institutional interest in crypto-related offerings.

Headquartered in Singapore, Crypto.com maintains operations across 90 countries. This expansion follows its recent in-principal approval for a MiCA license, enabling the exchange to conduct business throughout the European Union.

Circle acquires Hashnote, USYC on-chain money fund

Stablecoin provider Circle Internet Financial has purchased Hashnote, which issues US Yield Coin (USYC), a fund focused on tokenized real-world assets (RWA).

In a January 21 statement, Circle announced the acquisition "will help establish USYC as a leading yield-generating collateral option for cryptocurrency exchanges, custodians, and prime brokers."

Hashnote's USDY leads the tokenized money fund sector by market size, with assets under management reaching approximately $1.25 billion, based on RWA.xyz's market data.

The acquisition includes a strategic alliance with DRW, a major institutional cryptocurrency trading firm. The company stated that "[DRW] will strengthen its institutional-level liquidity and settlement operations in USDC and USYC" to enable "more effective and streamlined collateral handling."

"Circle plans to completely merge USYC with USDC, providing smooth transitions between TMMF [tokenized money market fund] collateral and USDC," states the announcement.

With a market value of roughly $48 billion, Circle's USD Coin ranks second among stablecoins behind Tether's USDt, which holds a market value of about $138 billion as of January 21, per CoinGecko data.

Circle's USDC has been improving its position against USDT since December, amid concerns about Tether's adherence to the Markets in Crypto-Assets Regulation (MiCA), the EU's regulatory framework aimed at standardizing cryptocurrency market oversight.

Tokenized RWAs — digital tokens representing ownership of assets ranging from US Treasury bonds to artwork — present a $30-trillion global market potential, according to Polygon's global head of institutional capital, Colin Butler, in comments to Cointelegraph last August.

Interest is growing in products that tokenize money market funds, which include US Treasury bills (T-bills) and other high-liquidity, yield-producing assets.

Key rivals to Hashnote's USDY include BlackRock's USD Institutional Digital Liquidity Fund (BUIDL) and Franklin's OnChain US Government Money Fund (FOBXX), managing approximately $630 million and $525 million respectively.

In an October analysis, the US Treasury Department indicated that T-bill tokenization "could generate both operational enhancements and innovation in the Treasury market" while potentially creating financial stability concerns.

BlackRock CEO wants SEC to ‘rapidly approve’ tokenization of bonds, stocks. But what does it mean for crypto?

BlackRock CEO Larry Fink, who leads the world's largest fund management firm, has voiced his enthusiasm for the SEC's potential approval of bond and stock tokenization. During a recent CNBC interview on January 23, Fink demonstrated strong support for digital assets, highlighting their role in making investments more accessible to the masses.

A crucial consideration remains: how might this transition to tokenized traditional assets impact the cryptocurrency landscape, which industry segments could thrive, and which projects might encounter increased competition?

The advantages of round-the-clock global trading and blockchain's transparency for bonds and stocks are undeniable. However, this transformation depends heavily on regulatory frameworks and governmental approvals. A significant concern is whether regulated assets can effectively integrate with decentralized finance (DeFi) ecosystems.

The tokenization of yield-generating bonds could present a significant challenge to stablecoins by offering digital assets linked to real-world interest rates. This innovation would introduce new financial instruments that compete for market liquidity and investor trust as people seek concrete returns.

In a similar vein, tokenized stocks such as GameStop or AMC could operate as blockchain-based assets with price volatility, supported by community engagement similar to memecoins. This development might impact trading platforms as investors shift toward regulated yet speculative stock tokens instead of pure memecoins.

The incorporation of tokenized traditional securities enhances the range of offerings on established DeFi platforms, potentially increasing total value locked. This would affect decentralized exchanges and lending protocols by enabling them to integrate conventional asset classes for additional revenue streams.

Tokenizing real-world assets enables direct ownership and pricing information to be embedded within tokens, reducing reliance on external oracles. This transformation also impacts blockchain data providers as these onchain assets naturally contain their own data.

The tokenization movement significantly expands the available asset pool for onchain derivatives, affecting decentralized exchanges and lending platforms seeking to offer diverse markets. Synthetic tokens replicating these securities might circumvent certain regulatory requirements, creating new possibilities for margin trading and yield generation.

Despite these advantages, tokenized securities face significant regulatory challenges, including mandatory Know Your Customer (KYC) protocols, restrictions on accredited investors, and complex securities law compliance requirements. Geographic-specific regulations and listing constraints continue to limit accessibility, while incomplete on-chain data coverage necessitates the use of oracle systems.

Furthermore, the combination of legal ambiguities and potential smart contract vulnerabilities can undermine investor confidence. Consequently, numerous DeFi protocols find themselves compelled to implement more rigorous oversight measures, which constrains the traditionally unrestricted nature of cryptocurrency transactions and impedes broader market adoption.

The January 23 appointment of Senator Cynthia Lummis as chair of the Senate Banking Subcommittee on Digital Assets could expedite legislation governing stock and bond tokenization. Lummis, recognized for her cryptocurrency-friendly position, is anticipated to promote collaboration between key regulatory bodies including the SEC, Treasury Department, CFTC, FINRA, and state-level securities regulators.

Nevertheless, Larry Fink's statements warrant careful consideration, given BlackRock's substantial interest in real-world asset tokenization. Such developments could expand the investor base for U.S.-listed securities, where BlackRock maintains significant holdings. Additionally, the firm could position itself as a key intermediary, managing custody and administrative functions.

Morgan Stanley CEO wants to explore crypto offerings for clients

Morgan Stanley's Chief Executive Officer Ted Pick has revealed that the investment bank is investigating crypto-related services for its clientele while engaging with US regulatory authorities.

During an interview with CNBC at Davos' World Economic Forum gathering, Pick stated: "From our perspective, the key question revolves around whether we, as a strictly regulated financial entity, can facilitate such transactions." Pick added: “We’ll be working with Treasury and the other regulators to sort of figure out how we can offer that in a safe way.”

The banking giant established its presence in digital assets through Bitcoin ETFs and began recommending these investment products to its customer base in 2024.

In January 2024, Morgan Stanley's digital asset markets leader, Andrew Peel, indicated that both CBDCs and Bitcoin pose a challenge to USD supremacy.

Peel described digital currencies as a transformative development capable of bypassing traditional global payment networks like the SWIFT messaging system.

Morgan Stanley authorized its wealth advisors to start recommending Bitcoin ETFs to customers in August 2024, marking a significant development for cryptocurrency.

The institution stands as the biggest global wirehouse — an organization providing comprehensive financial services, encompassing investment guidance, banking solutions, estate management, trading platforms, and additional offerings. Following Morgan Stanley's move, John Reed Stark, former SEC Internet Enforcement Chief, strongly opposed the decision to offer Bitcoin ETFs.

Stark suggested that Morgan Stanley's initiative to recommend Bitcoin ETFs would attract intense regulatory oversight from both SEC and FINRA.

"Morgan Stanley has now willingly exposed themselves to what could become the most extensive SEC and FINRA examination campaign ever conducted," the ex-SEC official stated in an August 9 X post.

Seven days later, on August 14, Morgan Stanley reported holding $188 million in Bitcoin ETF assets, comprising over 5.5 million shares in BlackRock's iShares Bitcoin Trust ETF.

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