📈 This Week in Markets

• BTC: $107,625.71 (3.58%)

• ETH: $2,508.62 (6.77%)

• SOL: $156.92 (11.09%)

📊 Chart of the week

Bitcoin tends to experience significant single-day price fluctuations. This chart illustrates the considerable impact of holding BTC during the top 10 price jump days on the overall return on investment.

The takeaway: Just like investing in equities, “time in market” beats “timing the market”. 

Robinhood, Coinbase, and Kraken take stock trading on-chain.

What Happened:

Tokenized stocks gained significant momentum in the last week.  

• Robinhood is launching tokenized stock trading, utilizing its own Layer 2 built on top of Ethereum

• Coinbase is seeking approval from the Securities and Exchange Commission to offer tokenized equities. Trading would occur on BASE, Coinbase's Ethereum Layer 2.

• Kraken announced xStocks, a 24/5 tokenized platform that allows withdrawals of equities to your wallet using Solana (and, interestingly, not Kraken's own Ethereum Layer-2 network, INK).  

Why it Matters:

Each platform will allow 24/5 trading, the ability to move stocks out of brokerage accounts to be used across blockchain applications (like borrowing & lending), and are cheaper and settle faster than traditional stocks.

Winners:

• Ethereum: Having Coinbase and Robinhood utilize their proprietary Layer 2s for trading equities is a massive boon for the Ethereum ecosystem.

• Coinbase & Robinhood: Each own the largest user bases, and since they own the Layer 2s on which trading will occur, most of the fees will flow directly to their bottom line. Layer 2’s tend to have gross profit margins of over 95%.

Losers:

• Solana: It aims to be the "Nasdaq" of blockchains. It is a win that Kraken selected Solana, but I expect they will migrate to their proprietary Layer-2, named INK, once they can because Layer 2s

• US Users: Thanks to the regulatory wasteland the US was in previously, the SEC prohibited this type of activity. As a result, all of these products are currently only available to users in the EU and EEA. Thankfully, given the new leadership at the SEC, I expect that these markets will gain approval in the coming weeks/months. Last week, Dinari, a Series A-funded broker-dealer, announced that it was the first broker-dealer to have its license to trade tokenized equities approved.

FISERV Announces Plans to Allow Community Banks to Issue Stablecoins

What Happened

Payments giant Fiserv is teaming up with crypto firm Paxos to enable small banks and credit unions to offer stablecoins—digital dollars backed one-to-one with cash. Fiserv will handle the front-end banking software; Paxos will issue and custody the stablecoins.

Why It Matters

1. Fiserv has elected to use Solana (SOL) as the underlying blockchain. This could be a decent win for Solana. Currently, Solana hosts 4% of stablecoins by volume, compared to Ethereum's 50%.

2. More mainstream support: Stablecoins are transitioning from crypto-native platforms to mainstream US banking. While giants like JPMorgan have built private solutions, this gives smaller banks a turnkey way to compete—bringing regulated digital dollars to local communities.

3. This announcement is just that, an announcement. Whether Fiserv can build, sell, and execute the product (or whether this is a press release timed to capitalize on Circle's impressive ~600% gains since its IPO last month) remains to be seen. The company says it will be ready for launch by the end of this year.  In crypto, we jokingly refer to announcements like this as Coming Soon^TM. Basically implying that we’ll believe it when we see it.

Winners

• Small Businesses: Stablecoins will only go mainstream when the entire payment lifecycle is seamless. Payment processors have work to do to catch up with Stripe's progress here.

• Solana: Stablecoin dollars are sticky. If Fiserv launches on Solana, it can result in significant transaction volumes for the blockchain.

• Consumers: Payments facilitated by stablecoins are currently half the cost of credit card payments, and that price is likely to decrease significantly as adoption grows.

Losers

• Clarity around "what is a dollar": One of the hurdles we will undoubtedly face in the coming years is the proliferation of competing on-chain dollars. As detailed in a recent Op-Ed by Barry Eichengreen (hat tip to Gray S. for sharing the article), competing stablecoins could result in a scenario where "thousands of cryptos flourish." While I disagree with most of the Op-Ed, there's some risk involved here. I may post my full thoughts in a different format. If you're interested in reading that, please let me know.

Foundational Read of the Week

Leading republican senators have put forth their Principles for any Market Structure Legislation.

Context 

The GENIUS Act (which regulates stablecoins) has passed the Senate, and President Trump wants the bill to pass the House of Representatives unaltered so that he can sign it into law quickly. The other side of the regulatory coin is the "Market Structure" legislation, which will move forward separately this summer to get it done "by the end of September, Period." This legislation is what industry observers tend to be most excited about: clear rules of the road to allow the industry to grow safely and effectively.

The Principles

1. Legislation Should Clearly Define the Legal Status of Digital Assets. It is a seemingly noncontroversial and straightforward request but one that has eluded the industry for over a decade.

2. Jurisdiction Should Be Clearly Allocated Among Regulators. In prior administrations, we have seen regulators engage in over-reach and turf wars, resulting in confusing and often contradictory requirements.

3. Regulation Should be Modernized to Foster Innovation. Not only does this include safe harbors and required disclosures, but it touches on one of the cornerstones of the industry: many of today's laws assume the need for centralized intermediaries. Those laws become non-sensical when centralized intermediaries become unnecessary.

4. Regulation Should Protect Those Who Purchase or Trade Digital Assets. Where centralized intermediaries do exist, they should be required to protect customer's funds.

5. Illicit Finance Measures Should Be Targeted and Pro-Innovation.  

6. Federal Financial Regulators Should Welcome Responsible Innovation. Regulators should provide clear guidance, sandboxes, and safe harbors to facilitate innovation and enable more targeted enforcement actions.

📥️ Want to weigh in? Reply to this email with your comments or hot takes. We may feature them next week.

Don’t speculate, validate.
- Validator Digital