Weekly Top Stories - 10/03/25

In this week's newsletter, Thad Pinakiewicz explains the significance of the SEC’s no-action letter granted to DoubleZero (offset by some less bullish developments in Washington); Lucas Tcheyan analyzes the debut of NFTs on Hyperliquid; and Christopher Rosa takes a look at the Swift interbank messaging network’s latest blockchain foray.

SEC Acknowledges Functional Tokens Aren’t Profit Promises

In a landmark move, the SEC’s Division of Corporate Finance issued a no-action letter (“NAL”) to DoubleZero for its proposed 2Z token distribution saying, “Based on the facts presented, the Division will not recommend enforcement action.” This week, a crypto project came in seeking forward guidance on the legal status of a proposed token launch and walked away with a productive response. Previously, during Gary Gensler’s tenure as Securities and Exchange Commission chairman, crypto builders faced a regime where the agency's guidance was almost exclusively backward-looking enforcement, with projects invited to “come in and register” instead receiving Wells notices on their way out. While this victory for crypto is largely due to a change of opinion and leadership at the SEC, credit is due to DoubleZero’s legal team for clearly outlining the token’s design.

An SEC no-action letter signals that the agency’s staff does not intend to recommend enforcement action against a party for a proposed activity, giving the requester regulatory comfort without formally binding the commission. While not legally precedent-setting, these letters are often influential by clarifying gray areas of securities law and guiding industry practices, making them useful signals of regulatory tolerance and expectations.

Prior to this NAL, the only other such forward guidance from the SEC on token issuance we recall was an April 2019 NAL for TurnKey Jet. In that NAL, the SEC staff signaled that it would not take enforcement action provided the token did not trade on secondary markets, maintained a stable value of $1, and could only be used to purchase services from the issuer — essentially that it must function like airline miles or other rewards programs (a highly restrictive design). The DoubleZero NAL represents a favorable view of tokens with significantly more usefulness and tradability, and thus represents a significant evolution by the SEC in the crypto industry’s favor.

DoubleZero’s pitch is interesting: 2Z is not a speculative claim on profits, but a functional incentive token engineered to coordinate decentralized physical infrastructure (DePin). The project is looking to establish a network of under-utilized fiber-optic bandwidth worldwide, to create a decentralized, purpose-built internet for distributed systems like blockchains. The network is designed to incentivize fiber-optic infrastructure owners, Network Providers, to utilize their latent fiber, and to incentivize operators, Network Participants, to coordinate traffic routing between Network Providers' infrastructure to keep the network robust and failure-resistant. Network Users, those accessing this private internet, then pay to access the network; that payment is programmatically routed to productive Network Providers and Participants in the form of the 2Z token.

In its letter to the SEC, the DoubleZero team homed in on the fourth prong of the Howey test: whether holders can reasonably expect profit based on the managerial efforts of others. DoubleZero effectively explained that the 2Z token merely acts to coordinate bandwidth suppliers and users. The profits (and losses) expected by Network Providers and Network Participants are directly attributable to their own actions in contributing to and operating the Double Zero network, not others’ actions. DoubleZero framed Network Providers and Participants as working within the operating rules of an incentivized network, something the SEC has already given a green light to (twice). An asset must pass all prongs of the Howey test to be considered an investment contract (and therefore a security), and without the fourth prong (the expectation of profits from the efforts of others) the 2Z token is not subject to SEC oversight.

Commissioner Hester Peirce publicly celebrated the letter and used it to reemphasize one of her longstanding views: economic substance, not form, should drive the SEC’s securities analysis. Peirce has long been a counterbalance to the overreach of the SEC under her predecessor, Gary Gensler, dissenting on many of the SEC’s crypto enforcement actions. In her “New Paradigm” speech after being made head of the SEC’s newly-established Crypto Task Force, she argued that many digital assets are not securities and pushed for safe harbors tailored to tokens. This week’s NAL is one of the first concrete actions that SEC staff has taken on this front. Under Peirce’s leadership, the Crypto Task Force has hosted five industry roundtables and conducted more than 150 meetings with crypto firms and other stakeholders.

OUR TAKE:

This is an encouraging move from the SEC for crypto. For years, projects were cast as criminal enterprises by default and submitted to one of several terrible options: get crushed by enforcement; navigate an opaque, slow registration process that only one project emerged from successfully; or deny services to U.S. residents (many of whom manage to circumvent the geofencing anyway).

Prior to this announcement, the only other crypto project we’re aware of that has had success with the SEC, if you could call it that, was Blockstack (later renamed Stacks) with its STX token. Stacks launched its token as a registered securities offering, through a crowdfunding exemption (Reg A) that allowed for minimal disclosures. Two years later, Stacks stopped filing with the SEC after self-determining the network was decentralized enough to not be a security. The SEC chose to not crack down on Stacks after a three-year investigation. This was a quiet, implicit acceptance of the project's stance, rather than the explicit acknowledgement given this week to DoubleZero.

This is obviously a win for DoubleZero, but it will likely also be a boon to token designers worldwide. This provides a roadmap for structuring and development of a functional utility token that this SEC will not consider an investment contract, though crucially the NAL can only be seen as interpretive guidance relative to tokens with substantially similar designs to the one described by DoubleZero. While the SEC staff is explicitly saying it would not bring an enforcement action against DoubleZero on the basis that this type of token offering is an investment contract, the NAL is not comprehensive about the SEC’s views on all types of token designs. The relief is conditional and fact-specific. This is staff-level relief, not a broad rule change. It doesn’t legalize prior distributions or token flows outside the limited design. It doesn’t preclude future enforcement if facts shift or the SEC’s view changes, such as under a different administration. And for every token that tries to mimic 2Z’s structure, legal teams will need to show discipline, documentation, and tight adherence to the “utility-first” structure described in the NAL.

While this is a bright star for crypto, it may be the last news, positive or negative, we hear from the regulators for a while. The federal government has shut down amid budgetary arguments, an unfortunately regular occurrence across administrations, and we can expect very little from regulators until the argument is settled (prediction markets expect the shutdown to last longer than two weeks).

The shutdown may indeed delay other SEC actions on crypto that we expect are forthcoming, such as a crucial “innovation exemption” to allow stocks to trade inside DeFi applications, something that the SEC is working to bring “very soon,” according to a report from The Information this week.

Meanwhile, the Commodity Futures Trading Commission is in limbo, with Brian Quintenz's chairman nomination withdrawn and acting chairman Caroline Pham the sole commissioner on the usually five-person panel. So savor the DoubleZero news, because the next win may take a while. – Thad Pinakiewicz

Cat's Out of the Bag: Hyperliquid Airdrops NFTs to Early Users

On Monday, Hyperliquid airdropped 4,600 “Hypurr” NFTs to early users of the protocol. Users had to opt in to receive the non-fungible token when registering for the airdrop last November, with the top 5,000 users by total points eligible to receive them. Of the 4,600 airdropped, 144 were reserved for the Hyper Foundation and 143 were distributed to core contributors such as Hyperliquid Labs and NFT artists. The foundation described the motivation behind the airdrop as “to share a memento with those who believed in and contributed early on to Hyperliquid’s growth.”

Day-one trading was explosive, with the floor price reaching nearly $70k following the initial release and a sale of a rare Hypurr for 9,999 HYPE (equivalent to nearly $470k at the time) already ranking as a top 500 NFT sale of all time. In less than a week since launch, the collection has done nearly $90 million in volume, more than double the next collection (CryptoPunks), making it a top 100 collection by all-time trading volume.

According to the terms and conditions, holders of a Hypurr NFT are granted an exclusive, royalty-free, transferable, sublicensable license to use and commercialize the specific artwork associated with their NFT across any media, for as long as they hold it. No additional utility is promised and the terms state only that “Hypurr NFTs may from time to time be associated with certain benefits, features, or entitlements (‘Utility’).”

OUR TAKE:

In many respects, NFTs are a relic of the 2020–2021 boom. Volumes are down more than 90% from their peak, floor prices for all but the most iconic collections have drifted toward zero, and many survivors have pivoted to fungible tokens (see Pudgy Penguins, Azuki, Doodles, Moonbirds). But as the Game of Thrones line goes, “What is dead may never die.” NFTs haven’t disappeared; they’ve simply evolved. Their most popular original use cases, community-building and speculation, have largely been absorbed by memecoins.

A key differentiator for Hypurr is its distribution model. Most NFTs have been used to bootstrap communities that rely on hype (lowercase, not Hyperliquid's native token) to stay relevant. Hypurr flipped that script. It was airdropped to one of the strongest user bases in crypto: Hyperliquid’s early supporters. These holders are already aligned with the project’s vision, well-capitalized from one of the largest airdrops in crypto history, and anchored by one of crypto’s fastest-growing, most-lucrative projects. The NFTs don’t need to sustain the community – the underlying exchange does that. Already, speculation is mounting that holding a Hypurr could entitle owners to future Hyperliquid ecosystem airdrops, including the next HYPE distribution, or even fee rebates on trading.

This model, building an NFT community on top of an existing business, may be one viable way forward for NFTs outside of historically relevant collections like CryptoPunks. Pudgy Penguins is the clearest parallel. After Luca Netz’s 2022 acquisition, the team spent years turning the collection into a consumer brand with toys, licensing, and now its own chain, Abstract. But Pudgy had to do it the opposite way: building a business after the NFT collection was already in the market, a much harder road.

More recently, MegaETH leveraged NFTs as a fundraising mechanism, raising over $13 million from buyers this year in anticipation of a future token drop. Without a large, revenue-generating product to anchor it, volumes quickly faded. Hypurr sits in between: not a bootstrapping or fundraising mechanism, but an airdrop embedded directly into an already thriving ecosystem. That foundation makes it more likely to sustain relevance even without explicit utility, while positioning it as a Veblen good. It is a scarce cultural asset whose value derives as much from status inside the Hyperliquid community as from any future use case.

The timing of the drop is also interesting. Hypurr landed just as Hyperliquid began ceding volumes to Aster (covered previously by Galaxy Research here). Against that backdrop, the airdrop could be seen as a strategic play to recapture mindshare, redirecting attention back to Hyperliquid’s ecosystem just as it was starting to face doubts. Whether by design or coincidence, it worked: Hypurr immediately dominated crypto Twitter chatter, pulled millions in secondary volume, and reinforced the narrative that Hyperliquid still knows how to command the spotlight.

Looking ahead, the success of Hypurr NFTs is far from guaranteed. It’s hard to judge longevity with less than a week since its launch. But in crypto, attention is currency, and Hypurr just bought Hyperliquid more of it. – Lucas Tcheyan

SWIFT’s Blockchain Era: Faster Payments or Faster Promises?

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) announced on Monday that it will partner with ConsenSys and Linea to integrate a blockchain-based shared ledger into its infrastructure. Ethereum development company ConsenSys will build the phase one prototype and chart the future roadmap. SWIFT is a messaging system that helps facilitate global interbank payments and transfers. It processed more than 11.5 billion messages in 2023 relating to perhaps hundreds of trillions of dollars worth of payments, securities, and foreign exchange transactions.

SWIFT has tested several blockchain integrations in the past, most recently in November 2024 with UBS Asset Management and Chainlink, completing a pilot that bridged tokenized fund transactions to existing payment systems. That workflow used ISO 20022, a global financial messaging standard that carries rich structured payment data and showed that SWIFT messages can trigger onchain actions for tokenized funds such as subscriptions and redemptions through smart contracts. Linea, ConsenSys’s Ethereum layer-2 network, already works with Chainlink’s Cross Chain Interoperability Protocol (CCIP), a protocol for moving data and tokens across blockchains, giving banks a clear path from SWIFT messages to onchain execution.

In its announcement, SWIFT says the shared ledger will “enable real-time, always-on cross border payments and settlement.” Transactions will be recorded, sequenced, validated, and governed by smart contracts that automatically enforce rules. The design aims to interoperate with existing and emerging networks while preserving the trust, resilience, and compliance that SWIFT offers.

OUR TAKE:

SWIFT is a secure messaging and standards network for cross-border payments – it does not have a central ledger, hold any customer funds, and does not operate payment rails. When Bank A pays Bank B, SWIFT carries the instruction, but each bank updates its own books and manages balances through nostro ("our money with you") and vostro ("your money with us") accounts. This creates split records across institutions, causing reconciliation work, cutoff times, and manual exceptions across time zones. The model also carries FX risk because transfers can start outside banking hours and rates may move before settlement, changing the amount delivered. As a result, the workflow and underlying liquidity rails are antiquated, slow, and constrained by time zones.

The pilot program proposes an update to SWIFT's secure messaging and standards layer to instead use a coordinated, shared-state blockchain ledger. By utilizing a ledger that can record, sequence, validate, and enforce rules automatically across many participants, SWIFT proposes a neutral coordination layer banks can trust while keeping the choice of regulated digital cash rails open in each corridor. The payoff is fewer breaks, lower operational risk, and smaller intraday liquidity buffers, plus instant availability across time zones. In the future, this could mean tokenized bank balances represented one-to-one on the ledger, transfers that settle onchain around the clock, compliance that is encoded in smart contracts, connectivity to central bank platforms or stablecoin issuers, and an immutable audit trail for every movement.

In the near term, there is no confirmation of a liquidity or settlement layer. A shared blockchain ledger would let banks coordinate records, sequence transactions, and validate payment instructions with smart contracts. Instant settlement will not be possible until participants hold prepositioned liquidity on the ledger. The pilot moves in that direction, but true 24/7/365 settlement remains aspirational for now. Banks would need to settle in tokenized assets, stablecoins, or a central bank digital currency (CBDC), and the method(s) for doing so is still undecided.

Complications span jurisdiction and regulation, governance, data privacy, migration cost, and competition. Finality depends on the settlement asset; outside central bank money, tokenized deposits or bank stablecoins must satisfy local rules on legal finality, intraday liquidity, and redemption. SWIFT has not named a single instrument and is likely to stay asset-neutral, aiming to interoperate across deposits, stablecoins, and CBDCs rather than picking a token. Ripple positions XRP as a bridge asset for on-demand liquidity, but whether SWIFT would adopt XRP directly or route around it through interoperability will come down to bank demand, regulatory comfort, and total cost. Zero-knowledge (ZK) rollups can conceal sensitive fields while proving that required checks passed and can map those checks to ISO 20022 structures, though banks still need auditability, key management, and retention controls. Migration remains nontrivial, because institutions must integrate their core banking systems, screening tools, and operations, and will run old and new flows in parallel for some time, which tempers timelines.

The path is iterative, not a rip-and-replace. First, banks can utilize a shared ledger while the cash leg often remains offchain. Next, regulated tokenized cash closes the loop for true real-time settlement that runs every hour of every day. SWIFT’s neutral ledger makes it possible to route across whichever regulated liquidity proves cheapest and safest in each corridor as the system matures.

The direction is important, but the hard parts are governance, legal finality, and integration at global scale. Until SWIFT names the production stack and publishes concrete corridor results, treat the Linea angle as promising but still provisional. — Christopher Rosa

Chart of the Week

Zcash (ZEC), one of the oldest cryptocurrencies and one of the best-known privacy coins, surged ~219% this week, climbing from $47 to ~$150 in just over seven days. The last time ZEC traded at these levels was May 2021. Hyperliquid also just listed ZEC perps for traders, as of Thursday. Community voices helped fuel the price move. Helius CEO Mert (@0xMert_) argued in a widely circulated thread that privacy represents one of crypto’s “three core missions,” alongside markets and store-of-value. Investor Naval Ravikant (@naval) also tweeted that “Bitcoin is insurance against fiat; Zcash is insurance against Bitcoin,” a post that drew more than 2 million views.

The ZEC/USD move underscores renewed investor interest in privacy infrastructure. With regulators laser-focused on stablecoins and centralized rails, privacy assets are perhaps enjoying a narrative revival as a counterbalance. Notably, while it did also rise (+17% in the last week), Monero (XMR), the market’s largest privacy coin, did not rise nearly as much as ZEC. – Will Owens

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