Do Kwon, co-founder and chief executive officer of Terraform Labs, poses in the company's office in Seoul, South Korea, on Thursday, April 14, 2022. Kwon is counting on the oldest cryptocurrency as a backstop for his stablecoin, which some critics liken to a ginormous Ponzi scheme. Photographer: Woohae Cho/Bloomberg via Getty Images
Photo: Woohae Cho/Bloomberg via Getty Images

Terra’s reboot has been as wild as its crash

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Wednesday: luna’s wild ride, Affirm and Stripe’s deal, and more dogecoin drama.

Off the chain

“I’ve seen some conferences.” That feels like something I might have said after a particularly arduous CES or a debauched SXSW, but no, it was Miami Mayor Francis Suarez attempting to explain what the nearly worthless MiamiCoin cryptocurrency he’d hyped was good for. Suarez, who once said that MiamiCoin was “going mainstream faster than bitcoin,” also insisted to CoinDesk that he wasn’t advocating for crypto: “I don’t push anything.” We’ll note that Suarez converted his mayoral salary to bitcoin, not MiamiCoin, which has fallen 96% from its peak.

— Owen Thomas (email | twitter)

Terra reboots

The attempt to relaunch the Terra blockchain after its recent implosion set off a trading roller-coaster over the weekend that was wild even by crypto standards.

The airdrop of the newly created luna token, hosted on a forked Terra blockchain, started early Saturday. The token’s value climbed briefly to near $20 from its listing price of $17.80 during the first hour of trading, before collapsing to under $4 the same day, according to CoinMarketCap. Binance listed the coin Tuesday, which helped bring the new luna up to a high of about $10.30. The coin slid down below $8 by early Wednesday morning.

Terra creator Do Kwon is picking up the pieces. The unraveling of Terra, which started early in May with a run on the algorithmic stablecoin UST, is on the short list of the biggest collapses in crypto history.

  • UST and the original luna coin were collectively worth $43 billion at the start of the year. In a matter of days, the coins were worth a fraction of that. Circle CEO Jeremy Allaire told Protocol he was shocked by “how fast the death spiral happened.”
  • Kwon, who relentlessly promoted UST and mocked skeptics as “poor,” offered a new plan after the crash: Build a new version of the Terra blockchain, with a new coin under the same luna name, which would be airdropped to holders of UST and the original luna. The old luna would be rebranded luna classic.
  • UST was left stranded on the old blockchain, with developer Terraform Labs focusing its efforts on luna and the Terra blockchain. Token holders approved the new plan in a vote last week.

Not all is going smoothly. Terraform Labs tweeted Monday that it is "aware that some have received less $LUNA from the airdrop than expected [and] are actively working on a solution."

  • Binance listed the new luna coin in its Innovation Zone, a trading designation reserved for assets that "may have increased volatility and pose a higher risk than other tokens."
  • The volatility in early trading shows the coin “will likely trade on narrative until they can regain the trust of builders to bring fundamental value to the new ecosystem,” Thomas Dunleavy, senior crypto research analyst at digital-asset data firm Messari, told Bloomberg. “I really, really doubt they can do that with so many other great, and well funded alternatives out there.”
  • For some, trust has permanently been broken. Some prominent voices in crypto pledged ahead of the airdrop to quickly sell whatever landed in their wallets.

Regulators are watching. The British Treasury proposed new rules for stablecoins Tuesday, noting that “events in crypto asset markets have further highlighted the need for appropriate regulation.”

  • Under the proposal, the Bank of England could effectively direct insolvency proceedings for any failing stablecoin deemed to have systemic importance to the financial system.
  • U.S. regulators are also concerned about recent events in the crypto asset markets. Treasury Secretary Janet Yellen compared the UST crash to a bank run. SEC Chair Gary Gensler warned after the sell-off that the “public is not protected.”
  • A draft version of the widely anticipated crypto regulation bill from Sens. Cynthia Lummis and Kirsten Gillibrand, published Friday by the Block, included a section detailing the requirements for depository institutions to create asset-backed stablecoins. Lummis has called the draft “outdated,” but the proposed measures seem consistent with her views. She’s been saying for a while that stablecoins should be backed by cash, with audited reserves.

Without clear regulation, are exchanges the gatekeepers? Kraken CEO Jesse Powell went on the defensive over the weekend for the company’s choice to participate in the relaunch of an ecosystem that devastated crypto investors. If Kraken didn’t list the coin, he said customers would just move on to an exchange that does.

As many a Twitter user has proclaimed about retweets, Powell said a “listing isn’t an endorsement.” But a retweet is an amplification, as is a coin listing. If the price of luna goes up based on an exchange listing the reborn coin — as it did ahead of Binance’s launch Tuesday — traders are deriving some meaning from that act, even if it's just greater liquidity. For his part, Binance CEO Changpeng Zhao defended his company’s listing as a necessary step for customers who held UST and luna classic and received the new luna in an airdrop.

Policymakers and investors are itching for someone to take responsibility for the stablecoin mess. Exchanges that try to dodge blame may find themselves swept up in the regulatory net.

— Ryan Deffenbaugh (email | twitter)


We wanted to understand how Stellar compares to other blockchains and the legacy financial system. But as we tried to gather information on what was publicly available, there was little to be found. Rigorously-tested data and research from the blockchain and traditional finance industries as a whole is lacking and not easy to come by.

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On the money

On Protocol: Tech experts skeptical of the blockchain are urging Congress not to bend to the industry’s demands for a regulatory carve-out.

Varo could run out of money by the end of the year, a fintech analyst says. Varo became the first chartered neobank after undergoing a tough regulatory process worth almost $100 million, but its latest regulatory filings show that it needs to start cutting costs and raising more capital.

Also on Protocol: Following the footsteps of its “buy now, pay later” competitors, Affirm announced a partnership with Stripe, which makes Affirm’s Adaptive Checkout available to all Stripe users starting Tuesday.

Consumer groups are lobbying the Australian government for crypto regulation. In response to the federal treasury’s crypto consultation papers, consumer advocates are strongly urging the government to hasten the regulation process, saying that digital assets are “complex, volatile and high-risk products that can cause harm.”

The U.K.'s consultation papers include explicit stablecoin regulation. Her Majesty’s Treasury intends to grant more power to the Bank of England to oversee stablecoin issuers and amend existing legislation to address the risks of stablecoins, citing the recent stablecoin collapse.

Overheard, dogecoin edition

Elon Musk is a dogecoin fan. So it’s only natural that he gets along great with the memecoin’s co-creators, right? Right? Wrong.

He’s palsy enough with Billy Markus, but isn’t a big fan of Jackson Palmer. For his part, Palmer seems unbothered, and isn’t afraid to let the people know. “Elon Musk was and always will be a grifter but the world loves grifters. They love the idea that they may also be a billionaire one day, and that’s the dream he’s selling,” he said in an interview with Crikey.

Musk hit back on Twitter, accusing Palmer of not being much of a coder. Jackson Palmer is a tool. And Palmer always forgets to mention that he never wrote a single line of dogecoin code …” Musk tweeted. He also criticized code Palmer had written to fight crypto spambots, Musk’s biggest pet peeve.

Billy Markus then chimed in, saying he didn’t think either of them actually did much for dogecoin, which was based on litecoin’s code. “The people after us did exponentially more than either Jackson or I did on the code base. I think I wrote like 20 lines of code and copied the rest,” he tweeted


Deal flow

Protego Trust Bank raised a $70 million series A. FTX Ventures, Solana Ventures and Coinbase Ventures participated in the round, which quietly closed in late 2021. The company is reportedly already working on a series B round that would bring it to a $2 billion valuation.

Procurement software company Zip reached a $1.2 billion valuation after raising $43 million in series B funding. Zip’s customers include Coinbase, Toast and Airtable.

Israeli blockchain-scaling startup Starkware Industries raised $100 million in series D funding in a round led by Greenoaks Capital and Coatue. The company is responsible for a ZK rollup popular with developers who want to make Ethereum transactions cheaper and faster. Starkware quadrupled its valuation to $8 billion over the last six months.

Babel Finance just reached a $2 billion valuation after an $80 million series B round from investors including Jeneration Capital, 10T Holdings and Circle Ventures. The company provides crypto asset management products and was funded by Tiger Global and Sequoia Capital in its series A.

Auto insurance provider and loan refinancing startup Caribou became a unicorn. Its $115 million series C round was led by Goldman Sachs Asset Management and boosted the company to a $1.1 billion valuation.

Equipifi, which offers “buy now, pay later” services for traditional financial institutions, raised $12 million in a series A round. Deferred payment products have drawn increasing scrutiny in recent months, but Equipifi doesn’t appear to be slowing down.


SDF has established an ongoing Carbon Dioxide Removal (CDR) commitment. Together with the Stellar ecosystem, we will pay for removal of carbon emitted by the network every year, and are retroactively paying for the removal of the historical carbon footprint of the network since launch.

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Thanks for reading — see you tomorrow!

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