This Week in Web3: ETFs, Scams, More Pushes for Acceptance

Can the world of payments and financial services embrace crypto and move on-chain?

Maybe partly, and maybe one day. Ultimately, it all boils down to usability, regulation, and of course, investment into the space.

Crypto regulation, for its part, is awaiting a potential shot in the arm in the U.S. as lawmakers for over two hours debated the Financial Innovation and Technology for the 21st Century Act (FIT21) on Wednesday (May 22), a piece of legislation which would detail which regulatory agencies have jurisdiction over certain digital assets, as well as how crypto companies would be able to operate in a compliant way.

“Whether you love crypto or you hate it, you should support regulation because the status quo just isn’t working,” said Rep. Wiley Nickel, D-N.C., during the hearing.

For his part, Securities and Exchange Commission (SEC) Chair Gary Gensler issued a statement decrying the act, which has bipartisan support. As of reporting, the policymakers had yet to put FIT21 to a final vote as it was still being debated.

And as it relates to the latter point around investment, a new report shows that investor interest is on the upswing after nearly two years of softness, with venture capital firms having deployed $2.4 billion into Web3 startups during the first three months of 2024.

As for the first and arguably most important point, usability, well, that’s why every week PYMNTS keeps its ears to the ground of the Web3 landscape, listening to the trends and themes that might shape its — and the broader financial marketplace’s — future.

So, from court showdowns, to Web3 incubators and ethereum exchange-traded funds (ETFs), to driving broader mainstream acceptance of crypto and beyond, these are the top stories around the Web3 landscape that PYMNTS has been tracking for the past week.

Institutional Embrace of Crypto 

Thursday (May 23) is the deadline for the SEC to approve or deny an ethereum ETF application from VanEck, one of the issuers that filed with the regulator, and the broader crypto market — as well as ethereum — is rising on speculation that the agency could approve the application.

Bitcoin topped $70,000 for a time Monday, and was back up as of reporting Wednesday (May 22).

And crypto custody firm Bakkt said last week that the SEC’s approval of bitcoin ETFs will lead institutional investors to play a larger role in the cryptocurrency trading market.

“As evidenced in our trading volumes in Q1, we’ve begun to see positive green shoots in the market and the overall demand environment improving, with more industry activity, higher coin prices and overall higher retail trading volume,” Andy Main, president and CEO of Bakkt, said during the company’s earnings call.

As more institutions embrace bitcoin and other cryptocurrencies, it may lead to increased mainstream acceptance and further development of the Web3 ecosystem.

Still, cryptocurrency spot trading cooled last month (April) for the first time in seven months 32.6% to $2.01 trillion in April, while monthly derivatives trading volume declined by 24.1% to $4.57 trillion, its first drop in three months, per numbers from CCData. Observers believe it was a trend driven by a dwindling likelihood of interest rate cuts and slower inflows into U.S.-listed spot bitcoin ETFs.

Crypto and the Courts

Despite the growing embrace of crypto ETFs, the digital asset space still has some holdover baggage from its wild west days.

Last Thursday (May 16), two Chinese nationals were charged with leading a scheme to launder proceeds from cryptocurrency investment scams. According to court documents, the two criminals and their co-conspirators managed an international syndicate for laundering scammed crypto. These scams, commonly known as “pig butchering,” fraudulently induced victims into transferring millions of dollars to U.S. bank accounts opened in the names of shell companies. The sole purpose of these companies was to facilitate the laundering of fraud proceeds, according to the release.

Elsewhere, the U.S. Department of Justice (DOJ) announced the unsealing of an indictment Wednesday (May 15) charging two brothers with crimes resulting from an alleged “cutting-edge scheme” in which they stole $25 million worth of cryptocurrency from the ethereum blockchain.

And cryptocurrency firm Genesis has been banned from operating in New York and will pay a settlement worth $2 billion, the Office of the New York State Attorney General said in a Monday (May 20) press release. The settlement includes the bankrupt firms Genesis Global Capital, Genesis Asia Pacific and Genesis Global Holdco.

In other domestic news, bitcoin payment processor IBEX Pay will suspend all its services in the United States, effective May 31, a move which comes at a time when some prominent figures in tech have been saying that crypto payments will unlock scalable, real-world usability.

Dolce & Gabbana has reportedly been sued by a customer who said he spent $6,000 on non-fungible tokens (NFTs) offered by the company, only to have them arrive late and without the benefits that were promised. The NFTs have lost 97% of their value, meaning the plaintiff has lost $5,800, the suit alleges.

And a judge at London’s High Court ruled Monday (May 20) that Australian computer scientist Craig Wright lied and forged documents to support his false claim of being the inventor of bitcoin, the pseudonymous “Satoshi Nakamoto.”

Unlocking Crypto’s Usability

But the crypto space is continuing to push for broader acceptance by highlighting the usability of Web3 technologies, and it is continuing to make inroads.

As just one example, on Wednesday (May 15), Mastercard selected five startups from around the world to participate in its Start Path Blockchain and Digital Assets program. The program is designed to connect Mastercard with industry experts and FinTechs so that they can work together to explore differentiated use cases in which blockchain and digital assets can help solve real-world problems.

While on Friday, PYMNTS unpacked how the integration of decentralized finance (DeFi) protocols and services directly into traditional and non-traditional financial applications, platforms and services could potentially streamline processes such as lending, borrowing and trading, making them more efficient and cost-effective.

As Sheraz Shere, head of payments at Solana Foundation, told PYMNTS in an earlier discussion, “It’s important to know that crypto is not just bitcoin and Doge and NFTs. … Blockchains are really alternative rails for payments and financial assets.”

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