Weekly Recap
December 23, 2023

Crypto Fundamentals #57

NY financial regulator approves Paxos expansion to Solana

Jimmy Zheng

Happy holidays! It’s been a crazy year and we’re thankful to have gone through it with everyone in the Artemis community. We hope that everyone is able to get some rest and recovery before the New Year! This will be the last article of the year - see everyone in 2024!

This week, Solana memecoin Bonk started trading on Coinbase, SEC tells Spot Bitcoin ETF applicants to make final changes by year-end, and Bloomberg put out an article about “Dogwifhat”.

🌞 NY financial regulator approves Paxos expansion to Solana

💫 Data Center Infra provider Akron Energy raises $110mm to expand US Bitcoin mining initiative

The week saw continued momentum from alt L1s and layer 2s as average and median W/W prices increased by 4.2% and 12.4%, respectively. This week saw alt L1s such as NEAR and SOL see mid double digit growth with ~39% and ~31% WoW gains, respectively. Layer 2 darling OP saw a whopping ~54% WoW increase as capital began rotating to the Ethereum ecosystem. The S&P 500 and Nasdaq Index continued its upwards trend, increasing 0.6% and 1.2% WoW, respectively.

🌞 NY financial regulator approves Paxos expansion to Solana

Paxos, a leading stablecoin issuer, has received regulatory approval to launch the Paxos USDP stablecoin on the Solana blockchain starting January 17, 2024. Paxos is also the issuer of the PayPal stablecoin and the previous issuer of the Binance USD stablecoin.

Per Fortune, Paxos received a “non-objection” for the expansion of USDP from Ethereum to Solana after an “extensive and exhaustive review [from the New York State Department of Financial Services]”, stated Walter Hessert, head of strategy at Paxos. The external review was focused on “an internal risk framework built by Solana to assess the blockchain and its processes, including its compliance protocols.” At this moment, the NY Department of Financial Services (NYDFS) remains the sole U.S. financial regulator to have implemented a comprehensive framework for crypto, which has attracted a number of leading crypto companies to New York, including Coinbase and Gemini.

Alongside the announcement, Raj Gokal, Co-Founder of Solana, stated that “Paxos’s decision to bring stablecoin issuance to the Solana blockchain will showcase how Solana’s high-performance network and low transaction fees can support regulated financial products and provide leaders like Paxos new ways to scale and innovate.”

Today, Paxos touts its commitment to working directly with the NYDFS on the subject of stablecoin issuance and distribution, which sets it apart from its competitors. This structure differs from its competitor USDC issuer Circle holds a license with the NYDFS but chooses to issue USDC without NYDFS oversight. This has led Circle to make certain decisions outside NYDFS guidelines such as backing assets with commercial paper (vs. US short term treasuries) and issuing stablecoins across a much wider set of blockchains than just Ethereum. In contract, Paxos has worked closely with the regulatory body to ensure that each decision it makes is well within regulatory bounds.

Over the course of 2023, Paxos has also been expanding its international operations with new partnerships with various international regulators. On November 16, 2023, the company announced that is had received preliminary approval from Singapore’s regulator for a new entity intended to launch a U.S. dollar-backed stablecoin. Paxos also received approval from Abu Dhabi's regulator to issue stablecoins and conduct digital asset services in the Emirate region.

💫 Data Center Infra provider Akron Energy raises $110mm to expand US Bitcoin mining initiative

Akron Energy, a data center infrastructure provider has raised $110mm to expand its data center megawatt capacity with the primary purpose of supporting Bitcoin mining operations. Bluesky Capital Management led the financing with support from Nural Capital and Kestrel 0x1. The company launched in 2021 with a 5-megawatt site in Australia. The platform has now grown to over 130 megawatts and has expanded into other countries and regions like the U.S. and Europe.

Akron has stated that $80 million will be used to acquire an additional 200-megawatt capacity across new data centers in US states including Ohio, North Carolina and Texas. These new data centers will help the company reach its goal of increasing total megawatts by 130% by mid-2024. The remaining $30 million will help bolster AI cloud infrastructure in Akron Energy's Norway-based data center.

As part of the press release, Josh Payne, the CEO of Akron stated that “these sites appeal to both bitcoin miners and AI [or] machine learning clients who have very high power computing demands.” Currently, Akron’s U.S. data center portfolio is largely occupied by institutional grade Bitcoin mining companies. Payne notes that “[Akron is] essentially a landlord who owns the underlying infrastructure assets.”

Per The Block, Bitcoin mining revenue reached $1.16 billion in November 2023, the highest it's been since April 2022. Transaction fees comprised $142.2 million of that figure which has been growing in value in Q4 2023.

The Block

Detailed dashboard for people who love more numbers in smaller font:

Note: Revenue represents fees that go to the protocol’s treasury or are returned to tokenholders via a burn mechanism (source: Token Terminal). Weekly commits and weekly dev activity as of 12/9/23.

The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments.

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