Eterna's Insights - February 2025

U.S. Crypto Policy Gains Momentum with SEC and White House Initiatives

Early February, SEC Commissioner Hester Peirce released The Journey Begins, outlining ten key points for reforming the SEC’s approach to crypto regulation, litigation, and enforcement. Almost simultaneously, White House Crypto & AI Czar David Sacks held a press conference with key congressional leaders, emphasizing the administration’s commitment to advancing crypto policy and intergovernmental coordination.

The press conference highlighted growing momentum for crypto regulation, with discussions on potential initiatives like a sovereign wealth fund holding digital assets. While it lacked new policy specifics, the event reinforced crypto as a legislative and executive priority, signaling continued engagement on regulatory clarity and innovation.

ByBit Suffers the World’s Largest Robbery of All Time

ByBit, the world’s second-largest crypto exchange, lost over $1.5 billion in Ethereum-based tokens in what is now the largest crypto hack ever. The FBI has attributed the attack to North Korea’s Lazarus Group. The exploit targeted ByBit’s cold storage system, which relies on Gnosis SAFE for multi-signature security. The attacker manipulated a proxy contract during a routine fund transfer, redirecting control to a malicious contract that enabled them to drain ByBit’s Ethereum reserves.

Investigations suggest the breach stemmed from a compromised developer machine or insider at Gnosis SAFE, rather than a fundamental flaw in its smart contract code. ByBit CEO Ben refuted concerns about malware on the exchange’s signer devices or a coordinated insider attack. The hack highlights security risks in Ethereum’s multi-signature implementations and underscores the vulnerabilities of infrastructure providers in the crypto ecosystem.

SEC Drops Major Crypto Lawsuits, Including Kraken Case

The SEC has withdrawn from several high-profile crypto lawsuits and enforcement actions, providing relief to firms like Coinbase, Consensys, Robinhood Crypto, Gemini, Uniswap Labs, and OpenSea. In some cases, such as Coinbase, the agency voted to dismiss litigation entirely, while in others, it closed investigations without action. The SEC attributed these decisions to its ongoing work on a clearer regulatory framework, emphasizing that the dismissals do not reflect judgments on the merits of previous claims.

Yesterday, Kraken also confirmed that the SEC dropped its lawsuit against the exchange, marking another major shift in enforcement strategy. Additionally, the SEC clarified that it does not classify most memecoins as securities, stating they resemble collectibles rather than financial instruments. These developments suggest a significant regulatory pivot, as the agency shifts its focus toward broader crypto policy reform rather than aggressive litigation.

Uniswap’s Unichain Goes Live with Stage 1 Decentralization

On February 11, Uniswap launched Unichain, its Ethereum Layer 2 network, on mainnet, four months after its initial announcement. Built on the OP Stack, Unichain is designed for cross-chain DeFi and asset swaps, leveraging the ERC-7683 token standard and aiming for future single-slot finality (SSF) within the OP Superchain. SSF is expected to roll out later this year to enhance cross-chain interoperability.

Notably, Unichain became the first Ethereum L2 to achieve Stage 1 decentralization at launch, as recognized by L2Beat, due to its fraud-proof upgrade that enables observers to dispute state accuracy. It joins OP Mainnet, Arbitrum, Ink, and Kraken’s L2 in reaching this milestone. To progress to Stage 2, Unichain will need to implement an exit window, allowing users to withdraw assets in case of disputes or unsatisfactory contract upgrades.

Arbitrum Advances Decentralization with Permissionless Validation

Arbitrum has reached a major decentralization milestone by enabling permissionless validation through its new BoLD (Bounded Liquidity Delay) fraud-proof protocol. Previously, only whitelisted validators could submit fraud proofs due to the risk of delay attacks. With BoLD, any validator can now challenge state transitions while ensuring dispute resolution occurs within a fixed timeframe, mitigating attack risks.

This upgrade strengthens Arbitrum’s security and censorship resistance by introducing parallel execution and economic disincentives for malicious behavior. By removing permissioned validation, Arbitrum moves closer to full decentralization, aligning with Vitalik and L2Beat’s rollup maturity framework.

FTX Begins Creditor Repayments with Initial $1.2B Distribution

On February 18, FTX began repaying creditors as part of its bankruptcy reorganization, with nearly $17 billion set to be distributed over multiple phases. Customers are expected to receive approximately 120% of their account value based on FTX’s November 2022 bankruptcy filing price.

The first round of payouts, totalling $1.2 billion, went to small creditors (claims under $50K) via BitGo and Kraken. The next distribution, scheduled for May 30, will cover larger claims and resolved disputes.

Eterna Portfolio Company Spotlight:

Hex Trust Secures Strategic Funding Ahead of Series C Raise

Hex Trust, a portfolio company and a leading provider of institutional digital asset custody, staking, and market services, has successfully closed a strategic funding round led by Morgan Creek Digital, with participation from global investors, including Injective. With this round, Hex Trust’s total funding now surpasses $100 million, further solidifying its position as a trusted partner for institutional investors and service providers. This investment sets the stage for its anticipated Series C raise later in 2025.

As institutional demand for secure and compliant digital asset solutions continues to rise, Hex Trust is expanding its staking and markets businesses, with plans for strategic acquisitions. CEO Alessio Quaglini highlighted that this funding round is a critical step in scaling operations and enhancing its service offerings for a rapidly growing institutional client base.

Founded in 2018, Hex Trust serves over 300 institutional clients and safeguards more than $5 billion in assets across its operations in Hong Kong, Singapore, Dubai, France, and Italy. This latest funding underscores its commitment to providing best-in-class digital asset solutions, ensuring institutions have access to secure, scalable, and innovative financial services. With a robust foundation in place, Hex Trust is well-positioned to continue its rapid growth and leadership in the digital asset industry.