With the CLARITY Act stalled in the Senate, the rule-writing was taken by the agencies themselves in August: the SEC proposed a bespoke crypto offering regime. This agency action creates a backstop ahead of the procedural vote regarding the CLARITY Act on 15 September. Rule-writing of a different kind played out on Solana, where the network's first binding governance votes tightened its monetary policy and formalised how future decisions will be made.
A hoped-for Senate vote on the CLARITY Act before the August recess never materialised which resulted in disappointment for many. A cloture has been filed on the motion to proceed with a procedural vote for the 15th of September. That vote needs 60 senators to open the floor debate. Republicans currently hold 53 seats, and at least seven Democrat votes are required. Democrats during summer voiced many concerns regarding the ethics clause, more specifically regarding President Trump and his family. The concern is that the Trump family is itself an active participant in the industry, from the World Liberty Financial venture to a family-branded memecoin and bitcoin-treasury businesses, so Democrats argue an ethics clause weak enough to pass would leave a sitting president profiting from the very markets his administration is writing rules for. Whether Republicans have done enough to keep a united front, and to win those 7 votes from Democrats, remains to be seen. On the outside, and through limited media coverage of ‘behind-closed-door’ discussions, developments regarding these issues seem to be mixed. As to what the reality of the situation is, we are yet to see. The GENIUS Act also presented uncertain moments which would briefly scare the industry when certain votes would fail, but these moments invited both parties back to the negotiating table, allowing next votes to pass. Failure for the procedural vote could likely indicate the end of the bill for the year of 2026, as the midterms could consume autumn’s calendar. The CLARITY Act is the industry's market-structure bill: it draws the long-contested jurisdictional line between the SEC and the CFTC, letting a sufficiently decentralised token be treated as a digital commodity under CFTC oversight rather than a security, creates registration pathways for crypto exchanges and brokers, and adds protections for software developers and self-custody.
SEC came prepared and quickly stepped into the gap which had remained unaddressed amongst the games of political interests. Paul Atkins came out with a statement clarifying the SEC’s position and eagerness to see the CLARITY Act pass through the legislative floors. More importantly, Atkins emphasised the SEC’s eagerness to provide clear rules to the crypto landscape. As a result, the agency proposed Regulation Crypto Assets, a 402-page rulemaking that would create the first bespoke offering regime for crypto assets under US securities law. These rules cover tokens that are also not themselves securities but are sold under investment contracts. It has three main components: a startup exemption would let any issuer, outside of the US as well, raise up to $5 million over four years without registering, with retail participation permitted, no real individual investment caps, and with general solicitation allowed. Airdrops, which have been the key mechanism for crypto teams to bring users to their product, are being recognised as a legitimate practice. Instead of SEC qualification and audited financials, issuers will have to file a notice and post standardised disclosures covering token economics, supply and allocations, governance, source code, and a roadmap. Additionally, there would be a second exemption, this time targeting larger fundraises. For established issuers, the system would be separated into two tiers. The first tier would allow up to $20 million raised in any twelve-month window without audited financials, while the second stretches to $75 million but requires audited financials and heavier ongoing reporting, and both limit how much of the offering can come from insiders selling their own holdings. Unlike the startup exemption, this route is reserved for genuinely US-based businesses. The issuer must be organised in the US, a majority of its executives and directors must be US citizens or residents, more than half of its assets must sit in the US, and the business must be principally run from the US.
Most importantly, this new regime would allow the transitioning out of the securities regime altogether. If an issuer wanted to transition its token ‘security’ into a pure token, the issuer would have to certify it by permanently ceasing any centralised managerial efforts it promised investors - something which has been a natural trajectory referred to as ‘progressive decentralisation’ by many protocols in our industry for years. Following this, a transition report filing would have to be done of the respective asset, or token, transitioning into a decentralised asset. Then the asset would cease to be treated as a subject to an investment contract, and it would trade on as a non-security. The comment period for the SEC’s new rulemaking will run until the 20th of October.
All together, the developments coming from SEC and CFTC may have a constricting influence on the experimentation that happens within the crypto landscape, but in return, it can provide guidance which will ultimately protect retail investors. Hopefully later, this can serve as a foundation on which the tokens can be defined even further. Nowadays tokens already pose many challenges to companies’ roadmaps as they balance the interests of both equity and token holders. Historically this has not been an issue for private investors as they typically get exposure to both instruments, but for public market participants, who usually can only get exposure to the token, it has caused awkward surprises. One recent example came when the Vector.fun team was acquired by Coinbase, which was also in charge of supporting NFT exchange Tensor and its token - only equity holders saw upside through the acquisition, while token holders saw their investment evaporate.
Solana ran three independent votes in August, addressing its monetary policy and its politics. The first proposal, The Solana Constitution, passed with roughly 86% support. Until now, decisions on Solana were made informally. Core developers and the largest operators agreed changes among themselves, and larger topics were settled through improvised polls that obliged none to respect them. This vote replaces that arrangement with written procedure enforced by an on-chain program. Routine technical upgrades still flow through developer review as they always have, but systemic changes can now only happen through a formal stake-weighted vote. A validator with at least 100.000 SOL of active stake can submit a proposal. A vote will get triggered once 15% of stake supports the vote, and passage requires a third of all network stake to participate and a two-thirds supermajority to approve. The other change cuts against the custodians. Validators will still vote with the stake delegated to them by default, but any individual staker can now override their validator’s vote on-chain, an answer to the principal-agent problem many users have faced in delegated staking.
The second vote was a consequential one. The “Double Disinflation” proposal passed with 67% of participating stake, just 33 basis points above the supermajority requirement. Originally the vote seemed like it would not pass, as major parties such as Kraken voted no. Many argued Kraken was protecting their interests as many centralised exchanges have staking and earn programmes within their interfaces. This vote reduces the yearly inflation, but it also reduces the staking rewards. The effect is that Solana’s issuance now declines by 30% a year, instead of 15%, until it reaches a final 1.5% inflation floor in mid-2029 rather than around 2032. This effectively removes roughly 19 million SOL from projected issuance over six years, or about 2.6% of projected supply. The staking yields currently sitting around 5.25% will compress towards 2.25% within roughly three years. This compression in staking yield explains Kraken’s initial position, but after active and turbulent market feedback, Kraken turned around its position, and so did major holder Galaxy, finally flipping the vote into green and allowing it to pass. After this vote, the implementing changes will still have to be written, reviewed, and activated through the normal upgrade process.
The third and final vote failed to reach supermajority. The vote would have replaced Solana’s flat per-signature fee with resource-based pricing and lifted daily burns from about 650 SOL to between 7.500 and 9.000 SOL, equating to roughly $800.000 a day at the current prices. 53.9% of participating stake voted in favour, but 72 million SOL abstained, and with abstentions counting toward quorum without counting toward approval reaching supermajority became a harder feat.
While Solana governance was moving, mainnet slot time dropped from 400 to 350 milliseconds, the first of a planned sequence of cuts targeting 200 milliseconds. The gain is latency rather than throughput. Blocks will become faster but proportionally smaller. Capacity will be unchanged but confirmations will land quicker. No human most likely will feel 50 milliseconds, but trading algorithms will. Tighter block times mean fresher quotes and finer spreads.
One of the more ambitious announcements made in August came from the LayerZero team. Following its rollup announcement regarding Zero, another item on the roadmap had been added through ATLAS, the new headless exchange that bundles matching, clearing, settlement and risk management into a unified backend infrastructure. Any venue will be able to plug into ATLAS, and it will use the Zero blockchain as its backend infrastructure. The exchange is built with prominent partners such as Citadel Securities, DTCC and ICE.
Interestingly, LayerZero designed its exchange in a headless manner so it is not competing with other exchanges trying to gain its users. As an example, Hyperliquid took a similar approach through its Builder Codes where it acts as a backend infrastructure. Through Builder Codes, wallets or other exchanges can integrate in the backend. This allows any interface to provide access to Hyperliquid’s markets while still owning the end user. On all the routed volume, frontend distributors can charge a small amount of basis points as fees. We still have to see if this is truly a more competitive model than the Builder Codes’ one. If all goes to plan, LayerZero could have multiple distribution partners fighting to bring users to the ATLAS exchange, exponentially growing its network effects. LayerZero team announced that ATLAS will launch before 2027.
Beyond this, Revolut came out with a major announcement. Following the excitement around stablecoins, Revolut doubled down and began a phased rollout of EURR, its euro stablecoin, beginning in Denmark, Poland, and Portugal. The token is issued by and its reserves are managed by Bridge. Revolut will act as a distributor to roughly 80 million users. All users will be able to interact once available in their countries. Another positive development thanks to the presence of clear regulations regarding this token class. Hopefully with the CLARITY Act’s passing, we can again see renewed excitement from institutions, but this time around DeFi components and tokenization.
Lastly, in the past few months, following the AI excitement, a lot more attention has been pointed towards blockchain toolings which can support AI agents and their usage. Cloudflare has been one of the pioneers with its previously launched x402 network. The network allows microtransactions which are a suitable fit for AI agent’s payments and transactions. Following the x402 rollout, Cloudflare launched programmable wallets designed to let AI agents pay for APIs, data and content in stablecoins, with owner-set allowances, approved-merchant lists and transaction caps as guardrails. All of the right tooling is being created for AI agents to function on the blockchain. Still, the AI agent-powered transaction volumes have been underwhelming. In the last 30 days, roughly $1.340.000 million volume has been processed through the x402 network. It still seems as if the market is searching for its breakout use case which will stimulate more activity.
GTE opened its public access waitlist ahead of mainnet, branding itself as the Internet Exchange: a fully on-chain order book targeting the latency of a centralised exchange, with spot, perpetuals and an API built for trading agents. The thesis tackles both incumbent models at once. Centralised exchanges ask users to trust custody they cannot verify, while AMM-based DEXs concede latency and pricing quality, and GTE's crankless central limit order book, one that matches and settles orders within the trades themselves rather than relying on external keeper bots to process the book, is built to close that gap without giving up self-custody or composability. Originally built on MegaETH, the project moved to its own chain last year, and is most likely to work with Zero and their new aforementioned headless exchange ATLAS, though final details are yet to be confirmed.
Kinetiq unveiled their plans for Elysium, a purpose-built layer 2 for the Hyperliquid ecosystem. The problem it targets is Hyperliquid's known weak flank: HyperEVM, the chain's general execution environment, where gas for a simple swap has exceeded $10 during peak on-chain activity. Elysium provides a new environment in which everything outside of HyperCore may flourish. Elysium's design is aligned with Hyperliquid's: HYPE remains the gas token, and market makers can quote on Elysium while reading near-top-of-block depth from HyperCore. In return, half of the sequencer revenue will go back to buying back and burning Kinetiq's token KNTQ. For Kinetiq the strategic logic is vertical integration, from staking dominance through its existing HIP-3 markets venue to owning the execution layer itself.
Umia, built by the team behind our portfolio company Chainbound, recently presented a new capital-formation stack on EVM, planning to compete with the successful ICO platform, MetaDAO, which is based on Solana. New teams can now fundraise for their start-ups, ideas, and projects. The fundraised amount is predefined into a monthly allowance, and any spending beyond it must win approval in a futarchy-powered decision market. How futarchy markets work, very briefly, is that each strategy is priced by the market, and the winning strategy executes on-chain. This way people aligned with the strategy of their liking have to stake capital for it to win the futarchy-powered decision process. The first fundraise was for Umia itself. In total, the fundraise closed at roughly $6.200.000, and the public raise cap was reached within 7 minutes, showing continued interest in futarchy-powered ICO platforms, but this time potentially looking for new solutions, and presenting a formidable competitor to MetaDAO. The first hurdle has been cleared by the team. Now, we are to see if the projects launching on Umia's platform will attract a similar amount of excitement, and whether each subsequent project fundraising on Umia will maintain the same level of attention.
