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Weekly Flip Thru: Crypto Lender Nexo Buys a Stake in Summit National Bank, SWIFT Partners with Chainlink to Build Cross-Chain Protocol

Cover Image for Weekly Flip Thru: Crypto Lender Nexo Buys a Stake in Summit National Bank, SWIFT Partners with Chainlink to Build Cross-Chain Protocol

Hi! Glad to have you here. Let’s get started with the most important rumblings from deep within the crypto news vault this week. In brief, a number of crypto projects are finding ways to partner with the traditional banking system, NFTs help Solana blaze past a major milestone, and the CFTC penalizes a blockchain project and the project’s associated DAO.

Here are the most impactful crypto news stories for the week of October 3, 2022.

Banks Are Still Figuring Out the Tricky Field of Digital Asset Custody (CoinTelegraph)

This article recaps how banks got to where they are today in the evolving digital asset custody space. The author pays attention to the fact that institutional crypto investing took off by leaps and bounds following central banks’ response to the pandemic in 2020, when markets were flushed with liquidity. That said, as more institutions aspire to put digital assets like bitcoin (BTC) on their balance sheets, banks are figuring out how to change on the fly to become reliable custodians of blockchain-based assets.

The bottom line is that it’s not so simple for banks to be as trusted with emerging digital assets as it is for them to handle physical assets. For starters, banks are not technology companies. And many of the existing and forthcoming features of digital assets require interoperability with multiple blockchains. A lot of assets gaining steam among crypto investors will need seamless user experience across many different devices, and tight cybersecurity protocols along with them. Although banks may have benefited from a digital gold rush during pandemic-era monetary policy, they likely need to start paying more attention to infrastructural improvements in order to meet the needs of both institutional crypto customers and retail crypto investors in the future.

Nexo Acquires Stake in U.S. Bank Summit National (The Block)

There aren’t many crypto lenders canoodling with conventional banks these days. And that’s partly because banks and crypto lenders swim in very different waters when it comes to regulation, cybersecurity, and operational risk. That’s why it’s notable when a crypto lender such as Nexo, which is headquartered in London, buys a stake in a U.S. chartered bank that’s regulated by the Office of the Comptroller of the Currency.

Timing is everything in life, though. At nearly the same time Nexo announced its minority stake in Summit National Bank, news broke that eight states were pursuing legal action against the U.K.-based crypto lending app. The legal actions being brought by California, New York, Vermont, Washington, South Carolina, Maryland, Oklahoma, and Kentucky take aim at Nexo’s interest-bearing crypto products.

SWIFT Joins Crypto Data Reporting Tool Chainlink in Building Cross-Chain Protocol (CoinDesk)

SWIFT, the international system that allows for cross-border payments and transfers of funds between banks, is getting a DeFi partner in Chainlink (LINK). SWIFT has been the legacy banking solution to cross-border payments for decades, but now the old school meets the new as SWIFT and Chainlink are teaming up to build a cross-chain interoperability protocol. The effort will enable SWIFT to interact in real time with tokens and other assets living on the blockchain. Industry watchers are touting this as a win for distributed ledger technology (DLT) and future interoperability protocols.

More reading: What are crypto bridges and why do people use them?

what is a crypto bridge blog image

Solana Clears Major Milestone of 100 Billion Transactions, NFTs Help Rise to Prominence (NewsBTC)

Solana reached the 100 billion transaction milestone last week, with transaction amounts kicking into high gear in recent months. Solana (SOL) can now claim the second-largest market share of the NFT space. Solana has frequently drawn comparisons to ethereum (ETH) as users flock to these networks for creating, buying, and swapping NFTs.

CFTC Levels $250K Penalty on Blockchain Protocol and Files Enforcement Action Against DAO (CoinDesk)

A bit of background would be good for this one: The Commodity Futures Trading Commission (CFTC) is one of the federal agencies with considerable stakes in the developing crypto regulation landscape. Either the CFTC or the Securities and Exchange Commission (SEC) may own much of crypto’s regulatory oversight as various agencies within the U.S. government try to align with the Biden Administration Executive Order on crypto from March of 2022. So, with those stakes in mind, let’s examine this first-of-its-kind enforcement action against a decentralized autonomous organization (DAO).

Blockchain protocol bZeroX was hit with a $250,000 penalty from the CFTC after allegedly operating as an unregistered futures commission merchant that also didn’t meet the requirements of the Bank Secrecy Act while gathering information on customers. While paying a quarter of a million dollars in penalties hardly seems like a pittance, this isn’t the most severe penalty for people accused of breaking the Bank Secrecy Act.

But the CFTC’s simultaneous action against Ooki DAO – which is essentially the same organization as bZeroX according to the CFTC – is remarkable. According to the CFTC’s complaint against bZeroX and Ooki DAO, the project founders hoped to render their operation “enforcement-proof” by transferring control to a DAO. A decentralized organization and its members “are not immune from enforcement and may not violate the law with impunity,” the complaint goes on to say.

Could this send a chill through the world of DAOs? One of the ideals that propels people into joining and participating in DAOs is the principle of voting with your tokens. If the CFTC’s approach to bZeroX and Ooki DAO sets a precedent for enforcement against these decentralized organizations and their members, then it may wind up cooling down some of the enthusiasm behind DAO activities.

More reading: What are political DAOs? The future of campaign fundraising


That was a lot of crypto news, but are you still looking for more? The perfect place to get crypto updates in one easy-to-remember place might be CoinFlip’s newsletter. Sign up to get stories like the ones summarized above, along with company updates and the occasional promo code to redeem at your nearest crypto ATM, delivered right to your inbox. Here’s your reminder that all crypto transactions are final and irreversible. Be sure to protect your personal information when buying, selling, or trading digital assets.