US Regulators Get Serious About Crypto 👨‍⚖️

Worldcoin $3B Valuation | Oh Baby Games Studio

February 10, 2023

GM folks 👋🏻 - Happy Friday.

Last night, I was about to sleep before my phone got blown up by notifications from @tier10k. Seems like US regulators are doing some serious move to regulate crypto in the US. The damage: staking-as-a-service might be considered unregistered securities.

We also see further shenanigans from 3AC founders (Su and Kyle, please stop). They’ve teamed up with CoinFlex founders to launch a new crypto exchange that will trade bankruptcy claims. The ultimate irony.

Also, we’re launching a referral program! Receive our list of “Must Follow Up-and-Comind Crypto Twitter Account” 👩🏻‍💻 — scroll down to the end to check it out 👇

In Today's Email:

What Matters: US Regulators moving in, Staking-as-a-Service banned(?) 👨‍⚖️
Founders Highlight: Pasteur Tran, Founder of Oh Baby Games 👶🎮
Deal Flows: Worldcoin raising at a $3 billion valuation 🌎

WHAT MATTERS

US Regulators Moving Into Crypto 👨‍⚖️

State of play: In the past 24 hours, we’ve seen numerous moves from regulatory agencies towards crypto. It almost seems like a planned move 💭

The SEC caused Kraken to end its staking program for US customers and pay a $30M fine.
The IRS seeks court approval to identify Kraken’s customers.
NYDFS investigates stablecoin issuer Paxos.

What’s going on? 🤔

Unsurprisingly, the market is spooked.

Prices of BTC and ETH fell to $21,800 and $1,550 respectively. Regulatory uncertainties around staking, which is the dominant consensus mechanism for a large majority of blockchain networks out there, caused concerns amongst market participants.

The key takeaway: The US seems to be “choking” the crypto industry by cutting off its banking access, and that Staking-as-a-service might fall under securities law.

Here’s a great excerpt from an amazing article, written by Nic Carter, fresh off the press.

“As crypto-facing banks ‘derisk,’ younger and smaller firms will struggle to get banking, taking us back to the 2014 to 2016 period when fiat access for crypto businesses was at an extreme premium. Exchanges and other businesses that rely on fiat onramps are concerned that their few remaining bank partners will shut them off or institute draconian standards for scrutiny. As a venture capitalist operating at the early stage, I am directly witnessing the chilling effects of this policy in action. Founders are reckoning with new uncertainties around whether they’ll be able to operate their businesses at all.” - Pirate Wires

Why it matters: Crypto businesses are still heavily dependent on FIAT infrastructures. Choosing to avoid regulation won’t work, but overregulation will cause innovation to move offshore. A smart country in EMs, especially those who aren’t too weak in terms of their GDP and dependency on the US, will play a significant role.

Hong Kong has re-adopted a friendlier tone towards crypto, likewise with the UK under Rishi Sunak. Perhaps a much more apparent move towards embracing crypto is The UAE goal to attract crypto firms towards its region.

For builders: As regulatory enforcements increase in the US, market participants are going to either move offshore or to decentralized applications. For example, this will be a massive win for liquid staking protocol. In addition to paying attention to regulatory development (code is now law!), builders have a choice to capture market share either by building decentralized products. There’ll be more protocols that are “decentralized enough” at its core, but have a centralized component to improve customer experience.

For investors: Having a multi-jurisdiction set-up of your funds and entities make a lot of sense. Investing in your legal resources and ensuring that you’re a truly “decentralized team” will be key.

Unless you have $10B+ to swing around like a16z or Paradigm, being a US-focused crypto investor might not be a good idea. Not only that you would miss on emerging opportunities in other jurisdictions, you’re also exposing yourself to concentrated regulatory risks.

BUILDER-INVESTOR HIGHLIGHT

Pasteur Tran, Founder of Oh Baby Games

Pasteur Tran is the founder of Oh Baby Games. They’re building a web3 gaming studio. To differentiate, they’re focusing on building games around the crypto community culture. One of the first games they’re building is What The Kart, a Mario Kart-like racer game that features notable crypto Twitter personalities.

Oh Baby Games also provides crypto-native features such as cross game collectibles, multi-wallet connectivity, multi-login support, and libraries. An in game item that you collect in one game will be usable in another game.
They also have 3 additional games that have been introduced: Rug Pull Guys, Baby Wassies, and Shogun Curse.
The team behind Oh Baby Games also has an extensive track record, with some individuals being responsible for hit games such as Age of Empires, League of Legends, Call of Duty, Magic The Gathering, and many more.

Previous backgrounds:

Pasteur Tran is a dental surgeon turned entrepreneur 👨‍⚕️
He was formerly the Chief Marketing Officer of IPOR Labs, a Switzerland-based blockchain software firm. He also founded Mana Wings, a VR fishing game on the HTC Vive.

The big idea: By focusing on crypto Twitter personalities and creating games that directly target the core crypto users, Oh Baby Games are hoping to provide genuinely fun games that will further improve crypto’s adoption.

Oh Baby Games last raised a $6M round in January 2023. Participants include Twitch co-founder Kevin Lin, Merit Circle DAO, and eGirl Capital.

QA tester somehow turbos past me wdf
— Pas (@passytee)
11:20 AM • Dec 18, 2022

DEAL FLOWS

Worldcoin Raising at a $3 Billion Valuation

MIT | This thing scans your eyeballs.

Deal flows are slowing down a bit. on fire 🧘 — we saw over $120M in deals, not counting the two acquisitions with undisclosed amount done. Additionally, VC firm Paradigm with $13B+ in AUM has promoted two personnels to its rank of General Partners (GPs). The two new GPs are Charlie Noyes and Dan Robinson.

Worldcoin $3 Billion Valuation: Remember that eyeball-scanning orb looking thing. Yes, they’re back. Worldcoin, a project that aims to become the global infrastructure for universal basic income, is raising up to $120M at a $3 billion valuation. Somebody please call Andrew Yang.

Fun fact, Sam Altman, the CEO of OpenAI, is the also the founder of Worldcoin.

Worldcoin had some backlash after unveiling its eyeball-scanning technology. It draws criticisms from privacy advocates such as Edward Snowden, stating that the biometrics data can be utilized to track a person’s identity.
Worldcoin has previously raised a $25M round at a $1B valuation from a16z, and a $100M round at a $3B valuation from Khosla Ventures.
It’s currently raising at the same valuation as the last round via equity and token warrants.

Deal flows in the past week:

VRRB Labs, $1.4M Pre-Seed Round
Cedro Finance, $1.5M Pre-Seed Round
Gamma Swap, $1.7M Seed Round
Port3 Network, $3M Seed Round
Sesame Labs, $4.5M Seed Round
Webacy, $5M Seed Round
Cenoa, $7M Seed Round
Carbonplace, $45M Seed Round
Salt, $6.4M Series A
Elementus, $10M Series A
Giga Energy, $10M Series A
Arpeggi Labs, $9.1M Unknown Round
Stellar Foundation, $10M Community Fund
SpaceID, $10M Strategic Investment Round
Gopax, Undisclosed $ Acquisition by Binance
Chingari, Undisclosed $ Strategic Investment by Aptos Labs

EigenLayer is raising a $50M Series A, but the close hasn’t been announced.

QUICK BITES

Kraken shuts down US crypto staking service, pays a $30M fine in SEC settlement.
Paxos investigated by the NYDFS.
SEC Commissioner Peirce rebukes her agency’s crypto enforcement.
3AC founders launched a new exchange to trade bankruptcy claims.
Duetsche Bank eyes crypto investments for its buy side arm.
Paradigm VC names new General Partners, Charlie Noyes and Dan Robinson.
Dubai clarifies rules for crypto companies.
MakerDAO integrates Chainlink oracle.
Aave’s GHO stablecoin goes live on Goerli testnet.
Tether reports $700M Q4 net profit.
Rocketpool doubles its TVL to $1 billion in two months.

MEME & NOTEWORTHY READS

Nic Carter’s article on how the Biden Admin is quietly trying to ban crypto.
DLNews’ article on how Coinbase sniff out its insider trader.
@0xRainandCoffee’s article on Modula MEV, part 1.

New @balajis@VitalikButerin pod has me like
— marcus.lens 🌞 (@marcusdotam)
11:19 AM • Feb 8, 2023

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