The securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended or with any other regulatory authority of any State or other jurisdiction of the United States or Canada and (i) may not be offered, sold or delivered within the United States or Canada, or to, or for the account or benefit of any U.S. Person or Canadian, and (ii) may be offered, sold or otherwise delivered at any time only to transferees that are Non-United States Persons and Non-Canadians.

October 11, 2022

MiCa; MakerDAO; Mishcon de Reya

Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, on key industry news that has caught our eye, plus our own developments. 

Comments available on the following news items:

  • Swarm adds ETH2.0 to liquid staking 
  • EU agrees full MiCa rules
  • MakeDAO buying government bonds
  • Mishcon de Reya gets into crypto recovery

Swarm launches institutional staking for Ethereum 2.0 on Polygon

Now the Ethereum Merge is complete, staking protocols have seen an influx of capital. Swarm has added Ethereum 2.0 to its institutional-grade liquid staking, enabling investors to earn passive income through staking yield and the flexibility to trade out of a position. Tokens can be traded on its compliant DEX.

We have partnered with Blockdaemon and Copper to provide an institutional-grade service. By simplifying access to a variety of layer 1 PoS networks, including NEAR, DOT, SOL and ETH 2.0 (AVAX coming soon), clients can buy into a staked position using USDC. All tokens are issued on Polygon, making it easier for institutional clients to rebalance their portfolio. 

Landmark MiCa rules mark a momentous shift for crypto

The EU has agreed the text of key rules for crypto, a landmark moment for regulation of the sector and the future of the market. Be under no illusion, these laws mean that crypto will be fully regulated and overseen by the EU by 2024.

By extension, this likely means US, and further, global adoption of regulatory frameworks, as the EU is often seen as an innovator and first mover. Jurisdictions such as Israel, US states and even the Federal Government often take their cues from such legislation. 

Looking at the specific measures now outlined, it introduces a licensing regime for crypto wallets and exchanges, reserve requirements for stablecoins and identity checks on transfers. In many respects this brings crypto finance into line with TradFi requirements and sets clear guidelines for the industry moving forward. 

Players that get with the program and comply will benefit greatly from increased protections for users and reassurance that there is oversight of the sector. Those that don’t comply will quickly find it untenable. Providers outside the EU regulatory sphere will also do well to watch developments, as it is likely similar rules are coming to their local regimes in due course. 

MakerDAO to buy US Government bonds

MakerDAO has announced an intention to invest in $500 million of bonds ($400 million in US treasuries and $100 of corporate bonds), in an apparent reversal on recent comments from the organization which indicated it wanted more decentralized assets. 

The move was however approved by the MakerDAO community after a month-long voting process. Although the move stands somewhat contrary to noises made by the organization in recent months, it is certainly positive that it sees the need to diversify its collateral in order to better protect the value of its stablecoin DAI. There is definitely something to be said for a blended approach, especially as the DeFi and TradFi universes become evermore entwined. 

By this point, liquidity and balance sheet issues in DeFi and stablecoin markets are well documented, so it is good to see major players making shifts to better establish secure diversified reserves. There is however a big difference between DAI and TerraUSD, the which was backed primarily backed by the project issued coin LUNA. 

But these kinds of crises tend to reward those that adapt, survive, and consequently learn to thrive in the landscape left behind. With major adaptations to key blockchains such as Ethereum, and the onset of new utilities such as staking, the crypto winter as it was could soon be left behind for a better, more robust future. 

Mishcon de Reya becomes key crypto asset recovery partner

Giant law firm Mishcon de Reya has announced a major partnership with Chainalysis to provide a crypto asset recovery service. It is a notable but obvious development for the law firm in a landscape that has struggled in the past from high-profile losses. 

The growth in sophistication and reach of crypto asset forensics and recovery is not much discussed, but clearly growing in terms of importance. High-profile losses for major crypto projects have been much reported, but less goes into looking at the process of recovering those losses. But the transparency of blockchains can often in fact aid the efforts of organizations looking to recover digital assets.

There is of course a point to be made as to the need for such recovery services when robust front-end regulation and protection for users and businesses can help to prevent such losses in the first instance. 

The truth is that DeFi or TradFi – neither is free from such bad actors attempting to misappropriate assets. The key differentiator is the lack of rules to protect market participants in crypto. But this is most certainly changing. 

There is much agreement in the sector now that concepts such as permissioned DeFi are the future of the sector. This should bring much greater protection and therefore trust in DeFi institutions, and will be a huge step for all aspects of the ecosystem.