Blockwall - March 2025 - What happened in Web3?

Dear Founders, Investors, and Friends,

Much like in February, public markets remain marked by uncertainty – risk assets continue to struggle, while gold trades at new all-time highs.

Yet beyond the markets, sentiment in traditional finance appears more bullish on crypto than ever, especially when it comes to stablecoins.

In the U.S., regulators are actively working toward comprehensive frameworks for the industry. Meanwhile, Europe has taken a different tone: the ECB is pushing ahead with plans to launch a digital euro (CBDC) later this year, while national regulators have cracked down on prominent stablecoin issuer Ethena Labs.

Bitcoin Becomes a Strategic Reserve Asset

After weeks and months of speculation and rumors whether the U.S. will see a Bitcoin Reserve, President Trump in March signed an Executive Order establishing a "Strategic Bitcoin Reserve" within the U.S. Treasury Department.
While the U.S. government has often times auctioned off Bitcoin it seized from illicit actors, this policy reverses course:

• All Bitcoin permanently confiscated by federal agencies will now be held, not sold.
• The Treasury is instructed to explore ways to accumulate Bitcoin, provided it can be done budget-neutral and without additional cost to taxpayers.
• Other digital assets (altcoins), seized or obtained otherwise, should be placed in a newly created “Digital Asset Stockpile” instead, which allows custody but prohibits new purchases.

While the short-term market impact was muted, mainly because it already was priced in by many market participants, the long-term and structural implications shouldn’t be underestimated. It’s the first time a Western government – and probably the most powerful one as well – has formally classified Bitcoin as a strategic asset, forcing any other nation to question their approach to Bitcoin, digital assets, and blockchain technology in general.

OCC and FDIC: Banks Are Coming For Crypto

At the same time, U.S. banking regulators have executed one of the most consequential regulatory pivots in years.

A new statement from the Office of the Comptroller of the Currency (OCC) now allows federally chartered banks – like JPMorgan, Citibank, and Bank of America – to engage in a broad suite of crypto activities without needing explicit case-by-case approval.

These activities include:

• Custody of crypto assets (e.g., BTC, ETH)
• Stablecoin issuance and management
• Operating nodes and validating transactions on public blockchains
• Crypto-fiat conversion and OTC settlement services

Shortly after, the FDIC echoed this sentiment, allowing crypto activities as long as risk frameworks are sound. This effectively reverses the agency’s 2022 guidance, which had required pre-approval for any crypto-related bank activity.

Taken together, these moves are a massive unlock for institutional crypto and blockchain adoption, as institutions now have the regulatory clarity they were waiting for.

Stablecoins: March’s Hottest Narrative

Stablecoins were arguably the most discussed topic in March. Before we dive into the stablecoin-related announcements of major financial players, let’s take a brief look at how things evolved on the regulatory side in the U.S.

The U.S. House of Representatives introduced the STABLE Act, which complements the Senate’s GENIUS Act. Together, they lay the groundwork for comprehensive U.S. stablecoin regulation. Key provisions include:

• Stablecoin issuers are prohibited from passing on any form of yield to their users.
• Issuance is limited to licensed entities (banks and certified non-banks).
• Two-year ban on new algorithmic stablecoins (existing projects are not affected)
• Stablecoins need to be backed 100% with cash or short-dates U.S. Treasuries

While the STABLE Act still awaits a full vote in the House and the GENIUS Act continues to evolve in the Senate, one thing is already clear: the U.S. is moving toward a consolidated regulatory framework for stablecoins – fast.

In that context, one provision in particular stands out: the ban on passing yield through to stablecoin users. While this measure aims to protect both consumers and the traditional deposit-based banking model, it also benefits banks issuing their own stablecoins, as well as established players like USDC and USDT.

It will be interesting to observe how this impacts the competitive landscape going forward.

Major Stablecoin Announcements

Without going into too much detail, here is a brief overview of the most important stablecoin announcement made this month:

• Wyoming's State-Issued Stablecoin (WYST): The U.S. state of Wyoming plans to launch its own stablecoin, "WYST," with testing set for Q2 and a potential official release in July. This multichain stablecoin aims for over-collateralization with U.S. Treasuries and cash. The plan has faced criticism with some observers comparing it to a central bank digital currency (CBDC).
• Fidelity's Stablecoin Initiative: Fidelity Investments is developing a stablecoin to integrate into its financial services ecosystem. With over $4.5 trillion in assets under management, Fidelity is the third-largest asset manager in the world, after BlackRock and Vanguard.
• Custodia Bank's Stablecoin Launch: Custodia Bank has also announced plans to issue its own stablecoin on the Ethereum network.
• World Liberty Financial's USD1 Stablecoin: World Liberty Financial, associated with the Trump family, introduced their new "USD1" stablecoin.

With competition in the stablecoin space growing fiercer by the day, the challenge for new market entrants will lie in building a robust ecosystem around their tokens, establishing deep liquidity, and generating sustainable demand.

ECB Gives Update on Digital Euro (CBDC)

Meanwhile in Europe, central bankers are pushing for a release of its CBDC. At a recent press conference, ECB President Christine Lagarde confirmed that the preparatory phase for the digital euro is on track to conclude by October 2025.

Beyond that, what was even more interesting, is that the tone around the actual framing of the initiative changed quite substantially. Up until recently, the digital euro was framed as a modern complement to cash: a neutral, innovation-driven initiative meant to expand consumer choice. Now, the project is increasingly portrayed as a defensive response to the rise of U.S. dollar-denominated stablecoins, which are gaining traction globally while euro-backed alternatives remain marginal:

In order for the digital euro to become reality anytime soon, it needs approval by the European Parliament and its member states, though.

At the same time, banks are raising concerns. Many fear deposit outflows if customers begin shifting funds directly to ECB-issued digital wallets.

And behind the scenes, there is growing debate about whether the ECB should enter a space traditionally left to the private sector.

But regardless of one’s stance on the utility or necessity of a digital euro, one thing is clear: stablecoins have become a geopolitical issue. Policymakers are beginning to understand their potential to influence currency demand – and as of now, only the U.S. dollar is reaping the benefits.

BaFin Cracks Down on Ethena’s USDe

Meanwhile in Europe (Germany, more specifically) the BaFin issued a rare and severe statement on Ethena Labs: It has banned the German arm of the company from offering the synthetic stablecoin USDe in Germany.

The rationale? Ethena’s delta-neutral strategy (long ETH, short ETH futures) does not meet MiCAR’s standards for stable reserves. Further, the staking token sUSDe was likely marketed as a security without a prospectus.

BaFin ordered a shutdown of the website, a freeze on reserves, and a stop to all new business. The case is now pending final review.

In response to BaFin’s action, Ethena expressed surprise, noting that previous communications with the regulator had been constructive from their perspective and that the announcement came without prior warning. Nevertheless, Ethena’s global operations remain unaffected, as the issuance of USDe is managed through its entity in the British Virgin Islands.

From a regulatory perspective, this incident doesn’t reflect well on Germany, or on European oversight more broadly. The communication from BaFin could have been handled way better.

That said, products like USDe represent entirely new territory for regulators, and crafting appropriate frameworks for such innovations is inherently challenging. Still, we hope incidents like this will remain just that – accidents – and we remain optimistic that the resulting European rules will foster innovation within the EU, rather than driving it elsewhere.

Key Events of the Last Few Weeks

1. BBVA receives green light for crypto trading. Spain’s second-largest bank will soon be able to offer its clients trading and custody services for BTC and ETH. (Source: Reuters)
2. Trump family enters Bitcoin mining. In partnership with publicly traded mining firm Hut 8, Eric Trump and Donald Trump Jr. are launching a joint venture called "American Bitcoin", with mining proceeds intended to help establish a Strategic Bitcoin Reserve. (Source: Hut 8)
3. Kraken acquires U.S. futures platform NinjaTrader. Valued at $1.5 billion, it marks the largest acquisition by a crypto company to date. (Source: Kraken)
4. Coinbase reportedly working on acquisition of Deribit. According to Bloomberg, Coinbase is in talks to acquire Deribit, the world’s largest crypto derivatives exchange, valued between $4-5 billion. If completed, it would become the largest crypto acquisition to date. (Source: Bloomberg)
5. Fidelity files application for onchain U.S. money market fund. With over $4.5 trillion in assets under management, Fidelity ranks among the top three global asset managers, alongside BlackRock and Vanguard. (Source: CoinDesk)
6. Google and CME Group announce tokenization initiative. The world’s largest derivatives exchange has begun testing applications on Google Cloud’s new Universal Ledger (GCUL), a DLT-based infrastructure for asset management and payments. According to the announcement, the solution is expected to go live next year following further testing with market participants. (Source: CME Group)
7. What We’ve Been Reading

1. 2025 Solana Stablecoin Report. This report provides insights into how the stablecoin market has grown on Solana in recent years, how the network is establishing itself as the go-to platform for payment use cases, and what startups, enterprises, and institutions are already working on their stablecoin and digital asset strategies on Solana.
2. a16z: Defining Tokens. This report provides a comprehensive framework for understanding the seven primary categories of blockchain tokens, detailing their unique characteristics, functions, and the implications for builders, consumers, and policymakers in the evolving digital asset landscape.

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