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PayPal Launches Stablecoin on Ethereum 🤝

PayPal customers will be able to purchase, send, convert and fund purchases in the coming weeks -- plus the top news, stats, and reports of the week in crypto.

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Issue Summary: Welcome back to Coinstack, the weekly newsletter for institutional crypto investors and industry insiders. We review the top news, stats, and reports in the digital asset ecosystem for our 130k weekly subscribers. This week we cover the Paypal launching a stablecoin, Coinbase vs. SEC lawsuit continues, Curve exploiter returns stolen funds, and big new venture rounds for Magic ($52M) and Anoma Foundation ($25M).

Price performance since we began writing Coinstack in January 2021

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💵 Weekly Crypto Fundraises & Deals

Here are all the crypto fundraises we heard about this week, ranked by size…

🗞️ Crypto News Recap: The Top 5 Stories

Welcome back to This Week in Crypto… everything you need to know in one scannable format. Here are the top 5 stories of the week…

  1. 🤝 PayPal launches stablecoin on Ethereum, citing 'shift toward digital currencies'- Silicon Valley-based payments firm PayPal announced it is launching a U.S. dollar stablecoin in conjunction with Paxos. The new digital token will be pegged to the dollar and “gradually” made available to PayPal’s customers in the U.S., the company said in a press release.

  2. ⚖️ Coinbase Wants SEC Lawsuit Thrown Out, Says Gensler Overstepped His Authority - Coinbase has asked a judge to scrap the U.S. Securities and Exchange Commission lawsuit against the cryptocurrency exchange. The San Francisco-based exchange said in a federal filing Friday that the SEC’s “claims must be dismissed” because “the subject matter falls outside the agency’s delegated authority.”

  3. 🎭 Curve Finance exploiter returns stolen funds, teases 'I'm smarter than all of you'- The Curve Finance exploiter appears to be returning funds back to the protocol, according to on-chain data. The hacker returned a total of 4,820 alETH to Alchemix Finance. The first transaction appeared to be a test of 1 alETH, with a batch of 1,000 alETH worth $1.7 million following around 9:00 a.m. ET. Another 3,819 alETH worth $6.7 million came a few minutes later.

  4. 🚀 Uniswap gets deployed on Coinbase's Layer 2 network Base- Uniswap, the largest decentralized exchange on Ethereum by trading volume, has been integrated into Coinbase's Base network, enabling users to swap tokens on the Layer 2 network.

  5. 🚀 Binance gets El Salvador's green light to become 'first fully licensed' crypto exchange- Binance said it received two licenses in El Salvador, becoming the "first fully licensed" crypto exchange in the Central American nation. The two licenses — the Bitcoin Services Provider (BSP) license by the Central Reserve Bank of El Salvador and the first non-provisional Digital Assets Services Provider (DASP) license by the National Digital Assets Commission of El Salvador — allow Binance to offer tailor-made products and services in the country, the company said Tuesday.

💬 Tweet of the Week

Source: @krugermacro

📊 Key Stats of the Week

Here are the most important and interesting stats in crypto this week...

1. Stablecoin transfers are growing rapidly with more than $2T in transactions in Q1 2023 alone.

Source: @Juan F. Leon

2. As of this writing the Curve pool is heavily imbalanced, holding 60% USDT.

Source: @Kaiko Research

3. BTC perps open interest has declined since March, suggesting robust hedging demand.

@DessislavaIane2

4. Solana has captured market attention and now stands out among the L1s. Solana TVL has gained $37m within the last month.

Source: @mallikakolar

5. Both USDT and USDC maintain a relatively consistent peg to the US dollar. The average daily deviation from the $1 mark over the past 30 days is minor, with noticeable fluctuations occurring only during unusual market pressures.

Source: @intotheblock

📝 Highlights from the Top Crypto Reports

Here are the top highlights from the best crypto research reports this week…

About the Author: Messari brings transparency to the crypto economy. Messari wants to help investors, regulators, and the public makes sense of this revolutionary new asset class and build data tools to drive informed decision-making and investment. This is an excerpt from the full article, which you can find here.

Introduction

Stablecoins have had a rather unstable year. It all started with the spectacular $20 billion blowup of TerraUSD (UST) in May 2022. Since then, there have been a few unfortunate events, although not quite as catastrophic.

  • Centre’s USDC had a major depegging event in March 2023 during the Silicon Valley Bank crisis.

  • Tether, the largest stablecoin, had a depeg scare in June 2023.

  • Also in June 2023, BUSD was labeled a security by the SEC, leading Binance to reduce support for the asset and increase adoption for True USD (TUSD).

  • TUSD is, in turn, facing increasing pressure on its unclear ownership.

Through these events, it would seem that the largest onchain decentralized stablecoin with a long and stable history would stand to benefit. However, that thesis has not materialized. Maker’s DAI languishes at a minor 3% market share of all stables, having wholly been unable to capitalize on any of the risks materialized in other stablecoins. Its market share today is lower than when UST first started to become relevant.

A large part of why Maker has been unable to capture market share is that it requires over-collateralization. Centralized stablecoins issue assets at 100% efficiency, but minting one DAI requires more than $1 worth of collateral. While this limits DAI’s competitiveness, Maker is utilizing other avenues where it can create a competitive edge.

High on Interest Rates

Higher interest rates across the world haveatly improved the profitability of stablecoin issuers. During the zero-interest rate era, stablecoin issuers had to either be content with minimal net interest margins or take on additional risk to generate a meaningful yield on deposits. Now simply deploying funds into short-term U.S. government bonds can generate annualized returns of ~5%. As such, the profits of stablecoin issuers have shot up significantly.

While this opportunity was earlier not available to Maker, with the recent proliferation of real-world assets (RWA) onchain, Maker has also been able to make hay while high interest rates shine. Maker has accumulated $2.5 billion in RWAs representing 54% of its asset portfolio; these RWAs are expected to generate an annualized yield of ~4%.

Centralized stablecoin issuers have internalized all the profits generated from higher yields for regulatory or financial reasons. Maker, on the other hand, is willing to share this yield with holders. To that effect, Maker has increased the DAI savings rate (DSR) to 3.19%. The DSR module acts like a savings account with a bank. Any DAI holder can deposit into the DSR module to earn a part of the yield that Maker generates from its lending and RWA vaults. Since the DSR was increased, DAI in the module has grown threefold to $300 million in just 35 days.

With Maker being the only large stablecoin that shares yield with holders, it should see growing adoption from users who hold their assets in stablecoins. The growing deposits in DSR show that there is demand for onchain yield on stables, and Maker’s DAI is best placed to meet it.

🎧 Top Crypto Podcasts of The Week

Here are the crypto podcasts tworth listening to this week...

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📰 The Coinstack Newsletter:

Tracking the most important blockchain stories of the 2020s, including a decentralized internet and the creation of a new open global monetary system that works for everyone. As always, published for informational purposes only. Please do your own research. Just our opinions. Not intended as financial advice as we are not financial advisors. We may own some of the digital assets we write about as we believe strongly in the sector. Please do your own research. Published and written weekly by Ryan Allis and Mike Gavela.

Coinstack is a news and analysis newsletter for the digital asset industry. None of the information here is a recommendation to invest in any securities or other types of investments. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All investments involve risk and may result in loss.

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