Kelp DAO, Aave Resume rsETH Operations

Banks Misread Stablecoin Competitive Threat | JPMorgan GENIUS-Ready Tokenized Fund

Marco Manoppo & Karon Pangestu
May 13, 2026

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Good Morning.

Six weeks after the largest DeFi exploit of 2026, Kelp DAO and Aave are cautiously reopening rsETH operations, but the recovery has exposed just how dependent the sector has become on ad hoc coordination, federal courts, and belated apologies from infrastructure providers to clean up what a single misconfigured bridging default broke.

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In Today's Email:

What Matters: Kelp DAO, Aave Resume rsETH Operations 👀
Case Study: Banks Misread Stablecoin Competitive Threat 🔎
Governance & Features: JPMorgan Launches GENIUS-Ready Tokenized Fund 🚀

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Narratives: BTC Consolidation Phase

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WHAT MATTERS

Kelp DAO, Aave Resume rsETH Operations

State of play: Kelp DAO and Aave are moving to restore rsETH operations following the April 18 $292M exploit attributed to North Korea's Lazarus Group, marking the largest DeFi security breach of 2026.

Kelp will progressively refill 117,132 stolen rsETH into the LayerZero OFT adapter over two weeks, with withdrawals unpausing within 24 hours of the first tranche.
Aave confirmed early recovery steps are complete, including burning the exploiter's rsETH on Arbitrum, with full operations resuming in the coming days.
The exploit created ~$190M in bad debt on Aave after stolen rsETH was used as WETH collateral, prompting DeFi United, which raised over $300M in ETH.
A federal court allowed Arbitrum to transfer ~$72M in frozen ETH to Aave, though funds remain locked pending court approval after terrorism plaintiffs filed a restraining order.
LayerZero apologized for allowing 1-of-1 DVN configurations on high-value transactions, while Kelp is now migrating to Chainlink's CCIP.

Why it matters: The Kelp exploit forced a sector-wide bailout and pulled federal courts into DeFi recovery, exposing how fragile cross-chain bridging defaults can be at scale.

Our take: DeFi United's $300M raise was impressive coordination, but it sets a precedent for industry bailouts over security investment. LayerZero's apology is too little, too late.

For builders and investors: Audit your LayerZero DVN configurations now. The Arbitrum restraining order also signals that frozen on-chain funds are increasingly vulnerable to off-chain legal claims.

CASE STUDY

Banks Misread Stablecoin Competitive Threat

Credits to @PaperImperium for the original tweet

A Fifth Third Bank deposit promotion is drawing scrutiny from @PaperImperium who argue that bank lobbying against stablecoins reflects a fundamental misreading of where the competitive threat actually lies.

Fifth Third's Relationship Money Market account is offering 4.25% APY through October 15, 2026, requiring a $25K minimum balance opened by June 15.
Yield-bearing stablecoins are structurally capped at ~3.7% since they must hold equivalent backing assets, making them unable to outbid insured US bank deposits on rate.
The accurate competitive frame is that stablecoins threaten foreign bank deposits, not domestic depository institutions.
With over 12 US depositories offering 4% or better, it's unclear which consumer would migrate to a lower-yielding, uninsured alternative.
Bank lobbyists' warnings about deposit flight suggest either a poor grasp of stablecoin mechanics or a tacit admission that their products lack competitive appeal.

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INSIGHTS

Bitcoin Dominance Rebounds, Altcoin Rotation Stalls

State of play: Bitcoin dominance has recovered from ~55% to ~58.5%, signaling consolidation rather than a broad alt rotation as BTC climbs from $63K to ~$80K off February lows.

Dominance peaked at 62-63% in mid-2025 before bottoming near 54% late last year as altcoin activity picked up.
Rising dominance historically signals BTC outperformance; declining dominance tends to precede alt seasons.
TON, ZEC, and DOGE have shown relative strength over the past month, a pattern that has historically preceded broader altcoin expansion.
If BTC stalls while dominance dips, it strengthens the rotation-into-alts case; a grind higher in both suggests the market isn't ready to broaden out.

FEATURES & GOVERNANCE UPDATE

JPMorgan Launches GENIUS Act-Ready Tokenized Fund

JPMorgan is launching a second tokenized money market fund on Ethereum, JLTXX, explicitly designed to satisfy stablecoin reserve requirements under the GENIUS Act by investing in US Treasurys and overnight repurchase agreements.

JLTXX will be managed on ETH via JPMorgan's Kinexys Digital Assets unit, with expansion to other blockchains anticipated, and an SEC filing effective May 13.
The fund is JPMorgan's second tokenized MMF after MONY, which launched late last year targeting institutional onchain cash management.
Morgan Stanley launched a similar stablecoin reserve-focused MMF last month, though without blockchain rails, while Franklin Templeton's BENJI also competes in the space.
The GENIUS Act requires US-compliant stablecoin issuers to back tokens with highly liquid assets including Treasurys, cash, and insured bank deposits.
The tokenized RWA market has grown to ~$32.2B as of May 12, with tokenized US Treasury products representing the largest share at ~$15.9B.

Other notable feature updates:

Circle unveils ARC Layer-1 tokenomics.
21Shares launches Hyperliquid ETF THYP.
Royco Dawn opens sNUSD tranche vaults.
Sushi launches Hyperliquid-powered Perps v2.
Resolv finalizes recovery agreement with Fluid.
Zest Protocol launches Bitcoin Collateral Vaults.
CoW DAO approves DNS hijack reimbursements.
Stream Finance provides update on reimbursement process.

QUICK BITES

Bitcoin dominance rebounds above 58%.
Kelp DAO, Aave to resume rsETH operations.
Blockchain analytics firm Elliptic closes $120M Series D.
eToro Q1 crypto revenue drops to $2.15B from last year's $3.5B.
JPMorgan launching second tokenized money market fund on Ethereum.
First-ever Hyperliquid ETF launches, posts 'very solid' first day of trading.
Spot XRP ETFs report largest single-day inflow since January, worth $26M.
CFTC backs Kalshi in Ohio fight over prediction markets jurisdictional battle.

NOTEWORTHY READS & MEME

A1’s read on Why Everything Is Becoming a Perp.
blocmates’s read on HIP-4 vs. Kalshi vs. Polymarket.
NB’s read on The Biggest Undervalued Neobank in Crypto.

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