Token2049 Highlights: Solana’s Innovations, Institutional Support, and SEC Congressional Hearing Shake Up Crypto Landscape

Token2049 Highlights: Solana’s Innovations, Institutional Support, and SEC Congressional Hearing Shake Up Crypto Landscape

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Key Takeaways:

• Solana Break Point & Token 2049 Key Takeawayssome text
  • Solana launching the FireDancer Validator client, boosting decentralization and performance with potential speeds of up to a million transactions per second.
  • Titans of traditional finance are launching tokenization projects on Solana, increasing network usage and lowering costs.
  • New stablecoins like EURCV and PHPC will launch on Solana, enhancing remittance and cross-border payments, particularly in the Philippines.
  • Citibank is exploring Solana for cross-border payments, a market expected to hit $250T by 2027, offering significant adoption potential.
• SEC Under Fire: Lawmakers Demand Clarity and Balanced Regulation for Digital Assets

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Last week, Singapore was the epicenter of the digital asset world, hosting two major conferences that delivered a wave of significant announcements, particularly for the Solana ecosystem. Token2049 kicked off the week on September 18-19, followed closely by Solana’s flagship event, Breakpoint, on September 20-21, making for a packed schedule of groundbreaking news and insights.

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Paving the Way for Tokenization on Solana 

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Unsurprisingly, Solana dominated the spotlight with a series of major announcements that extended beyond Breakpoint. The network revealed a host of innovations aimed at enhancing its infrastructure and bolstering the DeFi ecosystem. Among these, the standout development was the launch of Solana's FireDancer Validator client—a game-changer for the network. For context, a validator client is the software that enables validators to contribute to network security by proposing new blocks and verifying transactions, playing a critical role in maintaining the blockchain’s integrity.

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https://solana.com/news/validator-health-report-october-2023

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Currently, the Solana network operates with two primary validator clients: the Solana Labs client and Jito SOL, the latter being a slightly modified fork of Solana Labs' software. This shared lineage means that both clients could be susceptible to similar vulnerabilities, highlighting the critical need for greater client diversity. This is where FireDancer's testnet launch becomes pivotal. While some features of FireDancer have already been introduced to the mainnet through FrankenDancer, the full deployment of FireDancer is essential for several key reasons:

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• Increased Decentralization and Security: The introduction of a truly independent validator client will make the network more robust, reducing the risk of outages or vulnerabilities tied to a single client type.
• Enhanced Performance: FireDancer promises to significantly boost transaction throughput, with developers having demonstrated the potential for up to one million transactions per second (tps) in a testnet environment. Although testnets do not face the same real-world stress conditions, these results offer a promising glimpse into the network's future capabilities.

Beyond infrastructure improvements, the tokenization of real-world assets (RWAs) such as Money Market Funds (MMF) emerged as a significant focus, with several major players unveiling Solana-based initiatives. 

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• Securitize announced its plans to bring BlackRock’s on-chain MMF, BUIDL, to Solana.
• Franklin Templeton revealed its intention to launch its own MMF on the network, building on the momentum set by Hamilton Lane, which became the first asset manager to introduce a fund on Solana.
• Brevan Howard's tokenization firm, Libre, is also set to expand its offerings to the Solaba network. 
• Coinbase plans to bring its Bitcoin-wrapped asset, cbBTC, to Solana, aiming to enhance Bitcoin’s utility within the Solana ecosystem.

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This surge in tokenization activity on Solana is especially significant, considering the network currently accounts for just 1.2% of the total tokenization market, as shown below. These new initiatives are expected to boost Solana's adoption within this rapidly evolving sector, offering companies the opportunity to leverage a high-performance blockchain that can lower operational costs and streamline business processes.

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Figure 1 – Tokenization by Blockchain 

Source: Dune

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The stablecoin and payments sector is gaining significant traction on Solana. Société Générale plans to expand its euro-backed stablecoin, EURCV, to the network, while the Philippines' largest crypto exchange is set to launch a peso-backed stablecoin (PHPC) on Solana in Q1 2025—a strategic move considering the country’s $40 billion remittance market in 2023. This expansion could drive substantial revenue for Solana and lower fees for Filipino users. Adding to the momentum, PayPal’s recently launched stablecoin has seen rapid success, reaching nearly $1 billion in total supply on Solana, as shown in Figure 2. Furthermore, MakerDAO (now SKY) will deploy its USDS token on Solana via Wormhole, potentially attracting more users and liquidity. Thus, further boosting Solana’s expanding DeFi ecosystem.

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Figure 2 – Solana’s Stablecoins Marketcap

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Source: 21Shares, DeFiLlama

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Citibank, the main U.S. subsidiary of CitiGroup, is exploring Solana's potential for smart-contract development and revolutionizing cross-border payments—an opportunity amplified by the projected $250 trillion cross-border payments market by 2027. Solana’s technology is particularly well-suited for financial applications, especially in stablecoins and payment systems.

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This collaboration offers mutual benefits:

• Citibank: Enhanced ability to offer faster, more cost-effective cross-border payment solutions to its +200mm clients.
• Solana: Access to a significantly larger Total Addressable Market (200mm), potentially accelerating its adoption in the banking sector

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For context, Solana's growing popularity is evident in its rapid expansion, showcased by a surging user base and rising revenue:

• Monthly active users on Solana have skyrocketed 20-fold since the 2021 bull run, growing from approximately 610k users to 13.4mm users.
• Solana’s revenue surged to $173 million in the first nine months of this year, a dramatic increase from its peak of $14 million in 2021.

This increased network usage has significantly improved Solana’s valuation metrics. Its Price to Fees ratio has dropped nearly 90% over the past three years, from 1802x to 172x. This reflects a significant strengthening of Solana’s value proposition, driven in part by increased fee generation from the rising adoption of stablecoins and payment use cases.

The final major announcement was the launch of Seeker, the second edition of the Solana Saga phone, designed with crypto-specific features to enhance blockchain use:

• A built-in seed vault wallet with fingerprint unlock and quick transaction sending.
• An improved dApp store for easier app discovery.
• Enhanced data access for third-party apps, valuable for DePIN projects.

Overall, Seeker has the potential to accelerate the adoption of blockchain-based applications by simplifying the user experience. By streamlining complex processes, it lowers entry barriers, making crypto-native apps more accessible to a broader audience.                                                                                                     

Token2049 and Breakpoint showcased a wave of innovation within the Solana ecosystem, reinforcing its position as the leading alternative Layer 1 blockchain. As interest in Solana continues to grow, many U.S. investors are eager to gain exposure to the asset. In response, several ETF providers, including 21Shares, have filed for Solana spot ETFs. Although these applications were denied by the SEC, there are signs that regulatory sentiment towards crypto is evolving, as highlighted in recent congressional hearings. This shifting landscape may open the door for future approvals, reflecting the growing recognition of blockchain’s potential in traditional finance.

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SEC Under Fire: Lawmakers Demand Clarity and Balanced Regulation for Digital Assets

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The SEC's approach to regulating digital assets has faced criticism not just from within the digital assets industry but also from voices outside the space. This sentiment was on full display during a recent congressional hearing, where the SEC faced intense scrutiny and tough questioning over its handling of the sector.

During the hearings, SEC Chair Gary Gensler faced sharp criticism from both Republican and Democratic lawmakers over his approach to crypto regulation, highlighting the growing tension between the agency and the digital asset industry. Republican Majority Whip Tom Emmer questioned Gensler’s transparency and effectiveness, citing the SEC’s mishandling of the DEBT Box case, which resulted in sanctions against the agency. Emmer emphasized the need for regulatory clarity, echoing Vice President Kamala Harris’s recent call for clear and consistent rules for digital assets. This increasing demand for transparency and consistent regulatory standards is crucial for the future of crypto in the U.S., as it may pressure the SEC to adopt clearer guidelines.

House Financial Services Committee Chair Patrick McHenry criticized the SEC for acting like a 'rogue agency,' relying too heavily on enforcement actions instead of providing clear regulatory guidance. He highlighted the FIT21 bill, a bipartisan proposal to establish a structured market framework for digital assets, as proof of broad opposition to the SEC's current approach. McHenry cautioned that without clear and consistent regulations, the U.S. risks falling behind regions like Europe, which are adopting more supportive crypto policies. The push for structured regulatory frameworks could foster a more crypto-friendly environment in the U.S., attracting a new wave of innovators and reinforcing the country’s reputation as a global leader in technology.

SEC Commissioner Hester Peirce echoed these concerns, criticizing the SEC’s use of ambiguous terms like 'crypto asset securities' and calling out the agency’s failure to clearly define its authority. She noted recent SEC missteps, including a controversial footnote in the Binance case, as evidence of an inconsistent regulatory stance. In response, Gensler defended the SEC’s reliance on the Howey Test as the standard for determining securities among digital assets. However, critics argue that this framework remains overly ambiguous, leading to costly enforcement actions without clear guidance. Lawmakers also criticized the controversial SEC rule SAB 121, which requires crypto custody entities to list digital assets on their balance sheets—a mandate that has faced significant opposition and attempted reversals in Congress. 

Despite the heated exchanges, there was a shared acknowledgment of the need for regulatory improvements to maintain the U.S.'s competitive edge in global capital markets. This debate highlights the importance of a balanced regulatory approach that protects consumers without stifling innovation, which could be pivotal in advancing the approval of Solana ETFs and other digital asset products. The ETF wrapper has long provided investors with access to hard-to-reach markets like fixed income and emerging markets, and its application to digital assets is no different. It mitigates the risks associated with self-custody and shields retail investors from losses in cases like the bankruptcies of FTX, Voyager, Celsius, and other exchanges and lenders. ETFs simplify the process of investing in crypto, making digital assets more accessible and embodying the industry's core principle of democratizing financial market access globally.

Market Sentiment Gauge: Fear and Greed Index

A glance at the Fear & Greed Index, a multifactorial tool that analyzes crypto market sentiment, reveals a shift in market sentiment from a neutral stance to slight greed. The indicator is currently reading a 59. This marks a notable improvement from last week’s score of 49, indicating that the market has taken a more risk-on stance.

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Figure 3 – Fear & Greed Index

Source: Alternative.me

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What’s happening this week?

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