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Newsweek
5 days ago
- Business
- Newsweek
The Secret Deals Driving Crypto Markets...and Leeching Into Wall Street
Advocates for ideas and draws conclusions based on the interpretation of facts and data. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Crypto markets have always been volatile. For years, we've blamed speculation, low liquidity and hype cycles for the whiplash pricing of altcoins (crypto tokens outside of the leading digital assets Bitcoin, Ethereum and Solana). But there's an opaque force that exerts just as much influence: private market-making agreements. These deals often determine which tokens thrive and which collapse. And over the years, there have been far more failures than successes. Now, Wall Street firms are accelerating their exposure to crypto, investing in increasingly fringe assets and even adding them to corporate treasuries. Public companies Strategy (MSTR) and Metaplanet (3350.T) have amassed holdings of nearly $73 billion and $2 billion, respectively, and scores of other corporations have followed suit. These companies are stepping into markets governed not by transparent rules or familiar oversight, but by unseen, off-chain contracts. A failure to understand how crypto market-making works will distort valuations, mislead investors and potentially spark a backlash that could ripple across both Web3 and traditional finance. From left: Summer Mersinger, CEO, Blockchain Association; Sarah Reilly, vice president and senior tax counsel, Fidelity Investments, Alison Mangiero, head of staking policy and industry affairs, Crypto Council for Innovation; Jason Somensatto, director of policy,... From left: Summer Mersinger, CEO, Blockchain Association; Sarah Reilly, vice president and senior tax counsel, Fidelity Investments, Alison Mangiero, head of staking policy and industry affairs, Crypto Council for Innovation; Jason Somensatto, director of policy, Coin Center; and Corey Frayer, director of investor protection Consumer Federation of America, at the witness table during a House Ways and Means Oversight Subcommittee hearing on "Making America the Crypto Capital of the World: Ensuring Digital Asset Policy Built for the 21st Century" on Capitol Hill on July 16, 2025, in Washington. More AP Photo/Rod Lamkey Jr. I've Seen Behind the Market-Making Curtain Most people assume altcoins are volatile because they're illiquid or built on shaky fundamentals. That's partly true. But what's often overlooked is the influence of market makers—the firms responsible for ensuring there's enough liquidity to buy and sell these tokens in the first place. Unlike their Wall Street counterparts, crypto market makers operate with little to no regulatory oversight. Their agreements are not public. There are no standardized disclosures, no audit trails and no governing body to hold them accountable. Over the past decade, I've helped structure and manage market-making relationships at two of the largest global crypto exchanges, AscendEx and Gemini. I've also led FBG Capital, one of the major market-making firms in the space. Today, I run Forgd, a platform that helps token projects track market maker performance and negotiate better terms. Here's what I've seen: Most token founders are builders, not traders. They lack the financial background to assess how these contracts function, or how damaging they can be when incentives are misaligned. The result is often a one-sided deal, disguised as a liquidity solution, that leaves the project exposed and retail investors misled. The most common—and most problematic—structure is known as the "loan + call option" agreement. The Deal That Quietly Derails Crypto Tokens In a "loan + call option" agreement, a project lends its native tokens to a market maker, who agrees to provide liquidity. In return, the market maker receives call options: the right, but not the obligation, to repay those token loans in U.S. dollars, at a set strike price. If the token's price spikes, the market maker cashes in, buying tokens at a steep discount and selling into the rally. But even if the token flounders, the market maker may still profit by selling the borrowed tokens early, withdrawing support, or shorting the asset outright. The project suffers, but the counterparty walks away profitable. If this happened in traditional equity markets, it would be a scandal. Imagine a company IPO'ing on the NYSE, while a private actor had a backroom deal to dump discounted shares—without any disclosure to the public. Equities have protections for this exact reason. The Securities Exchange Act of 1934 outlines clear boundaries designed to prevent manipulation during public offerings: Regulation M governs stabilization activity and passive market making, helping to ensure that prices aren't artificially inflated, while Rule 10b-18 provides a safe harbor for stock buybacks, shielding companies from accusations of market manipulation when repurchasing their own shares. Crypto has no equivalent safeguards. And as more institutional capital enters the space, this lack of structure is becoming a systemic risk. Wall Street Is Next It's no longer just crypto-native funds or retail investors buying these assets. We're now seeing mainstream firms and institutional allocators adding altcoins to their balance sheets, sometimes without full visibility into how these markets actually function. That's dangerous. When token prices are being influenced by off-chain, through asymmetric contracts that no one outside the deal has access to, it undermines the integrity of the asset and misleads downstream investors. A market's fundamentals might appear sound, when in fact they're propped up by short-term gamesmanship and opaque incentives. If left unchecked, this could discredit digital assets at a moment when they're finally being taken seriously. It also opens the door to backlash from regulators and shareholders if firms suffer losses tied to undisclosed risk mechanics they never knew existed. For crypto to mature as a credible, investable asset class, we need to bring these agreements out of the shadows and into the realm of professional accountability. Founders need tools to benchmark proposed deals, simulate different scenarios, and negotiate on informed terms. Regulators, fund managers and institutional allocators should insist on basic transparency before engaging with new assets. At a minimum, every market-making arrangement should include standardized disclosures that outline the structure of the agreement governing liquidity. These disclosures should make clear whether call options are involved, specify the strike prices and loan tenor associated with those options, and describe any hedging policies that may impact token performance. Without this level of transparency, investors and project teams are left to navigate blind, with little understanding of the dynamics shaping token markets. These are table stakes. Without them, we're asking sophisticated firms to operate in the dark, and exposing retail investors to risks they never signed up for. If digital assets are going to sit on the balance sheets of public companies, the rules that govern those assets can't be locked behind NDAs. They need sunlight, structure and scrutiny. Otherwise, we risk importing the worst parts of crypto into the heart of Wall Street—and learning too late that we could have done better. Shane Molidor is the founder and CEO of Forgd, a token advisory and optimization platform that provides seamless access to essential tools for blockchain projects.
CNBC
22-07-2025
- Business
- CNBC
Trump just signed crypto's first big law. Here's what come next
Summer Mersinger, CEO of Blockchain Association, discusses what's next for crypto regulation after President Trump signs the GENIUS Act stablecoin regulation bill into law.
CNBC
21-07-2025
- Business
- CNBC
Trump Media shares rise after announcing $2 billion bitcoin buy: CNBC Crypto World
On today's episode of CNBC Crypto World, crypto prices are mixed to kick off the week after President Trump signed the GENIUS Act stablecoin regulation bill into law late Friday afternoon. And, the latest crypto treasury company, the Ether Machine, will begin trading on the Nasdaq through a merger with blank check company Dynamix Corporation. Plus, Blockchain Association CEO Summer Mersinger breaks down what will change for the crypto industry now that stablecoins are regulated in the United States.
Zawya
18-07-2025
- Business
- Zawya
US House passes stablecoin legislation, sending bill to Trump
The U.S. House of Representatives on Thursday passed a bill to create a regulatory framework for U.S.-dollar-pegged cryptocurrency tokens known as stablecoins, sending the bill to President Donald Trump, who is expected to sign it into law. The vote marks a watershed moment for the digital asset industry, which has been pushing for federal legislation for years and poured money into last year's elections to promote pro-crypto candidates. House lawmakers also passed two other crypto bills, sending them next to the Senate for consideration. One lays out a regulatory framework for crypto, and the other would ban the U.S. from issuing a central bank digital currency. The stablecoin bill, known as the Genius Act, and the crypto market structure bill, known as the Clarity Act, both received notable bipartisan support. Democratic lawmakers joined with Republicans to pass the stablecoin bill 308-122. Stablecoins, a type of cryptocurrency designed to maintain a constant value, usually a 1:1 dollar peg, are commonly used by crypto traders to move funds between tokens. Their use has grown rapidly in recent years, and proponents say that they could be used to send payments instantly. If signed into law, the stablecoin bill would require tokens to be backed by liquid assets - such as U.S. dollars and short-term Treasury bills - and for issuers to publicly disclose the composition of their reserves on a monthly basis. Blockchain Association CEO and former Commodity Futures Trading Commission official Summer Mersinger described Thursday's votes as a "defining moment in the evolution of U.S. digital asset policy." The crypto sector has long pushed for lawmakers to pass legislation creating rules for digital assets, arguing that a clear framework could enable stablecoins and other crypto tokens to become more widely used. The sector spent more than $119 million backing pro-crypto congressional candidates in last year's elections and has worked to paint the issue as bipartisan. The House of Representatives passed a stablecoin bill last year, but the Senate - in which Democrats held the majority at the time - did not take up that bill. Trump has sought to broadly overhaul U.S. cryptocurrency policies after courting cash from the industry during his presidential campaign. Tensions on Capitol Hill over Trump's various crypto ventures at one point threatened to derail the digital asset sector's hope of legislation this year, as Democrats have grown increasingly frustrated with Trump and his family members promoting their personal crypto projects. Trump's crypto ventures include a meme coin called $TRUMP, launched in January, and a business called World Liberty Financial, a crypto company owned partly by the president. The White House has said there are no conflicts of interest present for Trump and that his assets are in a trust managed by his children. CLARITY ACT SENT TO SENATE The Clarity Act, which passed 294-134, would critically define when a cryptocurrency is a security or a commodity and clarify the Securities and Exchange Commission's jurisdiction over the sector, something crypto companies aggressively disputed during the Biden administration. Crypto companies have argued that most tokens should be classified as commodities instead of securities, which would enable platforms to more easily offer those tokens to their customers by not having to comply with a raft of securities laws. That bill would need to pass through the Senate before heading to Trump's desk for final approval. Some Democrats fiercely opposed the Clarity Act, arguing it could be a giveaway to Trump's crypto ventures by enabling softer-touch regulation. The House also passed a bill prohibiting a central bank digital currency, which Republicans say could violate Americans' privacy. The issue had been a sticking point in House discussions this week. (Reporting by Chris Prentice, David Morgan and Douglas Gillison; Editing by Pete Schroeder, Matthew Lewis, Mark Porter and Rod Nickel)
Yahoo
12-07-2025
- Business
- Yahoo
6 takeaways from the Senate's crypto market structure hearing
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. Following the May release of the CLARITY Act, the House of Representative's market structure bill to establish a cryptocurrency regulatory framework, the Senate Banking Committee met with industry leaders Wednesday to discuss how the Senate would craft its own framework. Here are six takeaways from the hearing. Countries like the U.K., Japan and Singapore are implementing bespoke digital asset frameworks, as the U.S. has fallen behind, Blockchain Association CEO Summer Mersinger said. '[W]e must view establishing a federal regulatory framework as a national priority,' Mersinger said. 'Digital assets and blockchain technology are revolutionizing financial services, supply chains, and digital identity. The country that leads on this policy will set global norms and unlock enormous economic and strategic benefits. The United States should be that leader, and this is our moment to lead.' Mersinger noted that regulating the industry with the laws already in place has 'created ambiguity,' thus limiting innovation and pushing changemakers to other jurisdictions with clearer crypto rules. She also noted that traditional bank regulations are not fit for purpose for digital assets or the blockchain, as they're meant for centralized intermediaries – 'and that's not what we're dealing with here.' 'Without thoughtfully crafted rules for the road, we risk stifling innovation, leaving American consumers without proper safeguards and protections, and ceding leadership in a sector that will define the future of global finance and technology,' she said. In his opening statement, committee Chair Sen. Tim Scott, R-SC, said that Senate Republicans recognize 'the need to clarify and clearly define what is a commodity and what is a security and how digital assets can trade and be custodied in a way that fosters innovation while protecting investors.' Mersinger asserted that regulators must recognize that digital assets are not securities. 'Code is not a security,' she said. Timothy Massad, former chairman of the CFTC and former assistant secretary of the Treasury Department, implied that the discussion is broader than that. 'This is a technology. It's not an asset class. It will be used in many ways, including in tokenizing securities,' Massad said. 'Whether something in digital form is a security, a commodity, or neither, cannot be easily defined by a paragraph or two in a statute,' he said. 'It depends on what the token represents, whether there is an issuer, whether the transaction is one in which capital is being raised, and so forth.' Additionally,the technology and its use cases are rapidly evolving, 'so we should not lock in definitions that will prove obsolete soon,' he said. Americans lost more than $9 billion to crypto scams last year, up 66% from the previous year, according to Federal Bureau of Investigation statistics cited by Sen. Elizabeth Warren, the committee's ranking member. Additionally, 'terrorist organizations demonstrated increased sophistication in their use of cryptocurrency, turning to unhosted wallets, mixers, and privacy coins like Monero,' according to TRM Labs, which Warren also cited. But 'the data shows that more illegal activity still happens with cash than with crypto,' according to Scott, potentially referring to 2024 Treasury data that found 'the use of virtual assets for money laundering remains far below that of fiat currency.' 'Criminals use cash-based money laundering strategies in significant part because cash offers anonymity. They commonly use U.S. currency due to its wide acceptance and stability,' the Treasury reported. According to Chainalysis co-founder and CEO Jonathan Levin, blockchain enhances the ability to act quickly against illicit access. 'Following the money on the blockchain is actually easier than in traditional finance.' 'Issuers of tokenized assets can actually take actions to easily freeze and seize assets,' he added. 'In a recent pig butchering case, crypto exchange OKX and stablecoin issuer Tether froze and then seized $225 million of criminal proceeds in collaboration with U.S. Secret Service. The traceability and programmability of these assets is a key benefit in addressing illicit activity.' Chainalysis works with banks, fintechs and public agencies to mitigate fraud, and found that less than 1% of crypto transactions are linked to illegal activity, putting it on par with traditional finance, Levin said. Warren called out President Donald Trump personally for his myriad dealings in the crypto industry, including issuing his own memecoin, having a portfolio of crypto investments, and (for his sons) owning a bitcoin mining company. According to Chainalysis, Trump and his associates made more than $320 million on fees from the $TRUMP memecoin, Warren cited. 'If Congress passes a bill creating a new federal regulatory framework for the crypto market, what will happen to the crypto market? Is it likely to grow?' Warren asked Richard Painter, a former chief White House ethics lawyer. 'It will grow substantially,' he said. 'And what will that do to the value of President Trump's memecoin?' Warren asked. 'It will make him very rich, even richer than he already is,' Painter said. Painter also took aim at lawmakers mulling crypto legislation after receiving hefty campaign donations from crypto firms. He'd recently tweeted that Sen. Kirsten Gillibrand, D-NY, who co-sponsored the stablecoin legislation that preceded the GENIUS Act, had received $217,000 in campaign donations from crypto firms. The president having an outsized role in digital assets and Congress members receiving campaign contributions from the crypto industry and voting on the bill will lead to 'a lack of confidence in our regulatory system,' Painter said. Sen. Lisa Blunt Rochester, D-DE, asked Painter about the risks of Congress moving too quickly on crypto legislation without a clear understanding of market consequences. 'The risk is that we repeat the experience of regulating the banks in the 1920s and the depression that followed, 10 years of depression,' Painter said. 'The risk is that we repeat what happened in 2008 when campaign contributions poured into Congress from the securities swap industry, elsewhere in the financial services industry, and we had decades of de-regulation, the economy collapsed, millions of American families losing their homes, people unemployed.' 'We do not want another economic collapse caused by de-regulation of the financial services sector,' he said. Recommended Reading FDIC vice chair wants regulators to hurry up on addressing tokenization Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
