Linea L2 halted blockchain amid DEX hack, Ethena's USDe stablecoin crossed $3b, Biden vetoed SAB 121, Coinbase accused SEC for trying to destroy crypto.
Linea Layer 2 Halted Blockchain Amid $7M DEX Hack

Linea Layer 2 Halted Blockchain Amid $7M DEX Hack

Jun 3, 2024
| Issue

GM. As always, in the first issue of the week, we will review the most important events from Fri-Sun. This time, we have a mix of wins and losses. Starting with DeFi, we'll look at the latest case of centralization risk in Layer 2s, the increased demand for stablecoins, and the withdrawal of the 'ZK' trademark.

On the macro front, regulatory battles continue. US President Joe Biden vetoed a key crypto custody bill just as his administration appeared to be turning pro-crypto. In addition, Coinbase updated its lawsuit against the SEC, claiming that the agency is attempting to destroy the crypto industry on purpose.

Linea Layer 2 Halted Block Production Amid $7M DEX Hack

Linea, the Consensys-built Layer 2 (L2) network, temporarily halted block production following a $6.8 million exploit on decentralized exchange (DEX) Velocore. The hacker exploited a vulnerability in Velocore's smart contracts to drain liquidity pools on zkSync Era and Linea, prompting Linea to pause its sequencer in an effort to prevent further losses.

Many people weren't happy about the centralized demonstration and joked about it on social media. In response, Linea's team said that the goal was to protect users by stopping the bridged out of more funds, and made it clear that their ultimate goal is to remove the ability to stop the network once decentralization is complete. The total value locked of the L2 remained above $630m.

Ethena's USDe Stablecoin Crosses $3B in Just Four Months

Ethena Labs USDe stablecoin has reached a supply of over $3 billion tokens in just four months. The so-called 'synthetic dollar' maintains its peg through arbitrage mechanics and a yield-returning cash-and-carry trade. USDe currently accounts for a 3.3% share of the total stablecoin supply and is the fourth largest player behind Tether, USDC, and DAI.

USDe might challenge DAI as the largest algorithmic or decentralized stablecoin, but it'll need $2 billion in supply to get there. The stablecoin was recently integrated with Bybit, which provides spot trading pairs with Ethereum and Bitcoin. USDe also recently began airdropping its governance token, ENA, but there are currently some distribution issues that should be fixed this week.

Biden Vetoes Bill to Repeal SAB 121 on Bank's Crypto Custody

US President Joe Biden vetoed a bill aimed at overturning a US Securities and Exchange Commission (SEC) bill that establishes accounting standards for firms (like banks) that custody crypto. In a letter to the House of Representatives, Biden emphasized the need for consumer and investor protection through appropriate regulatory guardrails to harness the benefits of crypto-asset innovation.

The House and Senate had both voted to repeal the SEC's bulletin, SAB 121, with bipartisan support. The bulletin mandates firms to record customer crypto holdings as liabilities, a move criticized by the crypto industry for potentially hindering banks from safeguarding digital assets. The SEC maintains that SAB 121, though non-binding, enhances investor disclosures and mitigates crypto risks.

Coinbase Claims the SEC is Trying to Destroy Crypto

Coinbase urged an appeals court to compel the SEC to establish specific rules for cryptocurrency, arguing in a 36-page closing brief that the commission's current approach traps crypto firms in a "Catch-22." Coinbase accused the SEC of demanding compliance while simultaneously engaging in aggressive litigation against firms and refusing to set clear regulations.

Coinbase described this as a deliberate attempt to undermine crypto by enforcing unattainable standards. The exchange disputed the SEC's claim that its position on digital assets is consistent, noting the agency's reliance on vague statements. Despite years of requesting regulatory clarity, including a formal petition in July 2022, Coinbase argued the SEC's existing regulations are unsuitable.

Data of the day

According to a recent CCData report, at the beginning of May, open interest was $8.7 billion. Since then it has risen to $14.4 billion or an increase of 65.5%. The increase reflects rising investor confidence and the impact of regulatory approvals on Ethereum's market dynamics, according to the researchers.

The increase in OI is most likely in reaction to the recent spot Ethereum ETF approval in the US, which also contributed to the recent breakout of the ETH/BTC pair on the 200-day moving average.

More breaking news

  • Matter Labs, the company behind the ZkSync L2 network, has dropped all attempts to trademark the term "ZK", following backlash from researchers and users.
  • ARK Invest is no longer a partner with 21 Shares for the proposed spot Ethereum fund, according to an amended form S-1 registration statement filed late Friday.
  • Hong Kong officially kicks out all unlicensed crypto exchanges that have not applied for an operational license with the Securities and Futures Commission (SFC).
  • DMM Bitcoin, a Japanese cryptocurrency exchange was hacked for 4,502.9 BTC, worth about $308 million, in what the company called an "unauthorized leak".
  • EOS L1 proposed to limit supply to a fixed 2.1 billion tokens instead of 10 billion, while also burning nearly 80% of the total EOS supply from future emissions.

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