1/ Grayscale's victory over the SEC is *massive.*

It's very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously.

The DC Circuit just delivered a huge embarrassment for the SEC.

But the ETF isn't approved yet 🧵

— Jake Chervinsky (@jchervinsky) August 29, 2023

2/ The DC Circuit soundly rejected the SEC's view that Grayscale's ETF proposal was not "designed to prevent fraudulent and manipulative acts and practices."

The SEC has spent a full decade denying spot bitcoin ETF proposals under this reasoning. That era has now come to an end.

— Jake Chervinsky (@jchervinsky) August 29, 2023

3/ But the court didn't order the SEC to approve Grayscale's ETF proposal. It just said the SEC's analysis on the "fraud and manipulation" issue was wrong.

Now, the SEC has to go back and review Grayscale's proposal again, with the court's ruling in mind.

What will the SEC do?

— Jake Chervinsky (@jchervinsky) August 29, 2023

4/ One theory is that the SEC will just pick a different reason to deny Grayscale's proposal and force more long and costly litigation.

That's possible. It's hard to understate the extreme hostility of SEC leadership toward crypto.

Will Chair Gensler really accept this loss?

— Jake Chervinsky (@jchervinsky) August 29, 2023

5/ But another theory is that the SEC will take the DC Circuit's decision as a (semi-)graceful exit from their anti-ETF position.

I'm in this camp. It's the right move.

"We disagree, but we're following the rule of law" is a convenient excuse to back out of a losing battle.

— Jake Chervinsky (@jchervinsky) August 29, 2023

6/ There will also be political pressure on the SEC to approve spot bitcoin ETFs.

This isn't just about Grayscale. All of TradFi is ready for a bitcoin ETF.

Many other issuers have proposed ETFs this year, including Blackrock, and Larry Fink throws heavy punches in DC.

— Jake Chervinsky (@jchervinsky) August 29, 2023

7/ Chair Gensler can also spin a face-saving narrative out of a spot bitcoin ETF approval.

The SEC has been getting blasted for its regulation-by-enforcement approach to crypto.

Here's a chance to say "look, we aren't anti-crypto! we're willing to approve the right products!"

— Jake Chervinsky (@jchervinsky) August 29, 2023

8/ I have no doubt that we'll get a spot bitcoin ETF sooner or later.

The only question is if the SEC wants to make this more painful for itself. Trust me, if there's another denial, there will be another lawsuit.

I strongly recommend the SEC picks "sooner."

Let's see.

[end]

— Jake Chervinsky (@jchervinsky) August 29, 2023

👀Stablecoins Eclipse #Mastercard, #PayPal, Leading Digital Money Evolution
A thread from today's note on the @Bloomberg terminal which looks at a representative dataset of fiat-backed #stablecoins on the largest Layer-1 #crypto networks pic.twitter.com/mZmyPZ3WDl

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Stablecoin Payments Overtook Mastercard in 2022
👉 in '22 stables on various L1s transacted $6.87T, surpassing trad payment co's.
👉#Bitcoin did even more than #visa
👉This year volumes have plummeted 80% w/ hostile US regs and bear mkt exposing the extent of cyclicality/spec pic.twitter.com/tR5glBBZzR

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

But stable issuance is set to explode
👉PayPal's decision to issue $PYUSD leapfrogs competitors, addressing growth concerns via crypto's open networks.
👉The potential implication for crypto assets, especially, Ethereum, is a big deal if only a small % of PYPL users convert pic.twitter.com/DGZISnb1VL

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Note: though this scenario looks extremely positive for the asset, it's unrealistic at present given current network constraints in the form of transaction costs and L1 capacity. More on that later..

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉Visa and Mastercard are investing in & integrating with open networks
👉I expect to see more announcements & innovation from more payments companies in coming months pic.twitter.com/k8VR9BfeNK

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

While the structural adoption trend might have been hampered by tightening liquidity and an anti-crypto US reg environment, the potential for this new money to dominate global payments will be largely determined by the efforts of public blockchains to process more transactions. pic.twitter.com/wmIx7X6KsU

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉Despite censorship, higher friction which costs the economy and consumers Billions yearly, traditional payment companies using fiat rails provide global payments at scale.
👉Although tx growth has been exponential, annual stable tx's are only 0.5-3% of trad payment networks pic.twitter.com/q13SXp9LX9

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

However, payments companies that ignore the stablecoin-adoption trend are missing the speed at which scaling improvement is occurring..

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Lets take Tether as example. First it was on #BTC but history shows stablecoin liquidity flows to and adoption explodes once faster alternatives appear.

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

When the Ethereum mainnet with smart contracts launched in 2015, enabling new use cases with twice the throughput, USDT adoption migrated. By 2019, USDT on Ethereum had overtaken Bitcoin. pic.twitter.com/Vn2UBJFzqR

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

In 2020, Tron, began processing more stable tx's as it doubled Ethereum to 40 transactions/second. By mid-2023, Tron had increased throughput to 130 transactions/second, more than 10x Ethereum, facilitating almost 20x the number of transactions. pic.twitter.com/99dWEDWq9A

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

And I get it, #Tron is not exactly the pin up child for decentralized and transparent networks. Which is probably why it hasnt absorbed all of USDTs mkt cap -48% vs 42% on ETH-its not all about cheaper and faster txs. The mkt perceives a high security risk. pic.twitter.com/iKiv0ownmB

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉But its pretty clear that #Ethereum will be the winner in the upcoming stablecoin wars
👉Across most network-adoption verticals, ETH or its broader ecosystem, which includes fast-growing rollup chains (L2s) such as #Optimism , #Base, #Arbitrum, lead all alternative networks pic.twitter.com/UOU7abtvN2

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉However, today the cost of transferring the largest stablecoin, USDT on Ethereum is magnitudes more than the cost on other networks, especially L2s.
👉ETHs rollup-centric scaling roadmap will make L2 txs even cheaper (10-100X) next yr with EIP-4844 (proto-danksharding). pic.twitter.com/TfJvOSEMcW

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Back to the wider industry — once we put hostile US boomer reg's and macro headwinds aside, adoption under the hood is exploding.
👉A better metric for adoption than looking cyclical volumes is addresses with > $1 stablecoin balance pic.twitter.com/HvxTEmiewT

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Its possible stablecoin users will even overtake $btc in the next 3-5 years as network effects of payment and merchant-company integration (e.g. PayPal, Visa, Shopify), and product innovation like UST-backed pass-through yield stables @rwa_xyz pic.twitter.com/OnoObqt46O

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

1/ Grayscale's victory over the SEC is *massive.*

It's very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously.

The DC Circuit just delivered a huge embarrassment for the SEC.

But the ETF isn't approved yet 🧵

— Jake Chervinsky (@jchervinsky) August 29, 2023

2/ The DC Circuit soundly rejected the SEC's view that Grayscale's ETF proposal was not "designed to prevent fraudulent and manipulative acts and practices."

The SEC has spent a full decade denying spot bitcoin ETF proposals under this reasoning. That era has now come to an end.

— Jake Chervinsky (@jchervinsky) August 29, 2023

3/ But the court didn't order the SEC to approve Grayscale's ETF proposal. It just said the SEC's analysis on the "fraud and manipulation" issue was wrong.

Now, the SEC has to go back and review Grayscale's proposal again, with the court's ruling in mind.

What will the SEC do?

— Jake Chervinsky (@jchervinsky) August 29, 2023

4/ One theory is that the SEC will just pick a different reason to deny Grayscale's proposal and force more long and costly litigation.

That's possible. It's hard to understate the extreme hostility of SEC leadership toward crypto.

Will Chair Gensler really accept this loss?

— Jake Chervinsky (@jchervinsky) August 29, 2023

5/ But another theory is that the SEC will take the DC Circuit's decision as a (semi-)graceful exit from their anti-ETF position.

I'm in this camp. It's the right move.

"We disagree, but we're following the rule of law" is a convenient excuse to back out of a losing battle.

— Jake Chervinsky (@jchervinsky) August 29, 2023

6/ There will also be political pressure on the SEC to approve spot bitcoin ETFs.

This isn't just about Grayscale. All of TradFi is ready for a bitcoin ETF.

Many other issuers have proposed ETFs this year, including Blackrock, and Larry Fink throws heavy punches in DC.

— Jake Chervinsky (@jchervinsky) August 29, 2023

7/ Chair Gensler can also spin a face-saving narrative out of a spot bitcoin ETF approval.

The SEC has been getting blasted for its regulation-by-enforcement approach to crypto.

Here's a chance to say "look, we aren't anti-crypto! we're willing to approve the right products!"

— Jake Chervinsky (@jchervinsky) August 29, 2023

8/ I have no doubt that we'll get a spot bitcoin ETF sooner or later.

The only question is if the SEC wants to make this more painful for itself. Trust me, if there's another denial, there will be another lawsuit.

I strongly recommend the SEC picks "sooner."

Let's see.

[end]

— Jake Chervinsky (@jchervinsky) August 29, 2023

👀Stablecoins Eclipse #Mastercard, #PayPal, Leading Digital Money Evolution
A thread from today's note on the @Bloomberg terminal which looks at a representative dataset of fiat-backed #stablecoins on the largest Layer-1 #crypto networks pic.twitter.com/mZmyPZ3WDl

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Stablecoin Payments Overtook Mastercard in 2022
👉 in '22 stables on various L1s transacted $6.87T, surpassing trad payment co's.
👉#Bitcoin did even more than #visa
👉This year volumes have plummeted 80% w/ hostile US regs and bear mkt exposing the extent of cyclicality/spec pic.twitter.com/tR5glBBZzR

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

But stable issuance is set to explode
👉PayPal's decision to issue $PYUSD leapfrogs competitors, addressing growth concerns via crypto's open networks.
👉The potential implication for crypto assets, especially, Ethereum, is a big deal if only a small % of PYPL users convert pic.twitter.com/DGZISnb1VL

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Note: though this scenario looks extremely positive for the asset, it's unrealistic at present given current network constraints in the form of transaction costs and L1 capacity. More on that later..

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉Visa and Mastercard are investing in & integrating with open networks
👉I expect to see more announcements & innovation from more payments companies in coming months pic.twitter.com/k8VR9BfeNK

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

While the structural adoption trend might have been hampered by tightening liquidity and an anti-crypto US reg environment, the potential for this new money to dominate global payments will be largely determined by the efforts of public blockchains to process more transactions. pic.twitter.com/wmIx7X6KsU

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉Despite censorship, higher friction which costs the economy and consumers Billions yearly, traditional payment companies using fiat rails provide global payments at scale.
👉Although tx growth has been exponential, annual stable tx's are only 0.5-3% of trad payment networks pic.twitter.com/q13SXp9LX9

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

However, payments companies that ignore the stablecoin-adoption trend are missing the speed at which scaling improvement is occurring..

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Lets take Tether as example. First it was on #BTC but history shows stablecoin liquidity flows to and adoption explodes once faster alternatives appear.

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

When the Ethereum mainnet with smart contracts launched in 2015, enabling new use cases with twice the throughput, USDT adoption migrated. By 2019, USDT on Ethereum had overtaken Bitcoin. pic.twitter.com/Vn2UBJFzqR

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

In 2020, Tron, began processing more stable tx's as it doubled Ethereum to 40 transactions/second. By mid-2023, Tron had increased throughput to 130 transactions/second, more than 10x Ethereum, facilitating almost 20x the number of transactions. pic.twitter.com/99dWEDWq9A

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

And I get it, #Tron is not exactly the pin up child for decentralized and transparent networks. Which is probably why it hasnt absorbed all of USDTs mkt cap -48% vs 42% on ETH-its not all about cheaper and faster txs. The mkt perceives a high security risk. pic.twitter.com/iKiv0ownmB

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉But its pretty clear that #Ethereum will be the winner in the upcoming stablecoin wars
👉Across most network-adoption verticals, ETH or its broader ecosystem, which includes fast-growing rollup chains (L2s) such as #Optimism , #Base, #Arbitrum, lead all alternative networks pic.twitter.com/UOU7abtvN2

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

👉However, today the cost of transferring the largest stablecoin, USDT on Ethereum is magnitudes more than the cost on other networks, especially L2s.
👉ETHs rollup-centric scaling roadmap will make L2 txs even cheaper (10-100X) next yr with EIP-4844 (proto-danksharding). pic.twitter.com/TfJvOSEMcW

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Back to the wider industry — once we put hostile US boomer reg's and macro headwinds aside, adoption under the hood is exploding.
👉A better metric for adoption than looking cyclical volumes is addresses with > $1 stablecoin balance pic.twitter.com/HvxTEmiewT

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023

Its possible stablecoin users will even overtake $btc in the next 3-5 years as network effects of payment and merchant-company integration (e.g. PayPal, Visa, Shopify), and product innovation like UST-backed pass-through yield stables @rwa_xyz pic.twitter.com/OnoObqt46O

— Jamie Coutts CMT (@Jamie1Coutts) August 25, 2023