Blockwall - August 2025 - What happened in Web3?

Dear Founders, Investors, and Friends,

Despite the holiday season being in full swing, August wasn’t short of important events: In the U.S., the SEC and Trump administration signaled a historic shift toward bringing capital markets onchain with “Project Crypto” and clarity on liquid staking. Additionally, an executive order opened up retirement plans to crypto, potentially unlocking billions in inflows. Meanwhile, Circle, Stripe, and Google unveiled competing Layer-1 strategies aimed at institutional adoption, while DeFi giant Aave launched “Horizon” to integrate tokenized RWAs into DeFi lending at scale.

Together, these moves highlight the accelerating convergence of TradFi, DeFi, and big tech infrastructure.

So, without further ado, let’s unpack what happened this month and why it matters.

Table of Contents

• U.S. Regulatory Update
  • SEC’s Project Crypto: Bringing capital markets onchain
  • Hester Peirce pushes for financial privacy
  • SEC provides clarity on liquid staking
  • Trump opens 401(k) plans to digital assets
• Everyone Is Building Layer-1s Again
  • Circle launches Arc: A stablecoin-first network
  • Stripe & Paradigm launch payments-focused blockchain Tempo
  • Google doubles down on GCUL, its blockchain platform for institutions
• DeFi & Tokenization
  • Aave launches Horizon: Borrow stablecoins against RWAs at scale

U.S. Regulatory Update

Last month once again saw major announcements by the Trump administration and the SEC regarding digital asset regulation.

Paul Atkins Unveils "Project Crypto"

In one of the most pro-crypto statements ever made by a U.S. regulator, SEC Chair Paul Atkins unveiled "Project Crypto," a sweeping agenda to move U.S. capital markets onchain. It includes:

• Double down on tokenization: Move trading, clearing, and settlement onchain to keep U.S. capital markets globally competitive.
• Clear classification: Clarify which tokens are securities and let tokenized ones trade freely.
• Regulatory frameworks for tokenized equities: Allow issuers to raise capital directly onchain.
• Integrated trading platforms: Let securities and non-securities trade side-by-side on regulated “super apps.”
• Open infrastructure: Support both decentralized protocols and centralized operators.

Hester Peirce Advocates for Financial Privacy

In another SEC speech, Commissioner Hester Peirce called for the modernization of the U.S. banking framework, including outdated laws like the Bank Secrecy Act, to meet the privacy requirements of a fully digital financial system. She specifically highlighted:

• Support for zero-knowledge proof technology,
• Legal protection for open-source developers,
• New privacy frameworks for digital finance.

It’s the first time an SEC Commissioner has spoken this extensively in support of financial privacy, and it’s especially refreshing to hear such remarks after the SEC’s previously hostile stance toward the crypto industry.

SEC Greenlights Liquid Staking

The SEC also issued a formal statement clarifying that liquid staking is not a securities activity, removing a major barrier for staking-based financial products.

This opens the door for fully staked ETPs in assets like ETH or SOL, boosting capital efficiency for issuers and yields for investors without sacrificing liquidity.

Crypto for U.S. Retirement Plans

Lastly, President Trump signed an executive order allowing private equity, real estate, and digital assets to be integrated into 401(k) retirement plans.

With ~70 million Americans contributing roughly $1.25 trillion to 401(k) plans annually, even a very modest 1% allocation would translate into $12.5 billion of digital asset inflows.

Although this napkin math sounds compelling at first, there’s a catch. Fidelity, which services 40% of the 401(k) market, launched a Bitcoin option back in 2022, but adoption has been slow. The reason? Employers must opt in and assume fiduciary risk – a hurdle many are unwilling to take.

Still, with the order, the regulatory green light is there. Now it’s a question of real client demand and “institutional courage.”

Everyone Is Building Layer-1s Again

In recent weeks, three major companies across crypto, payments, and tech revealed that they are developing their own Layer-1 networks. Let’s dive into each of them.

Circle Launches Arc – A Stablecoin-First Layer-1

Circle, issuer of the second-largest U.S. stablecoin USDC, announced Arc, a Layer-1 primarily designed to address institutional concerns with public blockchains – namely gas volatility, lack of privacy, and poor enterprise integration.

Key features include:

• USDC as native gas: No ETH or another native token required. All fees are paid in USDC.
• Permissioned validators: Arc will be operated by vetted institutions to ensure compliance, rather than an open validator set like on Ethereum.
• Performance: With ~10,000 transactions per second and with <100ms finality, Arc’s performance should be on par with high-throughput networks like Solana and Sui.
• Confidentiality: To enable privacy, transaction amounts are encrypted while sending and receiving addresses remain visible. At the same time, regulators and auditors can be granted read-only access through “view keys” to ensure compliance.

For Circle, Arc is about more than just delivering better stablecoin infrastructure. The primary goal is to capture more value from USDC payment flows and expand beyond an issuance-only model – a model increasingly under pressure.

On the one hand, there are distribution partners (like Coinbase) which are demanding a large share of the yield from the underlying reserves.

On the other hand, the model is highly exposed to interest rate swings. For instance, a 100 bps cut would trim gross revenue by ~25%, forcing ~40% growth in USDC supply just to offset the loss.

Now, whether launching its own Layer-1 is the right strategy to escape these forces remains to be seen.

What is certain, though, is that Circle isn’t the only one with this approach. Rival Tether has already funded two stablecoin-focused networks (Plasma and Stable), with payments giant Stripe now also joining the Layer-1 race.

Stripe Announces Payments-Focused Blockchain Tempo

Together with our colleagues from U.S. VC firm Paradigm, Stripe announced Tempo, a payments- and stablecoin-focused Layer-1 network.

The project launches with heavyweight partners including Anthropic, Deutsche Bank, DoorDash, Nubank, OpenAI, Revolut, Shopify, Standard Chartered, and Visa.

Like Circle’s Arc, Tempo is designed for institutions, but with some differences:

• Performance: 100,000 transactions per second with sub-second finality.
• Fee model: Any stablecoin can be used to pay transaction fees, not just one issuer’s.
• Decentralization & Neutrality: While Tempo will go live with a permissioned validator set, Tempo plans to transition to a permissionless model. Further, anyone can issue a stablecoin on Tempo, unlike the chains built and funded by Circle and Tether, which are designed to build their ecosystems around their respective stablecoins.

The last point, in particular, should create an important differentiation and attract enterprises and institutions to build on Tempo as an "open platform."

And interestingly, Tempo isn’t the only player in town that wants to establish itself as a credibly neutral base layer for institutional finance – despite obvious signs that this promise might end up being nothing more than a sales pitch.

Google Puts Spotlight on GCUL

Amid the wave of new Layer-1 announcements, Google also stepped forward with more clarity on its own blockchain initiative. While the company has already talked about blockchain initiatives in the past, this was the first time it explicitly positioned its Google Cloud Universal Ledger (GCUL) as a Layer-1 network – one designed to serve as a central platform for tokenization, digital asset management, and payments for financial institutions.

Key features include:

• Blockchain-as-a-Service: The services are expected to be offered through a single API, with fees billed monthly rather than on a per-transaction basis. This model is closer to cloud services than conventional blockchains.
• Private and permissioned (for now): For now, GCUL operates as a private and permissioned network, with built-in compliance features like KYC-verified accounts. However, Google notes the potential to become more open as “regulations evolve.”
• Developer-friendly: GCUL supports Python-based smart contracts, a far more common programming language, lowering the entry barrier for enterprise developers and financial engineers which may want to build on network.

As mentioned earlier, this isn’t the first time GCUL has made a public appearance. Back in March, Google Cloud and CME Group, the world’s largest derivatives exchange, announced a pilot for wholesale payments and asset tokenization using the network. At that time, however, it was still framed simply as a “distributed ledger,” with no mention of the terms “Layer-1” or “blockchain.”

And now, with a $2.5 trillion market cap, Alphabet is the largest company to date to openly commit to building its own blockchain infrastructure. Given its reach to billions of users and deep ties with institutional partners, GCUL arrives with distribution power most crypto-native projects can only dream of.

But as with every new venture, a player like Google will also face serious challenges. For example, GCUL is non-EVM-compatible, meaning existing Ethereum applications (and developers) cannot be ported directly. Google must therefore build an entirely new ecosystem from scratch, something that is notoriously difficult to pull off.

That’s why we’re very curious to see what strategy Google and the other upcoming Layer-1s will pursue to establish themselves in the crypto ecosystem. At Blockwall, we’ll be watching closely how these networks aim to differentiate, not just in branding but in the features, integrations, and functionalities they bring to market.

A key challenge will be attracting developers, since strong developer traction drives new applications and ultimately brings users to the network. Institutional adoption, however, follows a different logic and depends more on factors like compliance, enterprise-grade integrations and infrastructure. It remains to be seen how much better the new contenders can really perform on these fronts compared to already entrenched Layer-1 blockchains like Ethereum and Solana.

Having these dynamics in mind, we think its fair to say that the battle for mindshare and liquidity between those players will probably be one of the most defining developments in the months ahead.

Aave Launches Horizon to Bring More Institutions Onchain

Aave, the largest DeFi lending protocol, unveiled Horizon, a new Ethereum-based market for borrowing stablecoins against tokenized real-world assets (RWAs).

The goal is to increase the utility of RWAs such as tokenized U.S. Treasuries and private credit, a market now sitting at $26 billion, and further drive institutional adoption of digital assets.

Whitelisted institutional clients can already post RWAs, starting with tokenized private credit funds and Treasuries from RWA protocols Centrifuge and Superstate, as collateral to borrow stablecoins.

But what currently hinders the growth and utility of RWAs in DeFi? Primarily, tighter integrations into lending markets. One of the biggest challenges is pricing. Unlike tokens, which are priced continuously on liquid exchanges, RWA valuations depend on NAVs reported by issuers. This creates risks of delayed or faulty updates that could trigger unintended liquidations.

To solve this, and provide institutional clients additional safeguards, Aave made some important tweaks to its codebase to enable Horizon:

• Special oracle: Together with Chainlink, Aave built a new oracle to handle NAV-based pricing and reduce liquidation risks.
• Emergency functionalities: RWA issuers can pause lending operations if something unusual happens.
• Collateral recovery tools: Issuers also can reassign collateral to a new wallet if keys are lost or other issues arise.

In the coming months, more issuers are expected to join, including Securitize, VanEck, and WisdomTree, which will bring additional RWA collateral types into Horizon.

Now, what are the concrete use cases opening up for institutional capital through Horizon? The ones with the strongest demand are so-called looping strategies, where institutions borrow stablecoins against their RWAs, reinvest them into the same RWA to boost effective yields, and repeat the process.

This added utility is likely to make DeFi yields more competitive with traditional finance and attract a broader set of institutional investors.

Overall, Horizon is a significant milestone and a major step forward for DeFi.

ICYMI: Blockwall Web3 Handbook

For everyone that missed it: Recently, we published the first version of our Web3 Handbook.

It offers a broad yet structured overview of the Web3 space – not from a purely technical or academic lens, but from the perspective of an active investor, innovator, or Web3-curious reader seeking to understand the foundational ideas shaping this ecosystem.

While long-form (~90 minutes read), it remains a high-level introduction. Feel free to read it end-to-end or dive into the sections most relevant to you. It does not aim to cover every aspect of Web3, but rather highlights the themes we believe are most important right now.

Read the Handbook

Key Events of the Last Few Weeks

1. U.S. Department of Commerce puts GDP data onchain. The agency has begun publishing GDP, PCE, consumer spending, and real final sales data across Bitcoin, Ethereum, and Solana with the help of Chainlink – a symbolic step toward treating blockchains as neutral, tamper-proof infrastructure for public data. (Source: U.S. Department of Commerce)
2. Global stock exchanges call for crackdown on tokenized stocks. In a letter to the SEC, ESMA, and IOSCO, the World Federation of Exchanges warned that tokenized equities mimic shares without granting shareholder rights, raising concerns about investor protection and market stability. (Source: Reuters)
3. Federal Reserve ends oversight program on crypto and DLT. The Fed is winding down its dedicated supervisory framework for banks engaged in digital asset activities, removing what many banks had considered an overly restrictive layer of oversight. (Source: Federal Reserve)
4. Wyoming launches state-backed stablecoin on seven blockchains. The Frontier Stable Token (FRNT) makes Wyoming the first U.S. state to issue a public stablecoin, with deployment across Ethereum, Solana, and five other networks. (Source: Bloomberg)
5. ECB weighs permissionless blockchains for retail digital euro. According to the Financial Times, the European Central Bank is considering a move toward permissionless infrastructure, spurred by competitive pressure following the U.S. passage of the GENIUS Act on stablecoins. (Source: Financial Times)

What We’ve Been Reading

1. Digital Assets Report (White House) — A new report outlines the U.S. government’s roadmap for strengthening the financial system through digital assets and payments, with priorities including real-time payment infrastructure and public-private collaboration.
2. Get Off Zero (Coinbase Asset Management) — This paper highlights five practical ways institutions can move from zero crypto exposure and shows how even modest allocations can enhance overall portfolio performance.
3. Blockchain-Based Mobility (Toyota Blockchain Labs) — Toyota explores how blockchain can support capital formation in mobility, including funding autonomous fleets, with the aim of unlocking new utility in transportation ecosystems.
4. Project Crypto Investment Memo (Bitwise) — CIO Matt Hougan analyzes SEC Chair Paul Atkins’ “Project Crypto” speech and identifies three areas best positioned to benefit: Ethereum, DeFi, and crypto super-apps.

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