DeFi: SEC war on stablecoins and TUSD Prime Trust troubles; Mythical Games raises another $37MM for GameFi
Mythical talks with Apple and Google to integrate NFT marketplace directly into NFL Rivals app, despite the 30% in-app purchase tax
Gm Fintech Futurists —
Today we highlight the following:
DEFI & DIGITAL ASSETS: TrueUSD Depegs On Binance.US, Drops To 80 Cents Against Tether (link here)
GAMEFI: Mythical Games Raises $37MM For In-game Marketplace In Series C Round (link here)
CURATED UPDATES
To support this writing and access our full archive of newsletters, analyses, and guides to building in the Fintech & DeFi industries, subscribe below.
DeFi Short Takes
DEFI & DIGITAL ASSETS: TrueUSD Depegs On Binance.US, Drops To 80 Cents Against Tether (link here)
TrueUSD’s TUSD, a stablecoin pegged to the US dollar, is being shorted by traders due to concerns that it might depeg as a result of problems at the underlying custodian, Prime Trust.
Shorting a trade is where an investor borrows assets and sells them, hoping to buy them back at a lower price before returning the borrowed assets. This investment strategy can be profitable if the trader is able to buy the assets back at a lower price, as the only cost incurred is the cost of borrowing. However, it can be disastrous if the asset increases in price after the short sale has been executed. The price of pegged tokens rarely varies and almost never moves materially higher, so attacking a stablecoin peg can be an attractive strategy for traders (e.g., Soros and the Bank of England).
Speculation kicked off after Nevada’s Financial Institutions Division issued a cease-and-desist order, which suspended deposits and withdrawals at Prime Trust. The Nevada regulator has since filed to take over Prime Trust and freeze all of its businesses, with the exchange now owing clients over $85MM in fiat and $69.5MM in crypto. Due to the seizure, TrueUSD was unable to provide a complete attestation to their reserves for a brief period, causing Ripcord, a service tracking TUSD reserves, to report discrepancies. On the back of this news, TUSD briefly depegged on June 10th and 14th to as low as $0.993. At this time, over $4MM in short positions against the stablecoin were opened on Aave, a decentralized exchange.
Prime Trust is reportedly closely connected with Binance and its ongoing lawsuit with the SEC. Binance has been shown to favour TUSD after regulators cracked down on their own stablecoin, BUSD. Overall, there are concerns that stablecoins will be the next prime target of the SEC due to their critical role within the DeFi ecosystem. This follows the narrative that Gary Gensler, Chair of the SEC, is attempting to dismantle crypto infrastructure within his domain.
Another narrative worth considering is that central bankers promoting Central Bank Digital Currencies (CBDCs) may feel threatened by independent stablecoins, which essentially provide a similar service (stable fiat onramps) without government involvement or control. It could be that as CBDC efforts develop, governments will look to remove stablecoin equivalents.
What we do know is that stablecoins require custodians and the SEC is targeting them at pace. BUSD came under fire with the SEC’s lawsuit against Binance, leading Paxos to halt minting the BUSD token. Separately, the popular stablecoin USDC depegged following the collapse of SVB, and now TUSD is in the firing line. With $138B in Total Value Locked (TVL), stablecoins are arguably crypto’s killer app by delivering the US dollar across the world without a KYCed bank account. If the SEC and other regulators like Nevada’s Financial Institutions Division continue to obstruct them, it will have an adverse impact on the broader crypto industry and its users worldwide.
👑Related Coverage👑
GAMEFI: Mythical Games Raises $37MM For In-game Marketplace In Series C Round (link here)
Mythical Games, the Web3 game studio behind the mobile game NFL Rivals, secured $37MM in Series C1 funding, with an additional $20-30MM expected later this year. Scytale Digital led the Series C1 extension round, joined by new investors ARK Invest, Animoca Brands, MoonPay, Proof, and Stanford Athletics. Previous investors, including a16z and WestCap, also participated. The company previously raised $150MM in a Series C round in November 2021, valuing it at $1.25B.
Getting an extension of a round from nearly two years ago and not calling it a Series D is odd — we assume this is done to keep valuation flat to that moment of time.
Beyond producing blockchain-based games, Mythical Games’ Platform allows developers to build or integrate blockchain-based play-to-earn (P2E) features economies into their games. Play-to-earn games feature an economy where players can earn real-world rewards by playing the game. Typically, highly skilled players can earn items of value in P2E games that they can then sell or trade to other players, often for currency that can be transferred for fiat.
Mythical’s platform features include a peer-to-peer marketplace, which facilitates trading and paying for game items across various public blockchains, supporting fiat and crypto transactions. The platform also provides an NFT and token management system, automatically tokenizing game items on the blockchain and synchronizing them with the marketplace. This system offers the ability to incorporate on-ramps to public blockchains, which theoretically reduces friction for would-be players to enter and exit the network by allowing them to convert fiat currency into tokens and transfer assets to other networks.
The Mythical Platform is built on a permissioned blockchain dubbed the Mythical Chain, using a Proof of Authority (PoA) consensus mechanism. Validators play a key role, validating transactions, agreeing on block validity, and collectively securing the network. Permissioned blockchains also typically have greater liveliness compared to fully open decentralized systems. But while liveliness is one of the benefits of permissioned chains, it comes at the expense of decentralization. Given that Mythical is optimizing for low-cost, responsive games, not decentralized game economies, we think this is a reasonable tradeoff.
Early P2E gaming platforms typically focused on users purchasing in-game assets, which could then be used to earn the native token. But these token economies were largely unsustainable once growth and usage of the native token dwindled the respective native token prices collapsed. One example is StepN, whose monthly active users (MAU) statistic has dropped from 705k at its peak in May 2022 to 44k a year later. Mythical Games is trying to avoid this outcome by prioritizing gameplay — reminiscent of traditional games — while incorporating blockchain-based innovations as a secondary objective. MetalCore, for instance, is meant to rival the design of popular games like Halo and Call of Duty.
The positive long-term trend for Mythical lies in establishing a gameplay-centric culture. By focusing on making the game enjorable, the company can cultivate a player base that wants to be part of the ecosystem and add value. This in turn should lead to usage of the platform's peer-to-peer marketplace and ownership aspects, distinguishing it from traditional Web2 games where players lack control over the assets they earn.
While we have not yet seen tokenized game economies work at scale, we are excited to see more producers experiment in the space as gaming provides the brightest example of digital objects being actively used.
👑Related Coverage👑
Curated Updates
Here are the rest of the updates hitting our radar.
Financial Institutions and Adoption
⭐ The State Of Web3 Perception Around The World Report - ConsenSys
⭐ NEAR Foundation Partners With Alibaba Cloud to Accelerate Web3 Growth in Asia - CoinDesk
Singapore's MAS Proposes Design Framework for Interoperable Digital Asset Networks - CoinDesk
BitGo Cancels Prime Trust Acquisition, Users Report Frozen Withdrawals - Decrypt
DeFi and Digital Assets
Proposal Urges Mantle To Allocate $72MM To Lido Finance - The Block
Terra Classic Revival Plans Continue As 6 Engineers Aim to Revive LUNC Ecosystem - CoinDesk
SAP Clients Testing Circle’s USDC To Fix Cross-Border Payment ‘Hassle’ - Decrypt
Blockchain Protocols
⭐ ZkSync: Matter Labs Releases ZK Stack For Building ‘Hyperchains’ - The Block
NFTs, DAOs and the Metaverse
⭐ Metaverse Projects Attract 44% Of 2023 Web3 Investments - The Defiant
⭐ Web3 Game Gods Unchained Joins Fortnite, League Of Legends On Epic Games Store - The Block
CyberKongz Introduces ‘Stakeless Staking’ With ERC-721x - The Defiant
Soccer Franchise FC Barcelona Scores World Of Women for Upcoming NFT Release - CoinDesk
MakerDAO Snaps Up More US Treasury Bonds - Blockworks
Azuki Expands With New 20K Ethereum NFT Collection, Elementals - Decrypt
Shape your Future
Wondering what’s shaping the future of Fintech, Digital Wealth and Web3?
At the Fintech Blueprint, we go down the rabbit hole to help you innovate and compete in Fintech.
Sign up to the Premium Fintech Blueprint newsletter and get access to:
Monday Fintech Short Takes, with weekly coverage of the latest fintech, digital investing, banking, and payments news via expert curation and in-depth analysis
Wednesday Long Takes on Fintech and Web3 topics with a deep, comprehensive, and insightful analysis without shilling or marketing narratives
Thursday DeFi Short Takes, weekly analysis of developments in the crypto space, including digital assets, DAOs, NFTs, and institutional adoption
Access to the Podcasts with industry leaders on building leading companies in Fintech and DeFi along with value-added data-driven, annotated transcripts
Full library of the weekly in-depth write-ups on 15+ topics and 50+ Fintech and DeFi brands, offering deep, comprehensive, and insightful analysis without shilling or marketing narratives
Exclusive Deep Dive reports into Fintech business models and brands that transform the Fintech and DeFi space
Access to our CEO & Founder focused 'Building Company Playbook' series, offering insider tips and advice on constructing successful fintech ventures.