Club Penguin

Rise and shine, friends. We’re excited about today’s newsletter for two reasons: 1) only one story is somewhat FTX-related and 2) we’ve added a new section—a crypto job board. Because no matter what SBF says next, this industry is still growing. So read to the bottom…you might just find your dream job.

Today: The call for more crypto middlemen, the Pudgy Penguin comeback story, and a crackdown on tax evasion. Let’s go.

—Vincent & Angelina

Should Crypto Bring Back the Middlemen?

The institutions have had enough. According to Bloomberg, hedge funds are asking crypto exchanges to use third-party custodians and prime brokers—a development that would notably deviate from crypto’s famously anti-middlemen approach.

Normally, the hedge funds in question would hold funds as collateral on exchanges to make trades. But after the demise of FTX, these hedge funds want to trade without keeping their crypto on the exchange itself.

Why? The FTX of it all. FTX loaned out customer assets to its hedge fund Alameda so that Alameda could make risky bets with those assets. Hedge funds don’t want exchanges—which often also act as lenders, custodians, and prime brokers—to do the same.

• The hedge funds don’t trust crypto exchanges to be able to properly keep track of their assets or keep them in custody.

• Instead, they want traditional names such as BNY Mellon and Nasdaq to look after their crypto when they’re not trading it.

What’s next? This is going to be a tough sell to exchanges, with players like Binance touting their own self-custody product in the wake of the FTX collapse. These hedge funds also can’t turn to decentralized exchanges because they currently lack the liquidity to facilitate big trades.

But the hedge funds are also some of the exchanges’ largest trading partners. If those exchanges want to see crypto prices rise and rake in the fee revenue from big clients, they’re going to need to listen to their demands.

Big picture: The pressure that hedge funds are exerting creates an ironic situation for crypto players who have preached that crypto would replace the middlemen in traditional financial markets, but the funds also know that if Sam Bankman-Fried had more intermediary companies helping him…it would have been much harder for FTX to mishandle customer funds.

—Vincent

Hold Your Penguins

Great comeback stories are rare in web3. But Pudgy Penguins is doing its best Tiger Woods impression, reclaiming (and perhaps outshining) its once esteemed standing in the NFT space. How did we get here?

Some context: Pudgy Penguins—a collection of, you guessed it, chubby arctic birds—were a household name in the NFT space during 2021’s bull run, right up there with Bored Ape Yacht Club. One collector even laid down a cool 400 ETH for his Pudgy Penguin.

But the collection’s fall from grace came quickly. Whispers of a rug pull scheme forced the founder (who had engaged in scam-like behavior) to sell the project to Luca Schnetzler, longtime fan and now CEO of Pudgy.

Schnetzler went all in on turning around the Pudgy brand by…

• Launching IRL products in 2023 (think Pudgy Penguin plushies, toys, and children’s books)

• Opening the Pudgy brand IP to all its NFT holders

• Building a mainstream Instagram presence promoting mental health and positivity (without mentioning NFTs)

• Collaborating with charities and the Sotheby’s auction house to garner positive media attention

Zoom out: Pudgy Penguins is a prime example of how troubled NFT projects can go beyond the web3 ecosystem to build a sustainable future. Taking a page from the Pudgy book might just be what some struggling crypto businesses need right now.

—Angelina

Sponsored by Caleb & Brown

What should we expect for crypto in 2023?

Join us virtually on December 7 for a fireside chat with Kevin Ting, founder and host of Coinsider, and Jake Boyle, Chief Commercial Officer of Caleb & Brown.

Kevin and Jake will share their top predictions for 2023 as well as reflect on and analyze what happened in 2022.

They’ll also share super actionable insights, like their bear market strategies, security best practices, and more!

Looking forward to seeing you on December 7.

Register for free here →

Did Someone Say More Taxes?

Popular places for tax evasion: Switzerland, Bermuda, and crypto wallets. But the latter is about to change, according to an EU draft bill leaked to CoinDesk.

The new law would force EU-based crypto businesses to share their user data (including transactions, names, addresses, and social security numbers) with national tax authorities to curb tax evasion.

The impact: Crypto is a popular tool for tax evasion because many countries’ lax reporting requirements offer citizens a way to shield their income from tax authorities. The new regulation could spark a global change, given that firms based outside of the EU could have clients who fall under this new regulation in the bloc.

—Angelina

Crypto Job Board

• Change, an SF-based startup that creates APIs to process donations (and often does so using crypto), is looking for a marketing manager.

• Den, which calls itself the “financial account for crypto-native teams,” is looking for a software engineer to help DAOs grow.

• Arkive is hiring a smart contract engineer for its web3-native museum of artifacts.

Want to share a job in next week's roundup? Hit reply and let us know who's hiring.

In other news:

• Asian crypto lender Matrixport is looking to raise $100 million at a whopping $1.5 billion valuation.

• Canada’s Manitoba province set an 18-month moratorium on new crypto mining shops.

• Sam Bankman-Fried said he didn’t try to commit fraud in a virtual interview with the NYT.

• The Fed’s most important gauge for inflation is cooling down, giving markets hope that the central bank won’t be as aggressive with interest rate hikes in the future.

• Dogecoin bounced by double digits amid unsubstantiated rumors that Twitter would use the cryptocurrency for payments.

And that’s what you need on your crypto radar today. What’s the most shocking thing you’ve heard SBF say this week? Reply to this email and let us know. See you Sunday!