January saw significant developments concerning both Ethereum and Hyperliquid. A substantial portion of the month was dominated by the US market structure bill and its lack of bipartisan support. Although January proved itself as an underwhelming month in terms of market performance for crypto assets, institutional adoption still shows no signs of slowing.
Ethereum has upgraded their roadmap efforts with two new updates. ERC-8004 is a newly announced standard designed to give AI agents trustless identities. This creates a portable reputation system where agents can act as autonomous economic participants across different organizations without any gatekeepers. Effectively, ERC-8004 builds the initial plumbing for a machine-to-machine economy. It is set to launch on mainnet imminently.
Secondly, Ethereum is elevating post-quantum security and making it a top priority. A dedicated team now formed and bi-weekly developer sessions will be underway, pivoting their focus from just theoretical research to active engineering. Ultimately, through this, Ethereum acknowledges that the window to prepare for quantum threats is narrowing. The announcement has brought back the conversation around a similar initiative to tackle Bitcoin’s post-quantum security, although there, to get alignment of the developer community might take more time.
While Ethereum has advanced, Hyperliquid has also progressed with HIP-3 markets. HIP-3, or Hyperliquid Improvement Proposal 3, allows for permissionless, builder-deployed perpetuals. To put it briefly, HIP-3 markets allow any user to instantly deploy and trade spot or perpetual markets for any assets if HYPE token is provided as collateral. So far the biggest focus has been on the perpetual non-crypto asset market deployments. Since their inception, HIP-3 markets have generated over $39 billion in volume. Silver emerged as a notable performer. On-chain silver perpetuals achieved over $1.1 billion in 24-hour volume during periods of peak volatility. Subsequently, silver perpetuals represented 2% of the total global volume for that asset class, indicating a promising initial level of demand for the recently launched HIP-3 markets.
The US market structure bill, the federal regulatory framework for digital asset markets to replace the current patchwork and ambiguity, is slowly reaching a major inflection point this month. The Senate Agriculture and Banking Committees, overseeing the CFTC and SEC respectively, advanced two competing bills. The primary friction points are twofold: One is a proposed ban on stablecoin yield for idle holdings, a move heavily lobbied for by traditional banks to protect their deposits and preserve competitiveness, and the other is political implications regarding the current administration’s own crypto ties. The concern around Trump’s family involvement in the industry has been heavily dismissed by Republicans, who assert that the current administration's affiliations are not appropriate for inclusion in governing legislation, arguing instead that these matters should be addressed independently. On the other hand, the stablecoin yield on idle holdings has been a more central issue in the debate and fiercely opposed by banks in the US.
The tension snapped mid-January when Senate Banking Committee Chair Tim Scott released a draft that drew a sharp line in the sand. Fueled by fears from traditional banking lobbyists that yield-bearing stablecoins will lead to a mass exodus of customer deposits from their low-yield bank accounts, the bill proposed a strict prohibition on rewards simply for holding stablecoins. Under this draft, idle stablecoin balances could not earn yield. This was a direct shot at the revenue models of firms like Coinbase, whose partnership with Circle on USDC is projected to generate over $1 billion in 2025. The partnership between Circle and USDC passes this revenue to the user. By restricting rewards and tying them only to specific activities, such as staking, providing liquidity, and so on, the bill effectively strips stablecoins of their utility as a superior savings vehicle, at least when a revenue-sharing agreement is in place, like the one we’ve seen with Coinbase and Circle.
Coinbase, as one of the main pro-crypto lobbyists, abandoned its support of this bill, dashing hopes of a resolution. Another concern coming from Coinbase was that the bill also acted as a “de facto ban” on tokenized equities and handed the government unlimited access to private financial records. The current White House administration, who had viewed Coinbase as a necessary partner for bipartisan optics, reportedly threatened to abandon the legislation entirely. Frustration between the administration's desire for a crypto regulation to be brought forth and the crypto industry’s desire not to be regulated out of any further innovation created great tension.
As the month closes, the legislation is sitting in a stalemate. The Senate Agriculture Committee pushed through its own version of a market bill with 12-11 votes, showing the lack of Democratic support needed to survive the full Senate. For the bill to pass through the senate, Republicans need to keep a unified front with a couple of Democrats showing support, as well. The lack of Democratic support mostly comes from the fact that there is no language addressing possible conflicts of interest within the current administration, although protective provisions focusing on non-custodial software developers and infrastructure providers are in place. In an effort to get a bill through from the Senate Banking Committee side so that both the Banking Committee’s and Agriculture Committee’s versions can be unified and sent onto the Senate floors, the White House has announced a Banking-Crypto Summit for early February. All eyes are on any future developments, as they are set to define the route our industry can take moving forward.
On a more positive note, while the Senate is trying to dispute their feuds, CFTC and SEC have taken a more collaborative approach. In an effort to create an interim solution, CFTC and SEC are working together on “Project Crypto”. In this joint effort, there will be delineation between what cryptocurrencies would be securities and which would not, until the Congress finalizes a legislation.
While the US remains temporarily stuck in a legislative gridlock, global jurisdictions are slowly progressing forward. Dubai’s DFSA adopted a stricter stance by banning privacy tokens and narrowing stablecoin definitions to prioritise fiat-backed assets, staying consistent with other global regulations issued so far. South Korea passed a comprehensive Security Token Offering (STO) legislation, officially legalizing the issuance and trading of tokenized securities ranging from debt to fractionalized real estate, putting South Korea at the frontier of global crypto regulations. Meanwhile, the UK’s FCA advanced its regulatory clarity, moving into the final stages of its Consumer Duty consultation to set explicit standards for retail crypto investor protection.
The tokenization narrative has officially graduated from experimental sandboxes to live commercial infrastructure. JPmorgan has led the charge by expanding its JPMD natively to the Canton Network, as well as to Solana. Concurrently, State Street and BNY Mellon launched their own tokenized cash and deposit services in an effort to remove the banking hours bottleneck. Perhaps the most significant integration came from Societe Generale which successfully settled tokenized bonds using SWIFT. Furthermore, stablecoin issuance is expanding well beyond crypto-native firms. Fidelity formally entered with FIDD, an Ethereum-based digital dollar aimed at institutional settlement, while Tether doubled down on US domestic compliance with the long-anticipated launch of USAT. A historic precedent for the public sector, Wyoming launched their own stablecoin, Wyoming Frontier Stable Token (FRNT), on Solana, the profits of which are to be redirected to the education sector. Lastly, Interactive brokers also bridged a gap by rolling out 24/7 enabled USDC funding.
On the DAT side, Strategy executed multiple billion-dollar Bitcoin purchases, although recently showing minor signs of acceleration. In the Ethereum ecosystem, BitMine continued its accumulation strategy. The firm is currently seeking shareholder approval to increase its authorized share count to 50 billion, a move that would allow it to raise massive capital for further acquisitions.
This month, Citrea has officially launched their mainnet, featuring a campaign tracking and incentivizing user contributions over the expected run time of a few months. The campaign is centered on growing the ecosystem with a clear focus on Bitcoin-related products. Furthermore, Kinetiq’s Markets has officially launched their first tradeable HIP-3 market this month, which we’ve briefly explained in the sections above. To date, Kinetiq has launched several perpetual markets focusing on major stocks such as $GOOGL, $TSLA, and $BABA, and has also been introducing indices. Furthermore, commodities like gold and silver are being launched, with future FX markets scheduled for release. When we look at new launches, MagicBlock has announced their pre-sale early next month, depicting themselves as the real-time engine for solana applications. Up until now, MagicNet has had 27.000 unique Solana addresses interact with, 250.000 delegations to Ephemeral Rollups, and beyond 1 billion transactions processed with 18 applications already built.
