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Global Liquidity Reconfiguration: How Does RWA Eats Up Traditional Finance's "Latency Arbitrage" Cake?

By: blockbeats|2025/04/16 12:15:02
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Original Article Title: "RWA: The Elephant in the Room"
Author: Zeke, YBB Capital

Foreword

"The tokenization of Real World Assets (RWA) aims to enhance liquidity, transparency, and accessibility, allowing a wider range of individuals to access high-value assets," this is Coinbase's explanation of the term RWA, and also a common explanation of RWA in educational articles. However, in my opinion, this sentence is neither clear nor entirely correct. This article will attempt to interpret RWA in the context of this era from my personal perspective.

1. A Fragmented Prism

The combination of crypto and real-world assets can be traced back to over a decade ago with Colored Coins on Bitcoin, which added metadata to Bitcoin UTXOs to achieve "coloring," giving specific Satoshis the attributes representing external assets, thus marking and managing real-world assets (such as stocks, bonds, real estate) on the Bitcoin chain. This protocol, similar to ERC-20, was humanity's first systematic attempt to achieve non-monetary functionality on a blockchain, and also marked the beginning of blockchain's move towards smart contracts. However, limited by Bitcoin script's restricted opcodes, Colored Coins' asset rules needed to be interpreted by third-party wallets, requiring users to trust these tools' definition logic of UTXO "coloring." Centralized trust mixed with factors like liquidity constraints led to the initial conceptual validation of RWA ending in failure.

In the following years, with Ethereum as a turning point, blockchain ushered in the era of Turing completeness. There have been crazy moments for various narratives, but RWA, apart from fiat-backed stablecoins, has always been thunderous yet drizzly over the past decade. Why is this?

I still remember writing in an article about stablecoins that there has never been a real dollar on the blockchain. The essence of USDT or USDC is just a "digital bond" issued by a private company to you, and USDT is much more fragile theoretically compared to the dollar. The reason Tether can succeed is actually due to the urgent need in the blockchain world for a stable value medium that cannot be created.

In the world of RWA, there is no such thing as decentralization; the trust assumption must be built on a centralized entity, and the risk control of this entity can only rely on regulation. The inherent anarchism in the DNA of crypto is fundamentally contradictory to this idea; the underlying architecture of any public chain is designed to resist regulation. The difficulty of regulation above the public chain is the primary reason why RWA has never succeeded.

Global Liquidity Reconfiguration: How Does RWA Eats Up Traditional Finance's

The second point is asset complexity. Although RWA encompasses the Tokenization of all real-world assets, we can still roughly divide it into two categories: financial assets and non-financial assets. For financial assets, they inherently possess homogenized attributes, and the link between the underlying asset and the Token can be established through regulated custody institutions. For non-financial assets, the issue is much more complex, and the solution basically relies on IoT systems, but still cannot address sudden factors such as human malicious actions and natural disasters. Therefore, in my understanding, RWA as a prism of real-world assets can only reflect limited light. In the future, non-financial assets that want to persist on the chain must inevitably meet the two prerequisites of homogenization and easy valuation.

Thirdly, compared to highly volatile digital assets, it is basically difficult to find real-world assets with a comparable level of volatility. Moreover, it is even more challenging to find assets in the real world that can achieve APY in the tens or even hundreds as seen in DeFi ─ making TradFi pale in comparison. Low returns and a lack of motivation to participate are another pain point for RWA.

If that's the case, why is the crypto community once again focusing on this narrative?

II. Policy Up Top

As mentioned earlier, regulatory advancement is a key factor for RWA to exist in TradFi, and the concept can only move forward when the trust assumption is established. Currently, regions that are friendly to the development of Web3, such as Hong Kong, Dubai, Singapore, etc., have recently successively implemented RWA regulatory frameworks. Therefore, when this starting point emerges, the journey of RWA is just beginning. However, the current situation shows that regulatory fragmentation and TradFi's high alertness to risks have shrouded this track in a layer of fog.

Here are the details of the regulatory frameworks for RWA in major jurisdictions globally as of April 2025:

United States:

Regulatory Agencies: SEC (Securities and Exchange Commission), CFTC (Commodity Futures Trading Commission)

Key Regulations:

· Security Tokens: Need to undergo the Howey Test to determine if they are securities, subject to registration or exemption clauses under the Securities Act of 1933 (such as Reg D, Reg A+).

· Commodity Tokens: Regulated by CFTC, Bitcoin, Ethereum, etc., are explicitly classified as commodities.

Key Measures:

1. KYC/AML: BlackRock's BUIDL Fund is only open to accredited investors (net worth ≥ $1 million), with mandatory on-chain identity verification (such as Circle Verite).

2. Security Tokenization Expansion: Any RWA involving dividends may be classified as a security. For example: SEC's penalty against tokenization real estate platform Securitize (2024 for unregistered security issuance).

Hong Kong:

Regulatory Bodies: Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC)

Core Framework:

· The Securities and Futures Ordinance regulates security token offerings, requiring compliance with investor suitability, disclosure, and anti-money laundering requirements.

· Non-security tokens (such as commodity tokens) are governed by the Anti-Money Laundering Ordinance.

Key Measures:

1. Ensemble Sandbox Program: Testing dual-currency settlement for tokenized bonds (Hong Kong Dollar/Offshore Renminbi), cross-border real estate collateralization (in collaboration with the Bank of Thailand), participating institutions include HSBC, Standard Chartered, AntChain, etc.;

2. Stablecoin Gateway Policy: Only approved HKMA stablecoins (such as HKDg, CNHT) are allowed, while unregistered coins like USDT are prohibited.

European Union:

Regulatory Body: ESMA (European Securities and Markets Authority)

Core Regulations:

· MiCA (Markets in Crypto-Assets Regulation): Effective 2025, requires RWA issuers to establish an EU entity, submit a whitepaper, and undergo an audit.

· Token Categories: Asset-Referenced Tokens (ARTs), Electronic Money Tokens (EMTs), and other crypto assets.

Key Measures:

1. Liquidity Restrictions: Secondary market trading needs licensing, and DeFi platforms may be classified as Virtual Asset Service Providers (VASPs).

2. Compliance Shortcut: Luxembourg Fund Structure (such as Tokeny Gold Token) becomes a low-cost issuance channel, with small RWA platforms expecting a 200% increase in compliance costs.

Dubai:

Regulatory Authority: DFSA (Dubai Financial Services Authority)

Core Framework:

· Tokenization Sandbox (launching in March 2025): Two phases (Intent Application, ITL Test Group), allowing the testing of security tokens (stocks, bonds) and derivative tokens.

· Compliance Pathway: Exemption from some capital and risk control requirements, formal license application possible after 6-12 months of testing.

Advantages: Equivalent to EU regulation, supports Distributed Ledger Technology (DLT) applications, reduces financing costs.

Singapore:

· Security Tokens included in the Securities and Futures Act, subject to exemptions (small issuance ≤ S$5 million, private placement ≤ 50 persons).

· Utility Tokens must comply with anti-money laundering regulations, MAS (Monetary Authority of Singapore) drives pilots through sandboxes.

Australia:

ASIC (Australian Securities and Investments Commission) classifies revenue-bearing RWA tokens as financial products, requiring a Financial Services License (AFSL) and risk disclosure.

In conclusion, while European and American countries focus on compliance thresholds, regions such as Asia and the Middle East attract projects through experimental policies, but compliance thresholds remain high. Therefore, the current status of RWAs is that they can exist on public chains but must be supplemented with various compliance modules to fit within the regulatory framework. These compliance protocols cannot directly interact with traditional DeFi protocols. Furthermore, based on different legal jurisdictions, a protocol that complies with the Hong Kong regulatory framework cannot interact with compliance protocols in other regions. From the current perspective, RWA protocols do not have sufficient accessibility and severely lack interoperability, resembling a "island" and deviating from the ideal form.

So, is there really no way to find a path back to decentralization within these frameworks? Actually, there is. Taking the Ondo protocol as an example within the RWA space, the team has built a lending protocol called Flux Finance, allowing users to use open tokens such as USDC and restricted tokens such as OUSG as collateral for borrowing. Lend out a tokenized anonymous promissory note called USDY (a compounding stablecoin). Designed with a 40-50 day lock-up period, this token avoids being classified as a security.

According to the Howey Test standard by the U.S. SEC, a security must meet conditions such as "investment of money in a common enterprise with an expectation of profits primarily from the efforts of others." USDY's earnings come from the automatic compounding of underlying assets (such as government bond interest), allowing users to passively hold it without relying on active management by the Ondo team, thus not meeting the "efforts of others" element. Ondo further simplifies the circulation of USDY on public blockchains through a cross-chain bridge, ultimately establishing a pathway for interaction with the DeFi world.

However, such a complex and unidirectional approach may not be the desired Real World Asset (RWA) we seek. Another key success factor of fiat-backed stablecoins today is excellent accessibility, achieving widespread financial inclusion at a low real-world threshold. Regarding the islanding issue of RWA, TardFi and project teams still need to explore how to first achieve interconnection within different legal jurisdictions and interact with the on-chain world to some extent. Only then can it truly align with the broad interpretation of the term RWA as stated earlier.

Three, Assets and Earnings

According to rwa.xyz (a professional RWA analysis website), the total value of on-chain RWA assets today is $206.9 billion (excluding stablecoins), primarily composed of private loans, U.S. bonds, commodities, real estate, and equity securities.

In terms of asset categories, it is not difficult to see that the main target group of RWA protocols is actually not native DeFi users but traditional financial users. Top RWA protocols such as Goldfinch, Maple Finance, Centrifuge, predominantly cater to small and medium-sized enterprises and institutional users. So why move this to the blockchain? (The following four points are just examples based on these protocols' advantages)

1. 24/7 instant settlement: This is one of the pain points of traditional finance relying on centralized systems, which blockchain addresses by providing a round-the-clock transaction system. It also enables instant redemption, T+0 lending, and other operations;

2. Geographical liquidity fragmentation: The blockchain forms a global financial network, allowing small and medium enterprises in third-world countries to attract external investor funds at minimal costs by bypassing local institutions through this network;

3. Reduced marginal service costs: Through smart contract management, the cost of servicing a pool of assets for 100 companies is nearly the same as servicing 10,000 companies;

4. Serving mining companies and small to medium exchanges: Such enterprises typically lack traditional credit records and struggle to obtain loans from banking institutions. By following traditional supply chain finance logic, they can leverage assets like equipment and accounts receivable for financing;

5. Lowering the Barrier to Entry: While early successful RWA protocols were generally designed for enterprises, institutions, or high-net-worth individuals, today, with the introduction of regulatory frameworks, many RWA protocols are also attempting to securitize financial assets to lower the investment threshold for investors.

For Crypto, if RWA can succeed, it indeed holds a Trillion-level imagination space. Moreover, I believe RWAFi will eventually emerge. For DeFi protocols, the underlying assets, after the addition of Tokens with real yields, will become more robust. For DeFi native users, this will introduce new options in asset selection and allocation. Especially in today's geopolitically turbulent and economically uncertain world, some real-world assets may be a lower-risk option than simply holding onto U for wealth management.

Here, I provide some existing RWA product choices and potential future choices: for example, gold has seen an increase of 80% from the beginning of 23 to this month of 25; the Ruble's fixed deposit rates in Russia are 20.94% for a 3-month period, 21.19% for a 6-month period, and 20.27% for a 1-year period; energy assets in sanctioned countries typically trade at over a 40% discount; short-term US Treasury bond yields are at 4%-5%; various stocks on the Nasdaq that have undergone significant corrections may have a stronger fundamental value proposition than your altcoin; further narrowing down to options such as charging stations or even blind boxes from Pop Mart may also be good choices.

IV. Swordholder

In the Three-Body world, Luo Ji, using his life as a trigger mechanism, deployed a nuclear bomb in the solar orbit, building a deterrence system against the Trisolaran civilization based on the Dark Forest theory. In the world of humanity, he is the Swordholder of Earth.

The "Dark Forest" is also the alias for blockchain used by most people in the industry. This is also the "original sin" inherent in decentralization. For some specific areas, RWA may serve as the Swordholder of this parallel world. Although the era of PFP avatars and GameFi stories has now faded away, looking back to the crazy times three or four years ago, we once gave birth to projects like Bored Ape Yacht Club, Azuki, and Pudgy that rivaled traditional IPs. But did we really acquire the IP intellectual property? The fact is, we never did. NFTs, to some extent, are more like consumer goods, and the definition of a 10K PFP on the blockchain is very vague. It indeed created some brilliant and short-lived IPs by lowering the investment threshold, but when it comes to returns and project development, the "Three-Body People" hold all the power.

Let's take Bored Ape Yacht Club as an example. The original intellectual property of the Bored Ape Yacht Club clearly belongs to its issuer, Yuga Labs LLC. According to the user agreement and official information, Yuga Labs, as the project's operating entity, holds the core intellectual property rights such as the copyright and trademark rights of the Bored Ape works. Holders purchasing NFTs only acquire ownership and usage rights to a specific numbered avatar, not the copyright itself.

When it comes to decision-making, Yuga Labs' direction for the Bored Ape Yacht Club design is the Metaverse, leveraging infinite issuance of sub-IPs in exchange for funding, detaching from the original luxury narrative. In this regard, NFT holders have neither the right to be informed, nor decision-making power, nor revenue rights. In the traditional world, when investing in an IP, investors usually have direct usage rights to the entire IP, direct revenue sharing, participation in decision-making, and even development leadership.

Yuga Labs is at least among the top PFP projects, while many other NFT projects have had more chaotic rights distribution. When faced with a looming threat, will they choose to show more respect for their community?

Part V: Above the Medium

In summary, RWAs have the potential to reshape finance and can also bring real-world opportunities to the blockchain, perhaps providing a new way to address the chaos in the blockchain space. However, constrained by the current regulatory framework in TradFi, its form still resembles a private protocol on a public chain, unable to unleash its full imaginative potential. Over time, I hope there will be a guide or alliance in the future to break through this barrier.

Assets on different mediums can unleash unimaginable brilliance. From the bronze inscriptions of the Western Zhou Dynasty to the fish scale pattern books of the Ming Dynasty, asset ownership has ensured the stability and development of society. What would it look like if RWAs could reach their ultimate form? I could buy Nasdaq stocks in Hong Kong during the day, deposit money into the Russian Federation Savings Bank in the early hours, and the next day, I could invest in real estate in Dubai with hundreds of shareholders from around the world who do not know each other's names.

Yes, the world operating on a vast public ledger is the RWA.

This article is contributed content and does not represent the views of BlockBeats.

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a16z Leads $18M Seed Round for Catena Labs, Crypto Industry Bets on Stablecoin AI Payment

Traditional finance is still stuck in a "human-to-human" model, while Catena aims to achieve "AI-to-AI" interaction.

Never Underestimate the Significance of the US Stablecoin 'Infrastructure Bill'

Original Title: "Never Underestimate the Significance of the US Stablecoin 'Genius Act'"Original Author: 0xTodd, Partner at Nothing Research


If the US stablecoin bill, the "GENIUS Act," passes smoothly this time, its significance will be tremendous. I even think it's significant enough to enter the top five in Crypto history.



Although abbreviated as the GENIUS Act, which translates directly to the Genius Act, it is actually the Guiding and Establishing National Innovation for U.S. Stablecoins, which translates to "Guiding and Establishing National Innovation for US Dollar Stablecoins."


The proposal is lengthy, with several key points summarized for everyone:


· Mandatory 1:1 Full Asset Backing: Assets include cash, demand deposits, and short-term US Treasuries. At the same time, misappropriation and rehypothecation are strictly prohibited.


· High-Frequency Disclosure: Reserve reports must be published at least monthly, introducing external audits.


· Licensing Requirement: Once the circulating market cap of the issuer's stablecoin exceeds $100 billion, it must transition into the federal regulatory system within a specified timeframe, adopting banking-grade regulation.


· Introduction of Custody: The custodian of the stablecoin and its reserve assets must be a regulated qualified financial institution.


· Clear Definition as a Payment Medium: The bill explicitly defines stablecoin as a new type of payment medium, primarily regulated by the banking regulatory system, rather than restricted by the securities or commodities regulatory system.


· Embracing Existing Stablecoins: A maximum 18-month grace period after the bill's enactment, aimed at encouraging existing stablecoin issuers (such as USDT, USDC, etc.) to promptly obtain licenses or become compliant.


After finishing the main content, let's talk about the significance of this matter with an excited heart.


Over the years, when others asked, "After working in the Crypto industry for 16 years, what application have you created?"


In the future, you can confidently tell others—Stablecoins.


First, Clearing Concerns is a Prerequisite


Some people have held opposing views. In the past, people's impression of stablecoins was that they were an opaque black box. Every few months, there would be FUD — whether Tether's assets were frozen or Circle had a significant black hole deficit.


In fact, if you think about it, Tether easily rakes in billions of dollars a year just from the interest on those underlying government bonds. Circle, slightly less, also made a $1.7 billion profit last year.


They basically made money while standing there. From a motivational standpoint, they have no malicious intentions. In fact, they are the most eager for compliance.


Now, this opaque black box will become a transparent white box.


In the past, the only complaint was that Tether's funds might have been frozen by the United States. Now, they will be directly placed into U.S. compliant custodial institutions, with high-frequency disclosures, so you can rest assured.


【No need to worry about a rug pull】 is such a huge advantage—I think especially all Crypto people understand this.


Second, Mastering the Standard is Very Important


Stablecoins were once almost on the verge of being overtaken by CBDCs. In any country, if a central bank digital currency really exists, it is highly likely not built on a blockchain, at most it is built on some internal central bank consortium chain, which to be honest, is meaningless.


When CBDCs were at their peak, that was the most dangerous time for stablecoins.


If CBDCs had become a reality back then, stablecoins today would have been relentlessly suppressed into a dark corner, and blockchain would only be able to play a minimal role.


The remaining half-dead stablecoins would even have to learn the standards of central bank digital currencies, completely relinquishing their standard-setting power.


And now, stablecoins have won (or are about to).


Instead, everyone should learn the 【Blockchain + Token】 standard.


Nowadays, many blockchains actually have no meaningful applications on top, only stablecoin transfers. For example, with Aptos, the only scenario I use Aptos for is transfers between Binance and OKX.


And now, stablecoins will be legislated, what does that mean?


That's right, blockchain will become the only standard.


In the future, every stablecoin user will be the first to learn how to use a wallet.


As an aside, I actually think Ethereum's concerted push for EIP-7702 is quite forward-thinking. While other chains are all about memes, thank you Ethereum for sticking to account abstraction.



EIP-7702 is about Account Abstraction, which can support, for example:


· Social Account Registration Wallet

· Paying GAS with Native Coin

· And more


This paves the way for future new users to heavily use stablecoins, solving the last-mile problem.


Third, Deposit Enters a New Era


Furthermore, once stablecoins receive legislative support, deposits and withdrawals will become even easier.


Let's imagine a scenario: previously, hindered by the gray nature of stablecoins, but after the bill passes, many traditional brokerages can support stablecoins themselves. The money from a US stock investor can be converted into stablecoins in minutes and instantly deposited into Coinbase. Believe it or not.



Let's imagine another scenario: if the brilliant bill smoothly passes through the House of Representatives, next, you will see:


Due to the extremely lucrative nature of this trading, existing stablecoin leaders and newly entering traditional giants will crazily start promoting their stablecoin products.


And an outsider, due to these promotions, will start using stablecoins. And then one day, after finding out that the wallet account has been created, will explore Bitcoin inside. Is mining Bitcoin difficult?


Stablecoins are a huge Trojan horse. The moment you start using stablecoins, you unwittingly step half a foot into the Crypto world.


Fourth, Conclusion


As a large reservoir for digesting US debt, although stablecoins cannot directly absorb debt, they at least provide ammunition for the US debt secondary market. These functions are quite important, and slowly, stablecoins are becoming a part of the US debt market's body. Therefore, once the US legislation is passed and experiences the benefits, there is no turning back.


And, we are also confident that stablecoins are indeed one of the great innovations in our industry. People who have used stablecoins will find it hard to return to the traditional cash-banking system.


Once the bill is passed, users can't go back. In the future, concerns are about to be resolved, standards will be mastered, and the era of large deposits seems to be on the horizon.


Original Article Link

$COIN Joins S&P 500, but Coinbase Isn't Celebrating

On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.



On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.


Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.


In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.


Side Effects of ETFs


Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.



Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.


According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.


This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.


Chart showing the trend of net outflows for Grayscale among the 11 institutions


Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.



In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.


According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.



However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.


The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.


Robinhood Takes a Stand, Traditional Brokerages Join the Fray


On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.



With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.


In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.



Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.



Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.



User Data Breach: Is Coinbase Still Secure?


In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.


Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.


Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.


Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.


Visualization: ChatGPT, Source: Farside


In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.


Visualization: ChatGPT


Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.


CEXs are All in Self-Rescue Mode


Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.



Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.


Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.



Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.


With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.


However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.


In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.


The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.


Arthur Hayes: Why I'm Betting on ETH While the Market Is Obsessed with SOL

"I personally have also allocated 20% to gold, expecting the price of gold to potentially rise to $10,000-20,000 by the end of this market cycle."

Key Market Insights for May 16th, how much did you miss out on?

1. On-chain Flows: $111.3M inflow to Ethereum this week; $237.6M outflow from Berachain 2. Largest Price Swings: $ETHFI, $NEIRO 3. Top News: Data: Solana Network's revenue reached $7.9M on the 13th, surpassing the sum of all other L1 and L2 chains

CryptoPunks Changes Hands Twice, Did the Originator of NFTs Finally Find Its "Forever Home" This Time?

The original NFT pioneer CryptoPunks has once again officially changed ownership after being sold to the Bored Ape Yacht Club (BAYC) developer Yuga Labs.

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