Bipartisan U.S. senators are preparing to vote on a major crypto market structure bill on Thursday in Washington, D.C., following an earlier delay this week due to bad weather. Lawmakers are expected to appear on Capitol Hill to discuss proposed changes and decide whether to add the bill to the CLARITY Act.

This markup is the first major attempt to advance the bill after the Senate Banking Committee delayed its own markup when Coinbase withdrew its support.

Senators introduce new changes to the bill

Multiple lawmakers have submitted amendments to adjust the bill before a final vote. Senator Michael Bennet of Colorado suggested rules to limit crypto holdings and activities for government officials and their families, which include the U.S. president, the Vice President, and United States Representatives. This is to avoid conflict of interest, though it is not yet clear if the committee will approve this proposal.

Senator Amy Klobuchar of Minnesota filed two amendments. One would delay the bill until the Commodity Futures Trading Commission (CFTC) has at least four commissioners, including two from the minority party. The second amendment narrows the definition of a “retail participant” and clarifies the responsibilities of the Digital Commodity Retail Advocate, a role meant to protect small investors.

Senator Dick Durbin proposed measures to ban bailouts for crypto issues and add rules to stop fraud in crypto ATMs. Meanwhile, Senators Tommy Tuberville and Jerry Moran introduced proposals aimed at limiting foreign adversaries from participating in U.S. crypto markets.

These amendments focus on improving oversight and protecting U.S. investors. Senators will discuss each proposal before voting, and all committee members are expected to attend after the weather is clear.

Push for clear crypto rules

In a video posted on X, Senator Kirsten Gillibrand highlighted the need for clear guidelines for the crypto market. She said the bill is essential so that companies and investors can understand how to follow the law. She highlighted that proper regulations would protect consumers and make sure buyers know the risks.

Common-sense crypto market structure regulation will protect consumers and market players alike.

It's a win-win. pic.twitter.com/NbXeytRFQY

— Kirsten Gillibrand (@SenGillibrand) January 27, 2026

“The need for market structure regulation could not be more important. We need these rules on the road so participants know how to do things legally and appropriately,” she said.

She added that clear rules would help crypto companies continue operating in the U.S., and also support New York’s position as a global financial hub.

The committee will review and vote on each amendment before deciding whether to send the bill to the Senate floor. Some senators, including Roger Marshall and Dick Durbin, expressed that they will not push their credit card swipe fee proposal during the markup. The process will be observed by the crypto space as the Senate faces the government funding deadline, which could lead to a shutdown if not resolved.

Also Read: Kansas Proposes Bitcoin Reserve Using Unclaimed Digital Assets

Bitcoin (BTC) and Ethereum (ETH) are stalling near $89,000 and $2,900 as institutional capital continues to exit the market. Both assets remain capped by key resistance levels, with price stability masking a broader shift toward risk reduction.

Between January 19 and 23, roughly $1.8 billion flowed out of U.S. crypto ETFs, the largest weekly outflow since late 2025. At the same time, on-chain data shows rising exchange inflows, increasing realized losses, and falling derivatives leverage, pointing to a market moving decisively from profit-taking into active de-risking.

A market stabilizing, not recovering

Bitcoin’s slide toward $89,782 reflects sustained selling pressure. Repeated failures in the $90,000–$93,000 range confirm that demand has not been strong enough to reclaim higher ground.

From its October 2025 all-time high (ATH) of approximately $125,000, BTC has seen a significant drop of 30%. The Relative Strength Index (RSI) is currently sitting at 46.56, indicating a neutral-to-bearish momentum that lacks the “oversold” signal needed for a sharp reversal.

On the other hand, Ethereum is hovering near $3,000, but failing to reclaim the $3,300 area that would signal real momentum returning.

Ethereum is down about 42% from its ATH near $4,800. Its Relative Strength Index (RSI) of 46.34 confirms a similar lack of buying pressure at these local resistance zones.

Both assets are now sitting in a “dead zone” where buyers are present, but not aggressive, and sellers don’t need to do much to keep the lid on.

Technically, momentum has cooled. The RSIs of BTC and ETH read neutral-to-soft rather than “washed out.” Markets typically need either fresh demand or true exhaustion selling to reverse cleanly. Right now, neither is obvious.

The ceiling is technical, and the pressure is flow

The $1.8 billion weekly outflow from U.S. ETFs suggests institutions aren’t simply trimming profits. They are reducing risk exposure into strength and using liquidity windows to exit.

That’s a classic “loss-realization” phase: prices can stop falling fast, but money is still walking out the door.

Despite the recent weekly crash, 2026 started on a high note for Ethereum, which reached $11 billion in YTD inflows by mid-January, outperforming Bitcoin on a proportional basis relative to assets under management.

Stabilization after tough Q4, but momentum still lags

Bitcoin has started 2026 on a steadier footing after a brutal end to last year. Following sharp losses in November and December, BTC is up about 2% in January, signaling stabilization rather than a rebound.

While Bitcoin remains roughly 30% below its late-2025 peak near $128,000, year-to-date inflows of around $678 million suggest institutional support is still stronger than in prior bear markets.

Ethereum is seeing a similar, weaker recovery. After a 28% drop in Q4 2025, ETH is up just 0.9% in January, with choppy price action and about $630 million in recent weekly outflows. The market continues to struggle to reclaim the $3,000 level.

Despite being roughly 42% off its highs, Ethereum pulled in about $12.6 billion of inflows over 2025, pointing to lingering institutional interest, just not enough yet to drive a sustained breakout.

ETF flows turn risk-off in January

U.S. spot Bitcoin ETFs reversed sharply in January, posting about $1.33 billion in net outflows for the week ending January 23, the worst since early 2025 and a sharp flip from the prior week’s inflows. The sell-off peaked on January 21 with a $709 million single-day redemption, signaling broad institutional de-risking.

BlackRock’s IBIT showed late-month resilience with a $15.9 million inflow on January 26 and still leads with $63.4 billion in cumulative inflows. Meanwhile, Fidelity’s FBTC and Grayscale’s GBTC saw the heaviest exits, highlighting how ETF demand remains fragile as Bitcoin trades below key resistance.

Ethereum spot ETFs followed Bitcoin into risk-off mode, logging $611 million in net outflows for the week of January 19–23. The pullback erased much of January’s early gains after a $229.9 million single-day redemption on January 20, underscoring choppy institutional positioning around current price levels.

BlackRock’s ETHA led withdrawals with $432 million exiting over the week, though it still holds $12.4 billion in cumulative inflows. Fidelity’s FETH and Grayscale’s ETHE also saw steady redemptions, while Grayscale’s mini ETH product was a rare bright spot. Despite the volatility, total ETH ETF AUM sits near $18.1 billion, suggesting long-term institutional interest remains intact even as short-term risk is trimmed.

What would change the setup

Bitcoin and Ethereum are no longer just consolidating; they are being stress-tested. With BTC pinned near $89,000 and ETH struggling around $2,900, both assets remain trapped beneath heavy resistance as institutional flows turn decisively defensive.

The $1.8 billion pulled from U.S. crypto ETFs in a single week signals a shift from passive profit-taking to active risk reduction, marking a broader loss-realization phase. Until flows stabilize and these core ceilings are reclaimed, rallies are likely to fade quickly, leaving the market in a fragile balance between consolidation and deeper downside.

Also read: Ethereum Stakers Wait 61 Days for 2.8% Yield: Why Demand Is Rising

RIVER, the native asset of a chain-abstraction stablecoin system, fell sharply over the past 24 hours, dropping nearly 29% and is now trading around $49. The decline happened right after the token hit an all-time-high (ATH) of about $87, concluding a month where its value surged nearly 2,000%.

Analysts had already warned about the possible risk of a crash due to low usage and possible manipulated trading, heightened by using leverage options like 80X.

Market watchers attribute this correction to extreme supply concentration and large profit-taking by early investors who exited their positions after a period of rapid growth.

At the time of writing, RIVER is trading at $49.11, with a decline of 29.57% on the day. The total market capitalization has declined by 29.53% in 24 hours, reaching $924.07 million. The 24H volume is $136.22 million with a rise of 70.15%. The circulating supply currently is 19.6 million RIVER, accounting for approximately 19.6% of the 100 million maximum supply.

Institutional funding impact

One of the key factors that contributed to the initial price explosion was a funding round, which drew the attention of institutional investors. Prominent investors like TRON founder Justin Sun and Arthur Hayes’ Maelstrom Fund gave the project a certain degree of legitimacy that helped RIVER boost its market capitalization. 

The funding injected into the project was intended to help the project’s objective of developing a multi-chain stablecoin abstraction layer that would render the need for bridges obsolete when transferring stablecoins between different blockchains.

Major centralization risks

Despite the project’s buzz, on-chain data shows that around 94% of the total RIVER supply is currently held in five individual wallets. This level of concentration of the total supply in the hands of a few individuals means that a handful of investors can create a huge effect on the market price.

Experts in the industry have warned that such a system is fraught with danger and that these ‘whales’ can create massive price crashes at will, leaving retail investors who purchased during the peak with massive losses. The future stability of RIVER is unclear as the market assesses the consequences of this supply distribution.

Although the project is still in the process of building its ecosystem by partnering with other networks such as TRON and Sui, the looming threat of further liquidation by the major holders casts a shadow over the price. Regulatory scrutiny could also increase if this uneven distribution leads to more claims of market manipulation or artificial volume.

The RIVER token is currently experiencing a similar pattern to what most of the other tokens that spiked during the bull market and went downhill once trading euphoria collapsed. While support from industry giants helped drive its 2,000% rise, the 29% fall acts as a reminder of the risks tied to highly centralized assets.

Also Read: Trove Token Crashes 95% After Abandoning Hyperliquid

Researcher Thomas Thiery, known as soispoke, along with other contributors, proposed Fork-Choice Enforced Inclusion Lists (FOCIL, EIP-7805) on Wednesday, aiming to protect Ethereum’s fundamental principles. The mechanism is expected to become a part of the upcoming Hegota upgrade, currently targeted for late 2026.

The adjustment aims to prevent network censorship by allowing multiple validators to work together, ensuring valid transactions are included according to the fork-choice rule. 

By requiring transactions to be processed within a set timeframe, the proposal seeks to limit the growing power of centralized block builders who currently have a lot of control over transaction ordering. Developers are prioritizing this change to keep Ethereum a neutral and decentralized ledger rather than letting it become dominated by a few intermediaries.

A push for fairness

The move toward FOCIL is not just a technical adjustment; it reflects a call for fairness built into Ethereum’s code. The network has had to contend with issues related to the growing influence of specialized builders who are able to selectively decide which transactions to validate in order to maximize their profits or in response to external pressures. 

FOCIL removes this kind of exclusionary power from the centralized bodies and returns it to the thousands of individual validators who help to support the network. This is a reflection of a very important struggle within the environment: the struggle to prevent Ethereum from becoming what it originally set out to replace, the centralized banking systems.

Breaking the builder monopoly

The main feature of EIP-7805 sets a binding requirement for block creation. Currently, a single block builder decides which transactions get included in a block. Under the new proposal, a group of validators will create an inclusion list of pending transactions from the public mempool. 

Thiery’s research paper, “Who Wins Ethereum Block Building Auctions and Why?” shows the urgency of this transition. The study reveals that only three builders produced 80% of all Ethereum blocks between late 2023 and early 2024.

This “chicken-and-egg” problem means dominant builders receive exclusive order flow because they win blocks, and they win blocks because they have exclusive order flow. FOCIL breaks this cycle by introducing a committee-based design where a rotating group of validators get local inclusion lists based on their own view of the mempool.

Cryptographic guarantee of neutrality

If a builder tries to leave out these transactions, the fork-choice rule will require validators to reject that block and select another one that follows the list. This offers a cryptographic guarantee that no one entity can permanently gatekeep the blockchain.

The proposal responds directly to the delay of similar features in the previous Glamsterdam upgrade. Although Glamsterdam, set for the first half of 2026, focuses on Proposer-Builder Separation (ePBS) to promote fairness in the network, developers concluded that FOCIL needed more thorough review before becoming a key feature. 

Future protocol resilience

By separating censorship resistance from block production, Ethereum can continue to grow with builders without compromising its credibility. For users, this means better assurance that their transactions won’t be unjustly blocked or delayed by institutional competitors or centralized intermediaries. For the wider industry, it sets an example for protocol-level resistance against the “cartelization” of block building, ensuring that the network’s rules stay clear and fair.

Adding FOCIL as the primary feature for Hegota shows the dedication to the blockchain’s core principles. As the scale and resource requirements for the node operators grow, the risk of centralization becomes more prominent. Through this move, Ethereum can maintain its position to build a system that is open to all, irrespective of the changes in the regulatory or economic landscape.

Also Read: Ethereum Stakers Wait 61 Days for 2.8% Yield: Why Demand Is Rising

A U.S. federal appeals court has dismissed a lawsuit against Ripple Labs, the company behind the cryptocurrency XRP, ruling that the case was filed too late under securities law. The lawsuit, brought by investor Bradley Sostack, alleged that Ripple sold XRP as an unregistered security. 

In a recent filing, the Ninth Circuit Court ruled that Ripple started offering XRP to the public in 2013, and U.S. law only allows claims like this to be filed within three years. The court also said that XRP sales in 2017 were not a separate offering. As a result, Ripple does not have to face federal securities claims from the investor.

Investor lawsuit dismissed for being late

Sostack filed his complaint in 2019, six years after XRP was first sold to the public. He argued that the monthly XRP sales from Ripple’s escrow account should count as ongoing offerings. However, the court rejected this claim. It said the 2017 XRP sales were part of the original offering in 2013 and did not reset the three-year time limit for lawsuits.

XRP was created in 2012 through the XRP Ledger. Ripple Labs received 80 billion of the 100 billion tokens that were created. The ledger became available to the public either in 2012 or early 2013. In 2017, Ripple began releasing one billion XRP each month from its holdings. Thousands of users bought XRP during these sales, including via the ledger’s built-in exchange.

Sostack claimed that these later sales made XRP a continuing offering, but the court disagreed, saying all XRP stayed the same and were part of the original sale.

Another legal win for Ripple

This is another major win for Ripple. It follows the firm’s settlement with the U.S. Securities and Exchange Commission (SEC) in August 2025, which ended a nearly five-year legal battle. The agency accused Ripple of raising $1.3 billion by selling XRP without registering it as a security. As part of the settlement, Ripple was ordered to pay a $125 million penalty to the SEC, which had already been placed in escrow.

XRP hasn’t really reacted to the recent development. At the time of writing, the token is trading for $1.90. This is just a modest 0.08% drop from the previous day, with a 14% surge in trading activity reaching about $2.39 billion in trading activity with its market cap sitting at $116 billion.

This dismissal is another big win for Ripple. The case added to the debate that questions whether XRP is an unregistered security, a topic that has caused a lot of talk in the crypto world.

Also Read: Ripple Launches Treasury Platform to Target Enterprise Cash

Fidelity Investments announced on Wednesday that it will launch its own stablecoin, the Fidelity Digital Dollar, or FIDD. The token will be accessible to institutional and retail investors in the coming weeks and will maintain a 1:1 peg with the U.S. dollar using cash reserves and short-term U.S. Treasuries.

With this launch, Fidelity is aiming to use its large existing infrastructure to compete directly with established players like Tether, Circle, and Ripple during a time of rapid regulatory changes in the United States.

Regulatory compliance and framework

As per a report, the rollout follows the passage of the Genius Act, a federal law that created an official U.S. regulatory framework for digital dollars. FIDD is based on the Ethereum blockchain and is intended to be a high-efficiency settlement layer for Fidelity’s trading and wealth management activities.

Mike O’Reilly, President of Fidelity Digital Assets, said that as digital asset adoption continues to grow, the company saw the stablecoin launch as the logical next step for the market and its clients. The launch aims to create a compliant, easy-to-use environment for around-the-clock liquidity and global payments.

Vertical integration advantage 

A key advantage of Fidelity in the stablecoin market is its vertical integration as a traditional financial giant. While the market leaders Tether and Circle are primarily issuers and rely on third-party partners for banking and custody, Fidelity operates its own federally chartered national trust bank.

This enables the firm to act as the issuer, custodian, and exchange simultaneously. By managing the entire financial framework internally, Fidelity reduces counterparty risk often linked with stablecoins, providing a “closed-loop” system that may attract conservative institutional investors who have previously steered clear of the fragmented sector.

Market competition and testing

The launch of FIDD comes nearly a year after reports indicated Fidelity was testing a stablecoin. The current market is very competitive. Tether-issued USDT still leads with about 60% market share. Circle comes in at second place with USDC having approximately 23%, followed by others in a relatively small margin.

Recently, Tether has launched its USAT stablecoin. While Fidelity uses its own bank for safety, Tether’s move attempts to neutralize its “offshore” reputation by submitting to the GENIUS Act and moving its primary reserve management to U.S.-regulated firms.

The long-term effects of FIDD’s launch could lead to the easing of traditional capital markets. By moving dollars onto a blockchain, Fidelity hopes to improve efficiency in its various wealth management platforms since digital transfers tend to be cheaper and faster than traditional networks like ACH.

Future market outlook

O’Reilly noted that many firms use stablecoins as the settlement method on crypto platforms because they offer liquidity for providers and firms year-round at a low cost. Additionally, Fidelity’s announcement hinted that the company might manage reserves for stablecoins issued by other firms, which could position it as the behind-the-scenes infrastructure for the industry.

As the industry waits for the outcome of future legislation, such as the Clarity Act, the success of FIDD will likely depend on whether Fidelity can transfer its trillions of dollars in managed assets to this new digital platform. The company already has extensive knowledge of managing reserves, and a large customer base gives it a competitive edge.

Also Read: USDC Stablecoin Is Not a Rival to Visa and Mastercard: Circle CEO at Davos

Nigeria’s crackdown on crypto exchanges continues to intensify as regulators tighten rules on crypto exchanges. Over the past few years, authorities have increased oversight and placed heavy restrictions on banks, exchanges, and even crypto transfer services like peer-to-peer trading, making it harder for both users and businesses to trade freely. 

The latest development comes from Quidax, a Nigerian crypto exchange that has halted its peer-to-peer (P2P) trading service in the country just five months after it went live, according to a local report.

This decision seemingly follows increased regulatory pressure on crypto platforms, especially those involved in direct user-to-user transactions. It has also sparked a debate in the Nigerian crypto space on whether the government is trying to slow down the use of crypto in the country or turn it off completely.

Why P2P trading became popular in Nigeria

Peer-to-peer trading (P2P) has been one of the most common ways Nigerians transfer money with each other, either locally or internationally. The system allows users to trade directly with one another instead of going through the exchange itself. The payments are usually made through bank transfers, which the platform acts as a meeting point, in many cases, an escrow service.

The trading model made crypto easy for citizens to access and helped keep trading active even during periods when banks were restricted from offering crypto services. It also helped improve liquidity and allowed users to easily find buyers and sellers at any time.

However, the Nigerian regulators have long viewed it as a problem. Authorities claim that the system has been used by criminals to carry out fraud and move illegal money to avoid transaction trails, as well as to influence exchange rates outside official markets.

Quidax’s solution to the issue 

Initially, Quidax tried to address this issue by introducing strict control when it launched its P2P service. Users who wanted to operate as merchants were required to complete full identity checks, including two-factor authentication, and go through an approval process before being allowed to trade. Only verified traders were allowed to post ads and interact with customers.

Still, with the measure, the feature was still suspended, which suggested that the effort was to keep P2P activity within a controlled environment that regulators could monitor. However, even with these safeguards, the P2P feature was still suspended, showing that the effort to comply alone was not enough under the current regulations.

However, the exchange clarified that while P2P trading has been paused, other services remain active. Users can still access instant swaps and order-book trading.

Adoption despite regulatory crackdown

Despite this crackdown on crypto, Nigeria remains the largest crypto market in Africa. From 2024 to 2025 alone, the country processed around $92.1 billion in crypto transactions, which is three times that of other major African countries like South Africa. 

Last year, the House of Representatives, in a public hearing held in Abuja, Nigeria, also urged authorities to stop viewing young Nigerians as internet fraudsters. In a previous report, a member of the house, Olufemi Bamisile, said that the security agencies, including the Economic and Financial Crimes Commission (EFCC) and the Nigeria Financial Intelligence Unit (NFIU), should stop the ‘misplaced aggression on Nigerians that trade crypto,’ saying that not every young person with a crypto wallet is a fraudster.

In short, Nigeria’s crypto market seems to be entering a new phase. Crypto is still active in Nigeria, but platforms are being forced to drop or rethink services that regulators see as risky. For now, P2P trading appears to be the most affected, even as other parts of the market continue to operate.

Also Read: Nigeria to Track Citizens’ Crypto Income Using National ID, TIN

The 1inch Network token (1INCH) dropped nearly 20% this week after on-chain data showed an investor’s wallet liquidating its remaining vested tokens in a single $14M transaction. The sale hit thin liquidity on Ethereum markets, sparking panic selling that erased close to $40 million in market value.

The move came despite a public statement from 1inch denying that any tokens were sold by the team, treasury, or wallets under its control.

Vesting wallet exit, not random volatility

Blockchain data shows the selling address had previously received around 15 million 1INCH tokens through early team or investor vesting. Over time, portions of that allocation had already been distributed. This week’s transaction marked a full exit of the remaining balance.

While the wallet is not controlled by the 1inch team, its history ties it directly to early allocations, making the sell-off look less like market noise and more like a delayed vesting unwind finally hitting thin liquidity. 

Thin liquidity meant one large exit quickly snowballed into fear-driven selling, pushing the price down far more than the initial sale alone would suggest.

1inch denies team involvement

In response to speculation, 1inch stated that the sell-off did not come from team wallets, treasury multisigs, or any entities it controls. The project stressed that third-party holders trade independently and are outside its reach.

Statement

With respect to yesterday’s activity, no 1INCH was sold from wallets controlled by 1inch entities or our team, or our treasury multisigs. We do not control third-party holdings or their trading decisions.

Our mission and vision remain unchanged. It is that focus which…

— 1inch (@1inch) January 28, 2026

The team also said nothing has changed internally. The roadmap is intact, operations are ongoing, and the team plans to revisit parts of its tokenomics later this year to make the system more resilient when liquidity thins out.

Market reaction overshadows fundamentals

At the time of writing, 1INCH was hovering around $0.116, down around 20% from recent highs, even though nothing broke. The decline occurred without any exploit, outage, or partnership fallout.

Throughout 2025, 1INCH steadily slid, ending the year down nearly 64%. The decline reflected ongoing vesting pressure and fading demand for DeFi governance tokens, with the latest sell-off accelerating an already established trend.

The weakness in price has persisted even as 1inch continued shipping new integrations. In mid-2025, the protocol added support for Uniswap’s Unichain, expanding swap routing and MEV protection and extending its developer tooling.

While 1inch framed the incident as unrelated to internal activity, the on-chain evidence tells a narrower story. In this case, the sell-off was driven by an early investor having a large amount of tokens vested in the project, which raised concerns for the community and traders.

Also read: 4.5 Million Users, Zero Price Growth: What’s Wrong With Tron?

In a market that is ‘now or never,’ Ethereum (ETH) investors are doing something unexpected. They are waiting. As of today, the Ethereum validator entry queue has reached 3.53 million ETH, creating a 61-day bottleneck that is in contrast to the exit queue of under 40 ETH. This huge imbalance indicates a surge in institutional and retail demand to lock up capital, even as staking yields have compressed to a low of 2.83%.

By choosing a two-month waiting period over immediate liquidity, investors appear to be signaling a shift in Ethereum’s market role. ETH is increasingly being viewed as a long-term investment rather than just a speculative asset for short-term trading. The desire for stability is outweighing the demand for high immediate returns.

Surge in demand despite low yields

The entry queue has risen sharply over the last 30 days, even with a limit of 256 ETH per epoch in place to control validator movement. Current data shows that 30.02% of the total ETH supply, roughly 36.4 million tokens, is now staked. This represents over $118 billion and sets a new record for the network.

This strong commitment remains steady, even though the staking APR has reached all-time lows. It shows that investors are prioritizing the network’s security and their long-term positions rather than short-term returns.

Evolution of ETH

In the past, staking offered higher yields of almost 6% and shorter entry times. However, as the network has developed, institutional investors and major exchange-traded product issuers have become the main drivers of this growth. 

For example, companies like BitMine have increased their assets, now owning over 4.2 million ETH tokens. The proposed Grayscale Ethereum Staking ETF has also helped bring “native yield” and attention into traditional financial systems. This change follows important technical upgrades, such as the Fusaka upgrade.

Introduction of DVT

Ethereum co-founder Vitalik Buterin has proposed integrating native Distributed Validator Technology (DVT) directly into the protocol to support network security and decentralization. This proposal aims to simplify the current complexities of DVT, allowing stakers to split a single validator across multiple independent nodes to eliminate single points of failure and reduce slashing risks. 

For the millions of ETH currently waiting in the entry queue, such an upgrade could provide a more resilient infrastructure, making it safer for the growing wave of institutions and stakers to lock up their capital long-term.

Impact on market dynamics

At the time of writing, Ethereum is trading at $3,003, reflecting a gain of 1.31% over 24 hours. The total market capitalization stands at approximately $363.5 billion. The circulating supply currently is 120.69 million ETH, accounting for 100% of the current total supply. The current queue situation has major effects on Ethereum’s market dynamics:

• Lower Sell Pressure: A nearly empty exit queue shows that current stakers are not selling their holdings immediately. This contrasts with earlier periods of congestion and demonstrates strong confidence in the asset’s future value.

• Demand Over Yield: Investors’ readiness to wait almost two months for a 2.8% return confirms that Ethereum staking is increasingly seen as a safe option. 

• Supply Impact: With nearly one-third of the total supply locked up, the amount of liquid ETH available on exchanges continues to shrink. This could increase the effect of any future demand spikes on market prices.

Ethereum stakers are willing to wait almost two months for a 2.8% yield as the network builds a native yield system accepted by global capital markets. While Ethereum’s price has remained sensitive to wider market sentiment and leverage, the underlying on-chain data shows a strong and growing ecosystem where long-term capital is opting to stay locked in the consensus layer rather than seeking to exit.

Also Read: Vitalik Calls for “Garbage Collection” to Prevent Ethereum Bloat

In the early days of the blockchain revolution, the Decentralized Autonomous Organization (DAO) was hailed as the ultimate “corporate killer.” The vision was simple yet profound: an organization with no CEO, no physical headquarters, and no middle management. By replacing human fallibility with smart contracts, DAOs promised a world where “code is law” and every member held an equal stake in a hyper-efficient, neutral entity.

However, by 2026, the honeymoon phase has officially ended. While the technology to execute decisions automatically is better than ever, the human element—governance—has become a massive bottleneck. Many DAOs today are stuck in a “governance trap,” spending more time debating how to vote than actually building products.

We saw this clearly in January 2026. While the technology works, its sociology is broken. Just look at the recent Optimism Superchain vote or the Uniswap Fee Switch debates. These weren’t town halls; they were board meetings where a handful of whales dictated the fate of millions of dollars, leaving the ‘community’ to rubber-stamp the decision.

How a DAO Actually Operates

To understand the current crisis, one must first look at the “Proposal Pipeline.” Unlike a traditional company where a board of directors meets behind closed doors, a DAO’s lifeblood is its public ledger.

Who can propose changes?

1. Permissionless: Some DAOs allow anyone with a wallet to submit a proposal. While democratic, this often leads to “governance spam,” where the community is flooded with low-quality or scam requests.
2. Threshold-based: Most mature DAOs (like Uniswap or Aave) require a “minimum stake.” You might need to hold 0.1% or even 1% of the total token supply just to put a proposal on the ballot.

The Pipeline:

1. Ideation: Discussion on Discord or a governance forum
2. Formal Proposal: A technical document submitted to a platform like Snapshot.
3. Voting Period: Token holders cast their votes over a period of three to seven days.
4. Execution: If passed, the smart contract automatically executes the code—moving funds or updating the protocol—without needing a human “signer.”

The Three Pillars of the Governance Crisis

Despite this elegant technical flow, the “autonomous” dream is hitting three major roadblocks:

1. Voter Apathy: 

In 2025 and 2026, data showed that participation rates in major DAOs frequently dipped below 10%. When members are asked to vote on everything from multimillion-dollar grants to the color of a logo, “decision fatigue” sets in. This creates “ghost town” governance where a tiny, active minority makes decisions for the silent majority.

2. The “Whale” Problem: 

Most DAOs use a “one-token-one-vote” system. This has inadvertently birthed a new form of digital oligarchy. Wealthy “whales” or venture capital firms can effectively veto or push through any proposal, turning the “decentralized” mission into a playground for the 1%. This can technically make a DAO centralized.

3. Analysis Paralysis: 

In a fast-moving tech world, speed is life. A CEO can make a decision in minutes; a DAO often takes weeks to move a proposal through the pipeline. This lag time has caused many projects to lose their competitive edge as they remain paralyzed by internal debate.

When “Code is Law” Becomes a Weapon

The most dangerous consequence of the “Governance Trap” isn’t just slow progress—it’s the risk of Governance Capture. In a system where voting power is a tradable commodity, malicious actors can treat a DAO like a corporate raider would a traditional company, but with the speed and anonymity of blockchain.

1. The Build Finance “Coup” (Feb 2022)

If other governance issues are “heists,” Build Finance was a scorched-earth invasion. Billed as a “venture builder” for crypto projects, Build Finance was literally taken over by a single malicious actor who used the organization’s own democratic tools to dismantle it.

A user known as “Suho.eth” put forward a proposal to take full control of the project’s minting keys, treasury, and governance. After an initial attempt failed, the attacker doubled down with a “stealth” strategy.

To ensure the second attempt passed, the attacker disabled the DAO’s “proposal bot” and Gitbook (documentation site). This effectively blinded the community; because no one was “watching the gates,” the proposal passed with almost no counter-votes.

Once the keys were handed over by the smart contract, the attacker minted over 1 billion new BUILD tokens, drained the treasury of approximately $470,000, and laundered the funds. The project was effectively killed overnight. In a DAO, management isn’t a board of founders; it’s whoever holds the most tokens.

2. The Compound Finance “Golden Boys” Incident (July 2024)

One of the most famous examples of a “Whale Attack” occurred within Compound Finance, a titan of DeFi. A small group of investors, known as the “Golden Boys,” successfully passed a proposal to divert $24 million (5% of the treasury) into a yield-bearing vault they controlled.

They didn’t find a bug in the code. Instead, they quietly accumulated COMP tokens on exchanges and through delegation until they had enough power to force the vote through during a period of low community participation.

It was a “governance heist” performed in broad daylight. While an “amicable” solution was eventually reached through intense social negotiation, the event proved that a DAO without high participation is essentially an open vault for wealthy whales.

3. The Tornado Cash Takeover (May 2023)

In another high-profile attack, a malicious actor submitted a proposal that looked like a routine technical update but contained hidden code. Once the community passed the vote, the hidden code granted the attacker complete control over the DAO’s treasury.

Now that they have all the votes, they can do whatever they want. In this case, they simply withdrew 10,000 votes as TORN and sold it allhttps://t.co/XxYezHusK6 pic.twitter.com/qOefI65SLk

— samczsun (@samczsun) May 20, 2023

This highlighted the “Information Gap.” Most DAO members vote based on the title of a proposal because they cannot read the underlying smart contract code. This creates a massive security hole where “Governance Theater” masks malicious intent.

4. The Beanstalk Farm Exploit (April 2022)

Beyond whales, attackers have used Loans—which is borrowing millions of dollars in tokens for just a few seconds—to manipulate votes. By borrowing a massive amount of voting power, passing a proposal to drain the treasury, and then returning the loan all in a single transaction, hackers have bypassed the need to even own the tokens they are using to “govern.”

Beanstalk Farms exploit was a purely mathematical execution. It proved that if you can “buy” a majority for just one second, you can own the entire protocol.

On April 17, 2022, an attacker used a Flash Loan to borrow nearly $1 billion in assets from Aave and Uniswap. They used this massive capital to instantly acquire a 67% “supermajority” of the protocol’s governance tokens.

Beanstalk’s code had an emergencyCommit function. It allowed a proposal to execute immediately if it reached a 2/3 majority, bypassing the standard multi-day waiting period. Within the same single blockchain transaction, the attacker borrowed the money, voted for a malicious proposal they had seeded 24 hours earlier (BIP-18). This triggered the emergencyCommit function and attacker drained $182 million from the treasury, and repaid the loan.

Vitalik Buterin’s Warning

The cracks in the system have caught the attention of Ethereum Co-Founder Vitalik Buterin. In a series of 2025 and early 2026 statements, Buterin issued a stark warning. 

We Need More DAOs—But Different And Better DAOs: Vitalik

He argues that the current “token-holder voting” model is fundamentally broken because it replicates the flaws of traditional politics. His recent critiques highlight three major shifts:

Concave vs. Convex Governance: 

Buterin suggests that different problems need different voting styles. “Concave” problems (like setting a budget) benefit from compromise and wide community input. “Convex” problems (like a major strategic pivot) require decisive, high-conviction leadership that current DAOs lack.

Privacy and ZK-Proofs: 

He is advocating for Zero-Knowledge (ZK) voting to prevent “social signaling,” arguing that public voting makes governance a “social game” where people vote to look good rather than to do what’s right.

AI Integration: 

Buterin suggests that AI can help reduce “decision fatigue” by summarizing dense forum debates and filtering votes for the community.Vitalik also argued that “walking away from DAOs would be a mistake.” 

Why Ethereum Needs High-Quality DAOs To Survive

Vitalik outlined five critical areas where Ethereum needs high-quality DAOs to survive:

1. Optimizing Oracle Design: 

Current oracles are too easily manipulated; we need DAOs to ensure “truth” enters the blockchain neutrally. If the oracle is token based, whales can manipulate the answer on a subjective issue and it becomes difficult to counteract them.

2. On-Chain Dispute Resolution: 

For things like DeFi insurance, we need decentralized “courts” to make subjective judgments.

3. Keeping Lists Honest: 

DAOs are needed to maintain the lists. Preventing “hidden power” by using DAOs to maintain safe-lists of verified apps and registries.

4. Helping Startup Projects: 

Allowing fast, community-led funding for short-term projects that don’t need a full legal entity.

5. Long-Term Project Stewardship: 

Ensuring protocols don’t die just because the original founding team moves on. DAOs are needed for long term project maintenance.

Alongside his DAO comments, Vitalik has pushed for “Protocol Simplification” in 2026. He warns that if Ethereum’s code becomes an “unwieldy mess” that only a few experts understand, then decentralization is an illusion.

He argues that for a DAO to be truly autonomous, the underlying protocol must be simple enough to pass the “Walkaway Test”: if the core developers disappeared today, could a new team understand and run the network tomorrow? 

DAOs Turning Votes into Value

To escape the trap, the next generation of DAOs is moving away from simple voting and toward more nuanced models. As we move through late January 2026, the “Governance Trap” is being broken by hard economics. Two of the largest DAOs in history are currently executing “Economic Pivots” that tie their tokens directly to network revenue.

1. The Optimism Superchain Revenue Share:

On January 22, 2026, the Optimism Collective initiated a landmark vote to allocate 50% of Superchain sequencer revenue toward monthly OP token buybacks for 12 months, directly linking network growth to token value beginning in February. 

This proposal strengthens the token’s role in the ecosystem. It signals a transition from pure governance utility to a model where token demand scales with network adoption across chains like Base, Uniswap, Ink and World Chain.

2. Uniswap “Unification”:

After years of “Analysis Paralysis,” Uniswap activated its long-debated ‘Fee Switch’ in late 2025. Protocol fees now programmatically burn UNI tokens, turning a “governance-only” asset into a deflationary value-accrual asset. This proposal establishes a long-term model for how Uniswap would operate.

This proposal shifts operational duties from the Foundation to Labs, putting them in charge of ecosystem support, funding, governance, and developer relations. As of January 2026, early data shows annualized burns reaching millions of dollars, proving DAOs can move from “theater” to “business.”

The “Governance Trap” isn’t a sign that DAOs have failed; it’s a sign that they are maturing. As we move through 2026, the focus is shifting from “decentralizing everything” to “decentralizing what matters.” For DAOs to reclaim their original goal, they must find a way to let the code handle the routine and let the humans focus on the vision.

Crypto money laundering didn’t just grow in 2025; it professionalized. Illicit flows reached at least $82 billion, up sharply from $10 billion in 2020. U.S.-based blockchain research firm Chainalysis’ findings show that this growth is largely driven by Chinese-language money laundering networks (CMLNs). 

According to the report, these networks appeared during the pandemic and now move nearly $44 million in crypto every day. The engine behind this explosion is specific: Chinese-language money laundering networks (CMLNs), who handle about 20% of all known crypto laundering. 

Researchers found that they often work alongside offline criminal schemes, like “pig butchering” scams, while avoiding big exchanges. As a result, authorities find it harder to track these operations because much of the money moves through Telegram, which offers both trust and secrecy.

CMLN operations and rapid growth

Chainalysis found over 1,799 active wallets linked to CMLNs in 2025, up from just a few years ago. They move money on a massive scale, with some services handling $1 billion in just a few months. 

For instance, Black U services reached that milestone in only 236 days, while over-the-counter (OTC) services took 1,136 days. Black U refers to “tainted” crypto known to be stolen or linked to scams. Because these tokens risk being frozen, they are sold at a discount. Altogether, these networks move around $44 million every day, showing how organized and well-funded they have become.

Experts say this growth is tied to China’s strict capital controls. Tom Keatinge, Director at the Centre for Finance & Security, noted, “Wealthy individuals seeking to move money out of China provide liquidity needed to service organized crime groups in the West.” 

Similarly, Chris Urben of Nardello & Co explained that crypto is replacing old informal transfer systems, making it faster and easier to move money across borders without drawing attention.

The backbone of these networks: Guarantee platforms

Guarantee platforms form the backbone of CMLNs. Platforms like Huione and Xinbi work like marketplaces and escrow services, helping connect buyers and sellers without directly handling the laundering itself. Vendors build their reputations and advertise service quality, which creates a kind of accountability within this underground system. 

These platforms support a range of services, from money mules and informal trading (OTC) to Black U platforms, peer-to-peer services, online gambling, and crypto mixing. Moreover, they link easily with offline operations, allowing money to move quickly and efficiently across borders.

Running point brokers and money mules are key players in the process of money transfer by these criminal networks. Running points enable criminals to use bank accounts and/or wallets to launder their stolen money. Money mules help launder the money by moving it through several accounts to conceal its origin. Moreover, online gambling sites and mixing services help funnel stolen funds back into the financial system. 

In short, these networks follow the same basic money laundering steps—breaking up, moving, and merging funds—but now do it all using crypto.

Automation and efficiency in laundering

The automated tools also make the laundering process faster. The Black U services can move large amounts of money in less than two minutes, while the gambling sites move huge amounts of money on a daily basis. 

The money mules are slower but are used for the largest transactions. The ads are always about the speed, secrecy, and reliability of the services, making sure the large amounts of money are moved for the high-end clients.

Global implications and enforcement

Chinese-language money laundering networks show just how hard it is to regulate crypto worldwide. Authorities in the U.S. and the UK have sanctioned groups like Huione and Prince Group, and FinCEN has warned about these networks.

However, they adapt quickly, simply moving to new platforms when disrupted. Keatinge stressed, “There is a chasm in most countries between the capabilities of criminals and law enforcement when it comes to crypto use.” Stopping them effectively requires countries to work together, using blockchain analysis and human intelligence to track and dismantle these networks.

Also Read: Accused $40M Govt. Crypto Thief ‘Lick’ Launches Memecoin on Solana

Vitalik Buterin, the Co-Founder of Ethereum, revealed he earned $70,000 on the prediction market Polymarket last year, investing approximately $440,000. The gain came from betting against markets driven by irrational hype, a strategy he calls “anti-crazy mode.” 

In a recent interview in Chiang Mai, Thailand, Vitalik Buterin explained how he spotted markets getting too much hype and used that to make smart bets. He also said that while platforms like Polymarket work well, they still face rules and design problems that need fixing.

Besides personal profit, Vitalik highlighted broader issues in crypto applications. “Over the past year, Ethereum has made major progress in scaling technology. Our gas capacity has increased from 30 million to 60 million, and this year’s goal is to reach 300 million,” he said. zkEVMs have launched successfully, and wallet infrastructure has improved, enabling smoother access for users. However, he pointed out that financial success in crypto often overshadows meaningful application development.

The limits of prediction markets

Polymarket allows users to bet on future events, including political outcomes, economic indicators, and weather patterns. However, Vitalik noted many markets focus on short-term predictions like sports or hourly price movements. “I think these short-term bets don’t have much social significance in the long run. In theory, the prediction market is a successful tool (because it works), but we need more meaningful applications,” he explained. He expressed interest in long-term incentive models such as Robin Hanson’s Futarchy, which MetaDAO is experimenting with.

Vitalik also warned that the reliability of oracles—the systems that feed real-world data to crypto platforms—is a big concern. For example, a market about Ukraine gave the wrong result because the data source messed up, showing how fragile current systems can be. 

While Chainlink is the main solution, Vitalik said it’s “complex and relatively centralized” and hopes for simpler, fully decentralized options. He also pointed out that most prediction markets don’t pay interest, which makes them unattractive for people who want safer, long-term bets.

SocialFi and the application gap

The conversation shifted to SocialFi, where Vitalik criticized overly financialized social networks. “When users are no longer there to acquire quality content but to make money, they begin to generate a large amount of spam in order to maximize their profits,” he said. He praised Substack as a model where content quality drives engagement, unlike some crypto platforms where hype dominates. Farcaster’s pivot toward wallets, he explained, reflects SocialFi’s inability to scale purely as a social platform.

Vitalik also talked about how Ethereum could play a bigger role in the age of AI. He imagines it as an open “world computer” where AI programs can own money, trade, and join decentralized organizations. But he warned we shouldn’t force AI into everything. 

Instead, he focuses on three practical uses: AI bank accounts, prediction markets, and verifying that content is real. He believes crypto can help stop AI from becoming too centralized and prevent digital control by a few powerful players.

Regulatory and market challenges

The platform, however, has been under watch in different parts of the world. In the United States, customers were barred from using Polymarket from 2022 to as late as December 2025, owing to CFTC concerns about unregistered derivatives. About a week ago, Portuguese regulators ordered an emergency shutdown after suspicious betting activity during a presidential election.

Several countries, such as Singapore and Ukraine, have also banned or restricted access to the platform. These issues, therefore, highlight the challenges facing prediction markets, even with technical advancement.

Also Read: Bitcoin May Surge if Fed Intervenes in Yen, JGB Markets: Arthur Hayes

Audit certificates are often cited by decentralized finance (DeFi) protocols as proof of their robust security. However, although audits provide some peace of mind, they should be viewed as a layer of security rather than a comprehensive shield. 

The image of forensic auditors probing smart contract codebases, identifying and resolving every single flaw, is itself flawed as illustrated by the vast number of defi projects that have suffered exploits post-audit. A successful audit should never confer a sense of serenity about all things being well. 

Daejun Park, senior security researcher at a16z Crypto, recently made this point by arguing that protocols must go beyond “patch-after-the-hack” security to preserve the health of the entire defi sector.

Learning Lessons From TradeFi

Just as the global financial system defines safety through layered risk management and operational resilience, DeFi counterparts must evolve beyond code-centric assurances, particularly as more real-world assets (RWAs) come on-chain. 

This is not to say auditors don’t do a tremendous job. After all, they often report a laundry list of findings, many of them non-critical and others more serious. It all essentially helps developers improve the usability of a protocol and avoid an unforeseen catastrophe. That said, auditors don’t conform to an industry standard and code audits are just one line of defence. 

The same is true in the legacy financial system, where another kind of audit occurs to ensure the accuracy of financial statements, and where risk management processes take account of various dangers facing a company. In addition to risk management, financial firms must weigh up things like physical and cyber security, fraud prevention, data privacy, and disaster recovery.

In DeFi, audit-first security should be viewed as a necessary but insufficient step during an age in which RWAs and institutional capital are demanding systems capable of operating reliably through failures, disruptions, and human error. At the end of the day, code exploits are just one threat with others stemming from operational breakdowns and systemic risk. 

When Audits Fail, the System Fails

In the most egregious example of an audit failing to flag systemic risk, the FTX cryptocurrency exchange imploded in spite of audits conducted by Prager Metis CPAs, which later paid $1.95 million to settle two Securities and Exchange Commission (SEC) charges of negligence. 

The SEC pointedly remarked that in its haste to accept FTX as a client, Prager Metis “assembled an engagement team that collectively lacked the competence, experience, and knowledge to appropriately conduct the audits.” 

FTX may be the most obvious example, but many other extensively audited projects, from Euler Finance to Nomad Bridge, have suffered significant exploits, driving home the point that audits alone cannot be afforded a ‘gold standard’ status when it comes to security.

Beyond Code Analysis

As TradeFi entities embrace tokenization and move parts of their business on-chain, security is destined to become defined by institutional risk frameworks rather than code correctness alone. 

With RWA adoption growing, it stands to reason that platforms boasting institutional-grade operational and governance maturity will have an advantage over those simply putting their faith in an auditor.

What does this mean in practice? It means combining audits with things like bug bounties, rigorous monitoring systems, incident response processes, multisig governance, and penetration testing, the better to prove one’s ability to absorb shocks, manage off-chain dependencies and human factors, and maintain availability under duress. The next phase of DeFi competition is likely to be defined by resilience rather than velocity. 

Some projects appear to understand this. Pharos, a EVM-compatible finance-ready blockchain for RWAs and cross-chain liquidity, was built to unify Web2 and Web3 at internet scale and its clear emphasis on operational resilience, governance, and failure recovery aligns with how global financial systems define security.

Rather than optimizing solely to avoid exploits, Pharos was designed to withstand, contain, and recover from failures, an essential requirement for RWA and institutional participation in defi. With its integrated KYC/AML modules and modular SPN architecture, compliance is built-in rather than bolted on. Auditing is also automated, and Zero-Knowledge Proofs (ZKPs) are deployed to provide an extra layer of security.

Seize the Day

Institutional adoption continues to accelerate, a consequence of regulatory de-risking and maturing tech. Protocols intent on seizing the day must start to appreciate the expectations of those entering the market and abandon their ‘code is law’ approach. 

If they don’t, their competitors will. 

Also Read: Accused $40M Govt. Crypto Thief ‘Lick’ Launches Memecoin on Solana

Layer 1 blockchain ZetaChain’s anticipated “2.0” update triggered a sharp market reaction, pumping its native token $ZETA before prices collapsed almost instantly. Yesterday, the core development team unveiled ZetaChain 2.0, aiming to merge high-performance blockchain interoperability with sovereign artificial intelligence (AI) technology. 

Following the announcement, the native token $ZETA witnessed a short-lived spike, but it has since declined by approximately 30% from the high. The team pitched the 2.0 upgrade as a revolutionary step for developers. The platform allows applications to run across multiple blockchains and AI models without complicated back-end integrations. 

2.0 shift and its impact

According to the team, ZetaChain 2.0 removes the need for custom wallets and services, letting developers focus on product creation. Besides, it introduces an AI Portal to connect models such as OpenAI, Gemini, Grok, open-source, and private inference providers. Routing, optimization, and billing capabilities now centralize in one hub.

Although the development promises futuristic optimism, seemingly a “sell the news” psyop, it has failed to push ZetaChain’s negligible presence further in the blockchain landscape. At the time of publishing, the price of ZETA was trading as $0.0715, with a 24h volume of $11.86 million and a 7.43% price decline in the last day. 

Token performance and ecosystem activity on ZetaChain

Since its mainnet launch in February 2024, ZetaChain has failed to gain much traction. Data from DeFiLlama shows its total locked value (TVL) merely sits at $1.51 million. Moreover, network activity within its ecosystem remains very low, with no fees or revenue recorded, and trading on decentralized exchanges barely reaches $27,748 in 24 hours.

The $ZETA token has a market cap of $87.55 million and a fully diluted value of $150.95 million. It once hit $600 million in early days of launch and since then the project has only lost its credible value. 

Despite the $ZETA token being listed on prominent exchanges—including Coinbase, KuCoin, OKX, Gate, Bybit, and others— its liquidity remains thin and indicates a higher possibility of price manipulation. 

Industry perspectives

The timing of the news aligns with the Solana co-founder Anatoly Yakovenko’s recent criticism on “pump and dump” culture prevalent in early-stage token launches. He suggested limiting token release on launch day, rewarding long-term holders, and unlocking tokens only after a year.

“Staking rewards long-term holders, much like funds with 10+ year timeframes get rewarded in early rounds,” Toly said. His framework aims to stabilize token prices and build sustainable market growth, contrasting sharply with ZetaChain’s rapid hype-driven launch.

Also Read: Bitcoin May Surge if Fed Intervenes in Yen, JGB Markets: Arthur Hayes

When the Union Budget for 2026–27 is presented in Parliament by Finance Minister Nirmala Sitharaman on February 1, 2026, it will arrive at a moment of quiet consequence for India’s digital economy. 

Over the last decade, India has quietly built one of the world’s most advanced public digital backbones, from real-time payments and digital identity systems to large-scale financial inclusion infrastructure that reaches hundreds of millions of people. 

In parallel, the country has also emerged as a major source of blockchain talent, fintech founders, and engineers working at the cutting edge of global crypto and Web3 development.

And yet, despite these structural advantages, India today finds itself drifting toward the margins of the global digital asset economy rather than shaping its direction.

This gap sits at the centre of the policy challenge now confronting the government. The question is no longer whether cryptocurrencies or blockchain-based systems belong in India’s financial future. Market behavior, international adoption, and domestic participation have already answered that. 

What remains unresolved is how India chooses to engage with this reality—and on what terms. The real question is whether India intends to shape this sector strategically or allow it to grow beyond its regulatory and economic influence.

The answer will not be found in speeches or policy intent notes. It will be embedded in the fine print of taxation, compliance architecture, and regulatory signalling contained in the Union Budget 2026.

In the Union Budget 2025, the government chose to maintain the existing crypto tax framework, offering no relief to the industry. The 30% tax on virtual digital asset gains and the 1% TDS on transactions were retained without any changes, despite repeated appeals from exchanges and industry stakeholders. 

The budget made no specific mention of crypto or Web3, signalling that the government preferred to continue with a cautious, tax-first approach rather than introduce regulatory clarity or reforms.

What parliament data shows about crypto tax in India

In a written reply tabled in the Lok Sabha in December 2025, the government laid out, for the first time in detail, how crypto taxation is actually playing out on the ground. The response showed that while tax collections from crypto transactions have gone up over the last three years, the system itself is far from settled. 

The Finance Ministry admitted that enforcement action had to be taken against several exchanges for non-compliance. 

In its own words, “survey actions under Section 133A of the Income Tax Act were carried out against three crypto exchanges and non-compliance of TDS provisions under Section 194S to the tune of ₹39.8 crore and undisclosed income of ₹125.79 crore were detected.” The reply also revealed that further investigations led to the discovery of undisclosed income amounting to ₹888.82 crore linked to virtual digital asset transactions.

What stands out even more is what the government has not done. In the same reply, the Finance Ministry clearly stated that no study has been carried out to examine how other countries tax or regulate crypto. 

“No studies for implementation of taxation models as seen in other countries, such as Thailand and Indonesia, for cryptocurrency have been undertaken,” the government said. This effectively confirms that India’s approach so far has been driven almost entirely by tax enforcement, not by policy design.

The contradiction is hard to miss. On one hand, authorities are collecting hundreds of crores in taxes and carrying out surveys and searches. On the other hand, there is still no formal framework that defines how crypto should operate in India, how exchanges should be regulated, or how the sector fits into the broader financial system. 

Even during India’s G20 presidency, no concrete global framework on crypto regulation emerged. As things stand, India is taxing crypto aggressively, but without clearly deciding what role the asset class is meant to play in the country’s economy.

The illusion of success in the tax numbers

At first glance, the government appears to have succeeded in bringing crypto activity into the tax net. Official data shows that tax deducted at source on virtual digital asset transactions rose to approximately ₹511.83 crore ($55.8 million) in Financial Year (FY) 2024–25, up from ₹362.7 crore ($39.5 million) the previous year and more than double the ₹221.27 crore ($24.1 million) collected in FY 2022–23.

These figures are frequently cited as proof that the crypto tax framework is working. But this conclusion does not survive closer scrutiny.

Tax Deducted at Source (TDS) data captures only transactions conducted on Indian exchanges that comply with domestic reporting norms. It does not reflect the much larger volume of trading undertaken by Indian users on offshore platforms, nor does it capture activity routed through decentralized exchanges, peer-to-peer networks, or overseas entities that fall outside Indian jurisdiction.

Industry estimates derived from blockchain analytics, exchange order flow, and cross-border settlement data indicate that Indian residents traded between ₹4.8 lakh crore ($52.37 billion) and ₹5.2 lakh crore ($56.7 billion) worth of digital assets on offshore platforms in FY 2024–25 alone. In other words, for every rupee collected in TDS, nearly ₹100 worth of trading activity occurred outside the Indian tax net.

Once this context is applied, the apparent success of the current regime begins to look less like regulatory effectiveness and more like statistical distortion. The tax system is capturing a shrinking slice of a much larger market that has quietly moved beyond its reach.

Background of the crypto tax framework

India introduced crypto taxation in the Union Budget 2022. The Finance Act that year brought virtual digital assets under the Income Tax Act, imposing a 30% tax on gains and a 1% TDS on every transaction.

The idea behind the TDS was to track transactions in a market that was largely unregulated at the time. It was not meant to be a revenue source. It was not designed as a revenue-raising measure.

The measure was positioned as a tracking mechanism rather than a fiscal one. No changes have been made to this structure since its introduction, and no separate regulatory framework has been notified alongside it.

How a compliance tool became a market distorter

The central flaw in India’s crypto taxation regime lies not in its intent, but in its structure.

Unlike the capital gains tax, which applies only to profits, the 1% TDS on virtual digital assets is levied on the gross value of every transaction. In traditional financial markets, the very idea of such a setup would be unheard of.

In markets where liquidity and turnover are the main drivers, margins are slim, and capital efficiency is of the utmost importance.

Typically, professional traders use margins that range between 0.1% and 0.3% per trade.

Market makers, who facilitate liquidity and help stabilize prices, operate on even tighter spreads. A flat 1% deduction on every transaction renders these activities mathematically unviable.

The arithmetic is unforgiving. After 10 trades, 10% of deployed capital is lost to tax regardless of profitability. No market participant can sustain operations under such conditions.

The impact was immediate and predictable. Liquidity providers exited Indian exchanges. Bid–ask spreads widened sharply. Trading volumes collapsed. Retail participants faced poorer execution and higher costs. Exchanges saw revenues shrink, leading to layoffs, closures, and consolidation.

What emerged was not a regulated ecosystem, but a hollowed-out one.

The tax structure that made participation unviable

The impact of the 1% TDS cannot be understood without looking at the second pillar of India’s crypto tax framework: the 30% tax on gains under Section 115BBH.

This provision applies a flat tax rate on all profits from virtual digital assets, with no allowance for loss set-off, no carry-forward of losses, and no deduction for trading costs. In effect, crypto is treated differently from every other financial asset class in the country.

In equity markets, losses can be adjusted against gains. In commodities and derivatives, trading expenses are deductible. In crypto, none of this applies.

The practical consequence is visible at the transaction level.

Why the math simply does not work for traders

To understand why India’s crypto tax regime has driven activity offshore, it helps to look at a simple, real-world example.

Consider a retail trader who deploys ₹10 lakh in crypto over the course of a year.

When this trader first deposits funds into a crypto exchange and executes a buy order, 1% TDS is deducted immediately. That means ₹10,000 is taken at the time of purchase itself, even before any profit is made.

If the trader later sells the asset and withdraws the funds, another 1% TDS is deducted at exit. That is another ₹10,000 gone.

Now, assume the trader redeploys the same capital again during the year, which is common in active markets. The moment the funds are deposited again and trades are executed, another 1% TDS applies. And when the trader exits for the second time, yet another 1% is deducted.

In practical terms, a trader who deposits and withdraws capital twice in a year ends up paying close to 4% of total capital purely in TDS, regardless of whether any profit was made.

This deduction happens on turnover, not on income.

It is important to underline what this means. The tax is applied even if the trader makes a loss. It is applied even if the trade breaks even. And it is applied before profitability is calculated.

On top of this, any profit that does remain is taxed separately at 30% under Section 115BBH, with no allowance for loss set-off, no carry forward of losses, and no deduction for transaction costs or fees.

So in effect, a crypto trader in India faces:

• 1% TDS when buying (18% GST on exchange fees)
• 1% TDS when selling (18% GST on exchange fees)
• Repetition of this cycle with every redeployment of capital
• 30% tax on net profits
• On top of this, the government also charges 4% as a health and education cess
• No ability to offset losses
• No recognition of trading expenses

This structure means that even a modest trading strategy becomes unviable. A trader making 2–3% annual returns can end up paying more in tax than the profit actually earned.

How does this compare with stock market taxation

This is where the contrast with India’s equity markets becomes stark.

In stock trading:

• There is no TDS on buying or selling shares
• Securities Transaction Tax (STT) is extremely small and applies only once per trade
• Capital gains are taxed only on profit, not on turnover
• Losses can be set off against gains
• Losses can be carried forward for up to eight years
• Business expenses can be deducted for active traders

For example, an equity trader who trades ₹10 lakh multiple times in a year does not lose capital simply for participating in the market. Tax liability arises only when profits are realized.

In crypto, however, the tax is imposed at every step of activity, regardless of outcome.

This is why the crypto market reacts so differently to taxation than equity markets. Crypto trading depends heavily on liquidity, volume, and capital efficiency. A structure that taxes capital movement itself destroys these fundamentals.

The result is predictable. Serious traders move offshore. Liquidity migrates. Market making disappears. And the remaining activity becomes shallow, expensive, and inefficient.

This is not a question of avoiding tax. It is a question of whether a market can function at all under a structure where capital is taxed repeatedly before profits even exist.

Adding to the regulatory burden, the government has now made crypto tax reporting mandatory from 2026, requiring all traders to disclose their crypto holdings and transactions to the tax authorities. This measure reinforces the existing TDS and flat tax structure, making compliance even more complex for active traders.

That is the core flaw in India’s current crypto tax design and the reason why trading volumes have shifted abroad despite rising TDS collections.

This is why volumes did not decline gradually. They collapsed.

Comparison of Crypto vs Stock Market Taxation in India (₹10 Lakh Example)

Between FY 2022–23 and FY 2023–24, trading activity on Indian exchanges fell by more than 70%, even as global crypto volumes remained stable. The issue was not demand. It was costly.

Crypto became the only asset class in India where capital was taxed on entry, exit, and profit, without recognition of risk or loss. Once this structure took hold, the outcome was inevitable.

The quiet migration offshore

By late 2023, the consequences of this structure had become visible. Trading volumes on Indian exchanges had declined by more than 70% from their peak. Several platforms shut down entirely, while others pivoted to non-crypto businesses.

At the same time, Indian activity on offshore exchanges surged. Dubai, Singapore, Seychelles, and similar crypto-friendly jurisdictions turned out to be the hotspots of choice for Indian traders. Stablecoins replaced the fiat rails. Peer-to-peer markets boomed. 

VPN usage increased after the ban of some foreign platforms, showing that users bypassed restrictions to continue trading. This migration was not limited to retail traders. 

Founders, developers, market makers, and proprietary trading desks began relocating operations abroad. Intellectual property was registered outside India. Treasury functions moved offshore. Venture capital followed.

What occurred was not capital flight in the traditional sense, but something more subtle and potentially more damaging: the gradual export of an entire financial ecosystem.

The numbers behind the shift 

When viewed alongside actual trading activity, the scale of this displacement becomes clear.

The data reveal a stark reality: as enforcement increased, compliance did not rise proportionally. Instead, the activity migrated. The tax base narrowed even as headline collections rose.

This is the classic signature of a policy that suppresses participation rather than regulating it.

Consolidation at the exchange level

FY 2024–25 crypto data shows concentration at a few exchanges. CoinDCX paid ₹259.58 crore ($28.3 million) in TDS. Total TDS collected was ₹511.83 crore ($55.8 million). More than 50% came from CoinDCX. 

Also Read: CoinDCX CEO bats for 0.01% Crypto Tax in India ahead of budget

Smaller exchanges struggled with TDS compliance. Some shut down. Some reduced operations. Liquidity moved to larger exchanges. 1% TDS made market making difficult. Section 133A surveys found ₹39.8 crore ($4.38 million) unpaid TDS and ₹125.79 crore ($13.72 million) undisclosed income at the exchange level. Other investigations found ₹888.82 crore in undisclosed income from Virtual Digital Assets (VDAs). Most trading now happens at a few large platforms.

A growing gap between potential and reality

The timing of the Union Budget 2026 matters because the economic opportunity is no longer speculative.

Estimates suggest that embracing virtual digital assets and the broader Web3 ecosystem could add $1.1 trillion to India’s GDP by 2032. Large-scale cloud and digital adoption, including blockchain, could contribute $380 billion to GDP by 2026 and create 14 million jobs. 

Yet, the divergence between India’s potential and its current trajectory is illustrated by the staggering volume of trade that has exited the domestic jurisdiction. Indian nationals traded nearly ₹5 lakh crore on offshore platforms in a single year. 

If this volume had been executed on compliant domestic exchanges, the 1% TDS, or even a rationalized 0.01% TDS, would have yielded significant revenue. More importantly, trading fees would have generated Goods and Services Tax for the state. Instead, this value was captured by foreign entities such as Binance, Bybit, and KuCoin, contributing nothing to the Indian exchequer.

The shadow multiplier of Web3

The ₹5 trillion figure cited in industry discourse refers not just to lost trading volumes but to the broader multiplier effect of the Web3 economy. By pushing trading offshore, India disincentivizes the establishment of domestic liquidity providers, market makers, and custodians. 

These are high-tech businesses that pay corporate tax and employ skilled engineers. Startups require liquid token markets to monetize their products. Suppressed domestic markets force them to incorporate in Dubai or Singapore to access capital and liquidity. India possesses 11% of the global Web3 talent pool, yet without a domestic market, this talent largely works for foreign protocols. 

Indian engineers build the product, but the intellectual property and economic value accrual occur elsewhere. The current tax regime acts as a primary incentive for offshore migration, effectively subsidizing foreign exchanges at the cost of domestic industry health. The Make in India initiative is undermined in the digital sector by a tax policy that makes trade in India mathematically unviable.

How India’s approach differs from global practice

Globally, the trajectory has been markedly different.

The United States has gone down the path of regulatory clarity through legislation and agency guidance, culminating in the GENIUS Act, which brings stablecoins into the regular banking system. 

Europe’s Markets in Crypto Assets (MiCA) regulation is a single licensing regime for 27 countries. Singapore and Dubai have set up clear and predictable rules, thus fostering institutional involvement.

India, by contrast, has relied primarily on taxation as a regulatory substitute.

This approach has produced a paradox. While the country possesses one of the largest crypto user bases and developer communities in the world, it remains largely absent from the institutional layer of the global digital asset economy. Major funds, custodians, and infrastructure providers operate elsewhere.

Markets can adapt to high taxes. What they cannot adapt to is uncertainty.

Global regulatory benchmarks

While India debated TDS rates, the United States and the European Union moved decisively to integrate digital assets into formal financial systems. The GENIUS Act in the United States integrates stablecoins with insured banks. 

Dollarization risk is a major concern for the Reserve Bank of India (RBI) and remittance flows. Europe’s MiCA regulation creates a single licensing framework for 27 countries, allowing passporting for CASPs and institutional inflows. 

Dubai VARA and Singapore MAS have established clear rules, attracting Indian founders and capital. India’s focus on taxation rather than regulation has produced a paradox. 

While the country possesses one of the largest crypto user bases and developer communities, it remains absent from the institutional layer of the global digital asset economy. Major funds, custodians, and infrastructure providers operate elsewhere.

What global data shows

A recent PricewaterhouseCoopers (PwC) report, a firm that provides audit, tax, and advisory services across 151 countries, on global crypto regulation shows how far other markets have already moved ahead. The report says more than 560 million people worldwide now hold digital assets, and most large economies no longer treat crypto as an experimental sector.

According to PwC, countries in Europe, the US, and parts of Asia have already put full regulatory systems in place for crypto exchanges, custodians, and stablecoin issuers. This includes licensing for exchanges, mandatory audits, capital requirements, and compliance standards that mirror those followed by banks.

The report also points out that enforcement has replaced uncertainty. Regulators are no longer debating whether crypto should exist. They are monitoring transactions, tracking risks, and supervising platforms through formal frameworks.

PwC notes that jurisdictions offering clear rules and predictable taxation are seeing higher institutional participation and business activity. In contrast, countries relying mainly on restrictive taxes or unclear policies are seeing trading volumes and startups shift abroad.

The report adds that stablecoins and tokenised assets are now a key focus area globally, with several countries integrating them into their financial systems under regulated structures.

What the PwC report says about India

India does not have a full crypto rulebook yet. PwC says over 52 countries already have clear regulations for crypto. These rules include licensing, audits, and compliance requirements. India is not among them.

Despite this, India has a very large crypto market. Around 90 million Indians hold or have used crypto. Adoption is high, but there are no clear rules for exchanges or businesses.

So far, India has focused on taxation. There is a 30% tax on crypto income and a 1% TDS on transactions. This helps the government track activity, but it does not make things clear for companies or users. There is no licensing system, no set capital requirements, and no standard compliance process.

In other countries, exchanges follow strict rules. They have audits, customer protection, and reporting requirements. India has some checks, but mostly through tax tracking. There is no dedicated regulatory structure.

Because of this, bigger exchanges can survive because they can pay for compliance. Smaller exchanges struggle, and some have shut down or reduced activity. Some trading has moved abroad because of uncertainty about the rules.

India has scale and a lot of users, but no clear framework to support them. Without proper rules, the market is unstable. If things do not change, India could fall behind countries that have set up clear crypto regulations.

The policy dilemma for the Union Budget 2026

The Finance Ministry faces a choice. Retaining a 1% TDS may secure ₹500–600 crore ($55 – $65 million) for the Consolidated Fund, but it risks losing India’s seat in the future digital economy. Industry bodies advocate for a reduced TDS of 0.01%, allowing liquidity providers to return and offshore volume to be repatriated. 

Regulatory clarity and incentives to build domestic infrastructure are critical if India is to capture the $5 trillion opportunity and protect its talent and intellectual property. Strategic action now could turn policy inertia into an economic engine, creating jobs, tax revenue, and global leadership.

Industry voices on Budget 2026 and crypto

As Union Budget 2026 approaches, leaders in India’s crypto industry are watching closely. They say the current tax framework, introduced in 2022, has shaped trading behavior and pushed activity offshore.

Many highlight that regulatory clarity and predictable rules will be key to bringing domestic activity back. India already has a large base of crypto users and Web3 talent. But high taxes and unclear rules are limiting domestic participation.

Vikram Subburaj, CEO, Giottus.com, said: “The India crypto story is no longer hypothetical. Nearly 100 million Indians hold digital assets and the broader global base is over 560 million. We are past early adoption and are in the real participatory growth stage. For 2026, FIU-IND’s updated AML and CFT expectations push the sector toward bank-grade KYC, monitoring, and traceability. In the Budget, the most practical unlock would be predictability. This includes a clear rulebook for VDA intermediaries and reviewing frictions like the 1% TDS that hurts liquidity and onshore participation.”

He also added, “India can be an innovation hub if compliant players get clarity on licensing, custody, and taxation. There should also be regulatory sandboxes for Web3 rails at UPI scale and a dedicated crypto regulatory body for single-window clearance and customer protection.”

Sumit Gupta, Co-Founder & CEO, CoinDCX, said: “As we approach Budget 2026, the virtual digital asset sector is looking for measured relief, especially since it has been four years since the current taxation framework was introduced. The decisions taken now can accelerate innovation and help India emerge as a global Web3 and VDA leader.”

Gupta added, “Pragmatic reforms that bring users back to compliant platforms while strengthening compliance are key. Reducing TDS from 1% to 0.01% would retain monitoring while removing the primary incentive for offshore migration. Aligning the 30% capital gains tax with income tax slabs, allowing loss offsetting and standard business deductions for Web3 ventures, would create a stable and transparent ecosystem for responsible innovation.”

Edul Patel, CEO, Mudrex, said: “I do not expect anything to change immediately in this Budget regarding the 1% TDS or the 30% tax. These do not solve government concerns. Over time, more clarity is expected on regulatory rules. Recent FIU updates focus on the formalization of infrastructure and tracking for crypto players. There is also chatter about dedicated bodies responsible for crypto, including stablecoin monitoring by the RBI. Gradually, we expect more formalization and clarity for crypto payments in India.”

Vikas Gupta, Country Manager – India, Bybit, said: “2026 is likely to be a selective market rather than broadly bullish. Short-term rebounds may appear due to liquidity shifts, positioning resets, or technical factors, not underlying fundamentals. Macro developments, like US inflation and Fed policy, will influence market direction. Investors should focus on risk management, diversification, controlled exposure, and technical signals. The market will reward informed and disciplined participation rather than speculation.”

Ashish Singhal, Co-Founder of CoinSwitch, said: “India’s VDA ecosystem is at a pivotal stage, with growing adoption across the country. However, the current tax framework presents challenges for retail participants by taxing transactions without recognizing losses, creating friction rather than fairness. A reduction in TDS on VDA transactions from 1% to 0.01% could improve liquidity, ease compliance, and enhance transparency while preserving transaction traceability. Raising the TDS threshold to ₹5 lakh would help protect small investors from disproportionate impact.”

Ashish also added, “Introduced in 2022 as a stand-in for regulation at that time, VDA taxation has since been complemented by strong oversight from FIU-IND and improved compliance. This Budget presents a great opportunity to revisit the framework in a manner beneficial to both investors and the government. We remain hopeful that the government will recognize this gap and consider reviewing the current framework soon.”

Together, these perspectives show that the industry is not looking for exemptions. They are asking for “predictable rules, rational taxation, and a clear regulatory framework.” This can support domestic liquidity, innovation, and compliance.

What the industry is actually asking for

Contrary to popular perception, the industry is not seeking exemptions or special treatment. Its demands are narrow and pragmatic.

A reduction of TDS to around 0.01%, sufficient to maintain transaction traceability without destroying liquidity.

Rationalization of capital gains taxation, including loss set-offs.

Clear legal classification of digital assets and custody norms.

Regulatory certainty that allows long-term planning and institutional participation.

These measures would not weaken oversight. They would strengthen it by bringing activity back within the formal economy.

A decision that will shape the next decade

The debate around crypto in India is often framed as ideological. In reality, it is economic.

It is about whether India wants to shape the next generation of financial infrastructure or merely observe it from the sidelines. Whether it wishes to build platforms or consume them. Whether it wants to capture value or export it.

Budget 2026 will not announce this choice explicitly. But it will encode it — quietly, precisely, and decisively — in tax rates, definitions, and compliance rules.

And those choices will determine whether India emerges as a serious participant in the global digital economy or watches its most promising frontier mature elsewhere.

John Daghita, widely known as Lick and accused of stealing $40 million from the U.S. government, has launched a new memecoin, $LICK, on Solana. According to security firm Bubblemaps, Lick initially held 40% of the token supply and promoted the launch through live streams on Telegram. 

John Daghita (@lick), who stole $40M from the US government, just launched $LICK on pumpfun and is live streaming on Telegram

He holds 40% of the supply

Unhinged https://t.co/jUku6wIfXg pic.twitter.com/apZQojKnuz

— Bubblemaps (@bubblemaps) January 27, 2026

Dexscreener data shows that $LICK saw an increase in buying activity, but prices declined drastically soon as selling activity dominated. Its price jumped as high as $0.0009029, an increase of nearly 1,200% from the launch, just to crash to nearly zero within hours. 

Lick’s alleged history of theft

Lick’s actions have raised serious concerns beyond just his token. According to on-chain investigator ZachXBT, he allegedly stole $40 million from U.S. government crypto wallets in 2024, and also targeted other victims in late 2025. Reports show he controlled several wallets holding millions in Ethereum and other crypto, including money tied to the 2016 Bitfinex hack.

“Meet the threat actor John (Lick), who was caught flexing $23M in a wallet address directly tied to $90M+ in suspected thefts from the U.S. Government,” ZachXBT posted. The thread traces his crypto movements, highlighting transfers from government-seized wallets to personal addresses. 

1/ Meet the threat actor John (Lick), who was caught flexing $23M in a wallet address directly tied to $90M+ in suspected thefts from the US Government in 2024 and multiple other unidentified victims from Nov 2025 to Dec 2025. pic.twitter.com/SBAFU5hTnE

— ZachXBT (@zachxbt) January 23, 2026

Furthermore, Lick’s father owns CMDSS, a company contracted by the U.S. Marshals Service to manage and dispose of seized crypto, potentially enabling insider access.

Government scrutiny and Strategic Bitcoin Reserve

After these claims came out, the U.S. Marshals Service said it’s investigating whether over $40 million in seized crypto was stolen. The Virginia-based contractor CMDSS, responsible for handling some of these assets, is at the center of the investigation. 

This has raised bigger questions about how the government keeps its crypto safe, especially since it holds around 328,372 Bitcoin worth about $29 billion.

The controversy came after more attention was paid to how the government handles seized Bitcoin, especially after claims that Samourai Wallet funds were sold even though they were supposed to stay in the U.S. Strategic Bitcoin Reserve.

Nevertheless, it has now been confirmed by the DOJ that assets from the Samourai Wallet case are still under federal control and part of the Strategic Bitcoin Reserve. Additionally, the Treasury Secretary, Scott Bessent, announced at the World Economic Forum that seized Bitcoin, including assets from the Tornado Cash case, will not be sold but will be used for long-term reserve purposes.

Also Read: Tron Users Surge 36%. So Why Is TRX Going Nowhere?

Arthur Hayes, Co-Founder of BitMEX, says Bitcoin could see a strong upside move if the US Federal Reserve intervenes in Japan’s currency and bond markets through balance sheet expansion. 

In his latest essay titled “Woomph,” Hayes argues that stress in the Japanese yen and government bond market may eventually force central banks to inject fresh liquidity into the global financial system, a development that has historically supported Bitcoin prices.

Hayes uses the metaphor of a “woomph,” a sound that signals hidden danger in a snowpack, to describe recent market signals coming from Japan. According to him, the sharp weakening of the yen alongside rising yields on long-term Japanese Government Bonds (JGBs) is an unusual and troubling combination. 

“Woomph” is a an essay on my theory about how the Fed could be printing money to manipulate the yen and JGB markets. If true money printer go fucking BRRRR!

https://t.co/VdCUcd784t pic.twitter.com/loIlR5nOd0

— Arthur Hayes (@CryptoHayes) January 27, 2026

Normally, a country’s currency strengthens when bond yields rise, reflecting investor confidence. Japan’s divergence, Hayes notes, suggests growing strain beneath the surface.

Why Japan’s bond and currency stress matters

Japan plays a major role in global financial markets. Its investors hold one of the largest foreign investments in the US Treasury bonds, and the nation is highly dependent on imports, in particular, energy.

A weaker yen raises inflation risks for Japan, while higher JGB yields increase borrowing costs for the government and pressure the Bank of Japan’s balance sheet. Hayes argues that the Japanese authorities should not be able to stabilize these markets otherwise the US can intervene to safeguard its interests. 

Japanese investors selling US Treasuries in large amounts in a brief period would drive up US yields at a time when Washington is already operating at historically large deficits. 

To avoid this instability, Hayes thinks that the Federal Reserve might act indirectly by increasing its balance sheet to boost the prices of the yen and the JGBs. 

“The line item to monitor is Foreign Currency Denominated Assets,” Hayes emphasized. “They will not provide a detailed breakdown of exactly which assets it owns. We must infer from JGB price action whether the Fed is present. “

Such intervention, he explains, would involve the New York Fed creating new dollar liquidity, exchanging it for yen, and potentially buying Japanese government bonds. This process would increase the Fed’s balance sheet and inject more dollars into the financial system.

Implications for Bitcoin and crypto markets

Hayes says this type of liquidity expansion would be positive for Bitcoin. Historically, Bitcoin has been doing well when central banks inject more money into the economy because investors seek an alternative to fiat currencies.

While Hayes cautions that the impact may not be immediate, he believes sustained balance sheet growth would eventually lift Bitcoin and other crypto assets in nominal terms. 

“Bitcoin will pump alongside a growing Fed balance sheet (gold). It might not happen on your timeframe if you are 100x leveraged trading 1m candles on some shitcoin perp, but Bitcoin and quality shitcoins will mechanically levitate in fiat terms as the quantity of paper money rises,” he said. 

Recent market activity supports his broader thesis. In the last year, Bitcoin has been mostly trading flat even with the interest rate cuts in the US indicating that traders are waiting to see more indicators of new liquidity and not policy signals alone.

Current Bitcoin Market Snapshot

The current price of Bitcoin was $88,753.36 and the 24-hour trading volume was $38.17 billion at the time of writing. It is down nearly 10% from the month high, according to CoinMarketCap data. 

While Hayes’ analysis remains a theory and not a proven policy outcome, it points to the way in which the traditional financial market changes, especially in Japan, might determine the next significant step of Bitcoin.

Also Read: Strategy Inc Buys 2,932 Bitcoin for $264M; Total Holdings Hits 712,647

Ripple, a U.S.-based enterprise blockchain developer, has unveiled Ripple Treasury, which is powered by its recently acquired GTreasury platform, marking a strategic push into the $120 trillion global corporate treasury market.

The launch, announced on Wednesday, positions the blockchain infrastructure firm to target Fortune 500 finance teams worldwide. The firm aims to modernize how companies manage, move, and deploy liquidity by replacing slow, bank-centric systems with real-time, blockchain-based infrastructure.

Today, we're proud to introduce Ripple Treasury, Powered by GTreasury: the world's first comprehensive treasury platform combining 40 years of proven enterprise expertise with cutting-edge digital asset infrastructure.

Many finance teams are stuck managing growing complexity… pic.twitter.com/4scNUggARS

— GTreasury (@GTreasury) January 27, 2026

A calculated strike at idle capital

At the core of Ripple’s strategy is how hundreds of billions of dollars sit idle every day inside corporate balance sheets, trapped by slow settlement cycles, pre-funding requirements, and fragmented banking infrastructure. Ripple estimates that around $700 billion in corporate capital remains effectively stagnant, not because companies want it that way, but because legacy systems leave them few alternatives.

By absorbing GTreasury and rolling out Ripple Treasury as a unified platform, Ripple is positioning itself as an operating system for CFOs, one that spans traditional cash, digital assets, and real-time liquidity management under a single roof.

What Ripple Treasury changes for users

Ripple Treasury shifts treasury operations from fragmented systems to a single, always-on platform. By merging GTreasury’s enterprise tooling with Ripple’s blockchain rails, finance teams gain real-time visibility across cash, FX exposure, payments, and digital assets, without being limited by banking hours or geography.

For day-to-day operations, the most significant changes are speed and control, according to the official release. Cross-border payments settle in seconds instead of days, FX risk is compressed to near-zero during transfers, and companies no longer need to pre-fund overseas accounts just to keep vendors paid on time. In practice, users gain:

• One view across fiat, stablecoins, and tokenized assets
• 24/7 settlement and liquidity, including weekends
• Reduced FX exposure and faster vendor payments
• Yield generation on cash that previously sat idle

The result is a treasury stack designed to operate at internet speed rather than traditional banking speed.

Beyond cross-border payments

Ripple’s purchase of GTreasury marks its third major acquisition in 2025, following deals for Hidden Road and the stablecoin platform Rail. Together, these moves signal a shift beyond bank-focused payments toward a broader role as a full-stack financial infrastructure provider for large enterprises.

If successful, Ripple Treasury could reshape how Fortune 500 companies manage cash, turning treasury from a back-office safeguard into an active tool for unlocking and deploying capital.

For Ripple, the goal is to modernize how corporations move and deploy money, and the rest of enterprise finance will follow.

Also read: Ripple Enters Saudi Banking Sandbox With Riyad Bank’s Jeel

The Tron network is experiencing a surge in active users, reaching 4.59 million on Tuesday, i.e., a 36% increase from the previous month. As the network continues to dominate stablecoin settlement, its token TRX fails to show any significant movement in the market.

Yet as count rises, the TRON (TRX) token price remains largely unmoved. At the time of writing TRX is trading at $0.2947, reflecting a decline of 0.42% over 24 hours. The total market capitalization stands at $27.91 billion and the circulating supply currently is 84.71 billion TRX.

For investors, the divergence is becoming impossible to ignore: Tron adoption is accelerating, but the token is failing to capture it.

Stablecoin dominance drives activity–not TRX demand

Meanwhile, the growth in active accounts is mainly due to Tron’s strong position in the stablecoin market and its focus on real-world use. By prioritizing low fees and speed instead of speculative hype, the network has attracted a steady user base. This trend is expected to keep going as the network adds more features for high-volume financial services.

The main reason for this user increase is Tron hosting over $82 billion UDT in supply. This accounts for more than 98% of the stablecoin volume on the network, making Tron a key settlement layer for USDT. The network’s integration with the Base network in December 2025 improved its cross-chain capabilities. This allows the TRX token to connect with Coinbase’s Layer 2 ecosystem.

Price Analysis: high usage, low value capture

The latest 4-hour TRX/USDT chart shows that token is continuing to compress inside a descending wedge. This indicates that TRX is experiencing selling pressure despite stable network fundame.

At the time of writing TRX is trading near $0.2928, having failed multiple times to reclaim the $0.30–$0.31 resistance zone since January 24.  Each bounce has been met with lower highs, while support has gradually shifted down toward the $0.29 area, confirming a short-term downtrend.

Volume has also declined steadily during this compression phase, indicating waning speculative participation even as on-chain usage rises. Moreover, onchain data shows no corresponding increase in spot accumulation.

Momentum indicators remain weak. The Relative Strength Index (RSI) is at 36.3, below the neutral 50 level and approaching oversold territory, signaling that bearish momentum still dominates. 

Most fees on Tron are paid via bandwidth and energy credits, not through direct TRX spending, which limits fee-driven buy pressure even as daily transactions exceed 10 million.

AI and technical roadmap

The overall impact of this user growth is shown in the network’s revenue, which has recently surpassed that of other major blockchains. The 2026 roadmap includes the Java-tron v4.8.1 upgrade to improve EVM compatibility and a project focused on integrating artificial intelligence into DeFi and NFTs. These upgrades aim to attract more developers and boost on-chain use.

Also Read: River Token Jumps Nearly 2000% in January: Will the Rally Hold?

Japan’s Financial Services Agency (FSA) is seeking opinions from the public concerning new draft rules that will govern how stablecoins are backed and how crypto-related services are supervised under the country’s updated payments law.

This process is open until February 27, 2026, and follows previous changes on the Payment Services Act, which was passed in June 2025 to set the rules for how money and electronic payments are handled in the country.

In a statement released on Monday, the FSA said it has prepared a set of draft regulatory notices linked to Act No. 66 of 2025. These notices are part of the country’s overhaul of rules that cover its settlement system and electronic payment methods. The agency explained that the drafts are meant to define how regulated stablecoins should be backed and supervised under the law.

Clear rules for stablecoin reserve assets

One major part of the rules focuses on reserve assets used by regulated stablecoins that rely on trust structures. In Japan, companies that issue stablecoins often rely on a structure known as “specified trust beneficiary interests.” The new rules explain how assets under this structure can be invested and what types of financial products are allowed to support stablecoin value.

According to the draft notice, only certain foreign-issued bonds will qualify as reserve assets. The FSA said these bonds must meet two conditions. First, they must carry a very high credit rating and fall within a credit risk category of “1–2” or higher, as assessed by an approved rating agency. Second, the foreign issuer must have a very large bond market, with at least 100 trillion yen in bonds already issued.

New guidelines for banks and subsidiaries

The regulator also released updated supervisory guidelines for banks, insurance companies, and their subsidiaries. A newly added rule says that when a subsidiary offers cryptocurrency intermediation services, it must give customers clear and appropriate explanations about the risk involved.

The FSA said the measure is to prevent people from thinking a crypto product is safe just because it is offered by a well-known financial group.

For companies that want to handle stablecoins issued outside Japan, the draft rules add another requirement. Firms must explain that the foreign issuer will not issue, redeem, or actively promote stablecoins to everyday users in Japan. The FSA said it will also work with overseas regulators to share information about these stablecoins and their issuers.

Japan’s push for a regulated stablecoin market

The consultation is part of Japan’s attempt to build a regulated stablecoin environment. In October 2025, local fintech company JPYC launched what it described as Japan’s first legally recognized yen-backed stablecoin.

The country’s three major banks, MUFG, SMBC, and Mizuho, have also been testing stablecoins and tokenized deposits for payments and settlements, with formal backing from the FSA in December.

With the stablecoin market becoming a thing of interest in the country. Japan is pushing to protect customers by making sure banks and subsidiaries explain risks when offering crypto services. Limiting eligible reserve assets to high-quality foreign bonds reduces financial risk and ensures stability. The FSA said the rules will be finalized after the public comment period ends and will be enforced following the necessary legal steps.

Also Read: Japan May Allow Crypto ETFs by 2028 as Global Markets Move Ahead

Trump family-backed Bitcoin mining firm American Bitcoin Corp. (ABTC) expanded its Bitcoin reserves to roughly 5,843 BTC, according to a treasury update released this week. The move reflects a broader accumulation trend led by firms like Strategy Inc and includes purchases made through January 25, 2026, following the company’s most recent Bitcoin buy earlier this month.

In an X post on Wednesday, Eric Trump praised the company’s accumulation strategy, writing, “​​$ABTC is leading the charge, building America’s Bitcoin infrastructure faster than anyone.”

In 4 months and 22 days since our public debut on NASDAQ, American Bitcoin Corp (@ABTC) has sprinted past company after company:

30. DeFi Technologies — 2,452 BTC (passed September 2, 2025)

29. The Smarter Web Company PLC — 2,674 BTC (passed September 8, 2025)

28. Capital B —… pic.twitter.com/CHxT3eQ2T1

— Eric Trump (@EricTrump) January 27, 2026

ABTC treasury growth and BTC yield

American Bitcoin said its BTC yield reached about 116% since its Nasdaq debut. The figure is based on the company’s Satoshis Per Share metric, which shows how much Bitcoin backs each outstanding share.

As of late January, SPS climbed to 586 satoshis per share, up sharply from levels recorded at listing. The steady increase reflects a combination of direct Bitcoin purchases and operational gains rather than short-term trading activity.

Market reaction

Shares of American Bitcoin Corp. traded higher following the disclosure, rising 5.8% after reports of the January 25 reserve increase. The move extended a period of elevated volatility, as investors continue to price ABTC largely as a proxy for Bitcoin exposure.

Even after the recent pop, the shares are still far from past highs, underscoring how ABTC’s price moves tend to mirror crypto market sentiment more than classic stock fundamentals.

The same sharp jump happens every Monday when Strategy CEO Michael Saylor announces new BTC purchases. Yesterday, the notice seemed to drive prices 2.1% up.

The update follows American Bitcoin’s shift after its September 2025 Nasdaq listing, when it leaned fully into a Bitcoin treasury model and began judging progress by how much BTC backs each share, rather than by traditional operating metrics.

A smaller stack, a similar playbook

With roughly 5,843 BTC on its balance sheet, American Bitcoin now sits around 18th among public Bitcoin holders, according to BitcoinTreasuries. Its market cap hovers near $1 billion, putting it in the mid-cap tier of Bitcoin treasury companies. That scale is modest compared to the giants on the top 3 holders, but the strategy is familiar.

Just yesterday, Strategy Inc. added 2,932 BTC for about $264 million, pushing its total holdings to 712,647 BTC, or roughly 3.4% of Bitcoin’s fixed supply. Strategy’s approach is relentless and mechanical: constant capital recycling, steady equity issuance, and zero concern for short-term price moves.

American Bitcoin is playing the same game, just on a very different board. Where Strategy leverages massive access to capital markets, American Bitcoin is focused on incremental accumulation and growing Bitcoin per share as its core.

Also read: BlackRock Files for iShares Bitcoin Premium Income ETF

Digital asset firm Tether launched USA₮ today, a stablecoin regulated by the federal government and designed for the U.S. market. Issued through Anchorage Digital Bank, N.A., the token is the first to operate under the federal GENIUS Act framework established in July 2025.

As per the official announcement, the stablecoin aims to provide domestic institutions with a dollar-backed asset that meets strict national oversight standards while using established financial infrastructure like Cantor Fitzgerald for reserve custody.

Tether Announces the Launch of USA₮, the Federally Regulated, Dollar-Backed Stablecoin, Made in America 🇺🇲🚀

Read more: https://t.co/rIMQTQ7ipX

— Tether (@tether) January 27, 2026

Market availability and Infrastructure

This launch follows a preliminary design announcement made late last year, signaling a change in how stablecoins connect with the American banking system. USA₮ is now available to U.S. users via major platforms like Bybit, Crypto.com, Kraken, OKX, and Moonpay.

CEO Bo Hines, who previously served as the Executive Director of the White House Crypto Council, joined Tether in September and is leading the project. He said that the project focuses on stability and responsible governance to ensure American leadership in financial innovation.

Shift to federal oversight

While Tether’s global token, USD₮, is the most widely adopted stablecoin around the world, it has often operated outside the direct oversight of U.S. federal regulators. Meanwhile, USA₮ is designed to meet bank-grade compliance requirements and offers on-chain transparency through a nationally chartered bank.

Paolo Ardoino, CEO of Tether, noted that while USD₮ has shown the utility of digital dollars globally for over a decade, USA₮ extends that mission by providing a product specifically tailored to the American regulatory environment.

Global economic implications

The launch has wider implications for the future of the U.S. dollar in a digital-first global economy. As countries compete to shape the future of money, integrating a major stablecoin issuer into a federally recognized framework could set a new standard for trust and transparency.

Anchorage Digital Bank has developed infrastructure to manage large-scale transactions while maintaining integrated risk management, which may encourage more traditional financial entities to adopt blockchain-based settlements.

Legitimizing Tether’s role

USA₮ represents a fundamental rebranding for a company that has spent a decade navigating the American financial system. While Tether has been established with USDT, it did so by operating offshore, often drawing heavy scrutiny from U.S. regulators regarding its reserve transparency. In contrast, USA₮ is a calculated move toward transparency and federal legitimacy.

This approach is further solidified by the focus on “dollar innovation.” This launch places USA₮ under the direct supervision of the Office of the Comptroller of the Currency (OCC). It’s no longer just an offshore claim, but a bank-issued asset subject to the same compliance standards as traditional national banks.

The debut of USA₮ represents Tether’s effort to shift from being a global industry participant to a key player in the domestic regulated financial system. Although USA₮ is not legal tender and is not issued or guaranteed by the U.S. government, its compliance with the GENIUS Act serves as a foundation for the next generation of American commerce.

Also Read: Tether To Fund INHOPE For Fight Against Online Child Abuse

Clawdbot, an open-source AI assistant now rebranded as Moltbot, is facing a major security scare after its Founder, Peter Steinberger, revealed that crypto scammers hijacked his GitHub and X accounts. 

In a series of posts on X, Steinberger emphasized that he has never issued any tokens and that projects listing him as a coin owner are scams. He urged crypto enthusiasts to stop harassing him and clarified that he will not accept any token-related fees.

To all crypto folks:
Please stop pinging me, stop harassing me.
I will never do a coin.
Any project that lists me as coin owner is a SCAM.
No, I will not accept fees.
You are actively damanging the project.

— Peter Steinberger 🦞 (@steipete) January 27, 2026

Steinberger explained that a forced account renaming by Anthropic triggered the issue. He posted, “Crypto folks: I was forced to rename the account by Anthropic. Wasn’t my decision.” Scammers immediately squatted on his old accounts. 

Steinberger added, “Do I have anyone from GitHub in my timeline who could help me get my account on GitHub back? It was snatched by crypto scammers.” The founder also confirmed that the targeting came specifically from crypto communities, stating, “Because it’s only that community that harasses me on all channels and they were already waiting.”

Clawdbot security risks exposed

The founders’ posts come as blockchain security firm SlowMist recently warned about problems with Clawdbot. The firm found hundreds of Clawdbot API keys and private chat logs exposed online. Some accounts can be accessed without passwords, letting hackers steal information or take control. The risk comes from Clawdbot’s system that handles messages, tools, and sensitive account info.

Security Researcher Jamieson O’Reilly explained on X, “Something users (developers included) often don’t realise is, the entire IPv4 internet gets scanned continuously – by people on both sides of the security spectrum.” Some Clawdbot servers even run the agent as root, giving anyone who discovers them full system control. Reverse proxy setups can misinterpret external connections as local, allowing unauthorized access.

The Clawdbot craze has also spread into crypto. Fake Clawdbot tokens have seen wild price swings—one jumped nearly 129,000% in a single day—showing how hype can quickly attract scammers. 

Co-Founder of Voltagent Ozmen added, “This happens to nearly every OSS project. When it gains visibility, scammers create fake coins with the name, farm engagement, & run rugs.” He suggested that developers make it clear their projects are separate from scams and avoid getting unnecessarily involved.

Crypto scams worsen across platforms

The Clawdbot situation highlights a broader trend of targeting high-profile tech figures, similar to the recent phishing attack on South Korean prosecutors. Earlier this month, a prosecutor’s office in South Korea lost $48 million in Bitcoin after falling victim to a phishing scam. The officials accessed a phishing website while working on crypto assets that had been seized and stored their passwords on USB drives, which is not advisable. 

In another case, a crypto user lost over $500,000 in USDT after falling victim to an Ethereum address poisoning attack. The victim sent out a bulk transfer to an address that was very similar to the intended recipient. This shows that even experts can be victims of basic errors that cost them big.

Clawdbot’s stolen accounts and security gaps show how important it is for AI and crypto projects to stay safe. People should double-check if a project is real, keep their login info secure, and stay away from unverified coins or tokens.

Traders and investors are bracing for market movements as the Federal Reserve (Fed) prepares for its January 2026 Federal Open Market Committee (FOMC) meeting tomorrow. The market is closely watching whether the central bank will adjust interest rates, amid persistently high inflation and early signs of a cooling job market. 

The Fed, which has been cutting interest rates in recent meetings, now seems to be adopting a cautious stance, choosing to wait and see. The uncertainty is creating confusion among financial institutions, crypto traders, and even retail investors.

Currently, the Fed’s benchmark interest rate stands at 3.5%-3.75%. The central bank reduced rates by 75 basis points in the last three consecutive meetings, aiming to protect the labor market from rising unemployment. However, last month’s FOMC meeting showed many officials advocating a pause after repeated cuts. This signals that the Fed may maintain its current rates rather than push further easing or tightening.

Market sentiment and crypto implications

According to blockchain analytic platform Lookonchain, the market heavily prices in no change for the January 28 decision. Yet, a single wallet recently spent $23,000 betting on all three possible outcomes on Polymarket: a 25+ bps increase, a 25 bps decrease, or a 50+ bps decrease. If any outcome hits, the wallet could earn between $1.27 million and $5.64 million.

The market is pricing in no change for the Jan 28 #Fed decision.

Yet a newly created wallet spent $23K betting on all three extremes:

25+ bps increase
25 bps decrease
50+ bps decrease

It may seem unlikely — but if any one hits, the wallet stands to profit $1.27M+, $2.01M+, or… pic.twitter.com/DHFMxmLFEh

— Lookonchain (@lookonchain) January 27, 2026

Polymarket data confirms this, showing the trader holding active bets worth roughly $18,700. Despite the strong positioning for a rate increase, the account has posted nearly $3,000 in losses due to incorrect rate-cut predictions. This underscores the unpredictability in the market, even as consensus leans toward a hold.

The CME FedWatch Tool also shows this sentiment, showing a 97.2% probability that the Fed rates remain unchanged. Only a small minority, just under 3%, expect a cut to 3.25%-3.50%. No meaningful probability exists for a rate hike, suggesting the market broadly expects stability.

Expert views and historical context

Analyst Vlad Pivnev noted, “The FOMC meeting is coming soon. There’s a 99% chance there won’t be any changes. We’ve made a profit, so it’s time to open the next meeting.” He added that traders should monitor upcoming economic data to better gauge macro trends.

Chief US Economist Anna Wong analyzed historical FOMC patterns, particularly Kevin Warsh’s commentary during 2006–2011. She observed, “Even as inflation eased slightly, his remarks show a consistent worry that price pressures could re-emerge.” During the 2008 financial crisis, Warsh emphasized inflation risks despite surging unemployment, signaling how policymakers weigh long-term price stability against growth concerns.

If Trump wants someone easy on inflation, he got the wrong guy in Kevin Warsh.

Here we chart his inflation assessment during the FOMC meeting from 2006-2011 (along the unemployment rate, with core PCE inflation in the background).

One standout one:

April 2009 – 7 months after… pic.twitter.com/7cbpEKxJ1c

— Anna Wong (@AnnaEconomist) January 22, 2026

Crypto market reaction

The Fed’s decision could have a big impact on the crypto market. The total crypto market is around $2.98 trillion, slightly up 0.21% today. Still, major coins like Bitcoin, Ethereum, and XRP are losing value. BitMine CEO Tom Lee recently said that the drop is partly because investors are turning to gold and silver. The Fed’s rate decision could either help crypto prices steady or cause short-term swings.

The parabolic and continued surge in Gold and silver are overshadowing inherently strengthening fundamentals of crypto, particularly Ethereum $ETH and Bitcoin $BTC @Davos 2026 highlighted financial institutions are set to build on ethereum and smart blockchains

And when… https://t.co/qqCv7z4FXA

— Thomas (Tom) Lee (not drummer) FSInsight.com (@fundstrat) January 26, 2026

Investors and traders expect the Fed to keep interest rates unchanged, though a small surprise is possible. The decision could affect borrowing costs, market behavior, and crypto prices.

Also Read: SEC–CFTC Crypto Harmonization Event Rescheduled to January 29

Open-source AI agent platform Clawdbot is currently facing security risks amid broader market trend. In the latest update on X, security firm SlowMist highlighted that hundreds of API keys and private chat logs from Clawdbot are exposed online. 

As per the post, some Clawdbot instances can be accessed by anyone without a password, which could let hackers steal login info or even run malicious commands. SlowMist recommends locking down any open ports so only trusted IP addresses can connect.

🚨SlowMist TI Alert🚨

Clawdbot gateway exposure identified: hundreds of API keys and private chat logs are at risk. Multiple unauthenticated instances are publicly accessible, and several code flaws may lead to credential theft and even remote code execution (RCE).

We strongly… https://t.co/j2ERoWPFnh

— SlowMist (@SlowMist_Team) January 27, 2026

The threat stems from how Clawdbot connects AI agents to messaging platforms and manages integrations. Clawdbot Control, the web-based admin interface, holds sensitive information such as conversation histories and API keys. 

As noted by hacker Jamieson O’Reilly on X, the exposure is similar to hiring a butler and leaving your front door wide open. Anyone can access private chats, API keys, and other credentials if the Control UI is improperly secured. 

Exposed gateways and misconfigurations

Clawdbot’s gateway handles message routing, tool execution, and credential management. However, O’Reilly discovered that some instances run with default settings that auto-approve localhost connections. 

Consequently, reverse proxy setups misinterpret external connections as local, allowing unauthenticated access. Some servers run the agent as root, granting full system control to anyone who finds the gateway online.

The vulnerabilities of Clawdbot can be easily found by using online tools like Shodan or Censys. Simply searching for “Clawdbot Control” results in hundreds of exposed instances within seconds. 

“Something users (developers included) often don’t realise is, the entire IPv4 internet gets scanned continuously – by people on both sides of the security spectrum,” O’Reilly said. 

He noted that many of these contain chat logs, API keys, as well as login credentials for Telegram, Slack, Signal, and other services, making it easy for hackers to pretend to be users, steal their information, or control what they see. 

Operational risks and real-world impact

The hacker himself ironically emphasized that Clawdbot agents are independent and can send messages, perform commands, and change their responses without anyone observing. This makes them susceptible to hacking, where a hacker could pretend to be you or alter your digital interactions. 

O’Reilly pointed out the risks associated with AI agents. In one case, there was an exposure of signal integrations, where the device pairing file was publicly accessible. This meant that the encryption could be bypassed. In another case, the server was executing commands and had full system access, exposing sensitive files and settings. 

Crypto market buzz: Clawdbot tokens

The Clawdbot craze has spilt over into crypto. Several Clawdbot copycat tokens have seen huge short-term jumps. One token rose nearly 129,000% in a day, while another shot up 4,778% over 24 hours. 

These copycat tokens are examples of the hype and meme effect that creates a great deal of excitement in the market. While the project itself, Clawdbot, is all about innovation in AI, the rush to invest in these tokens is all about the potential gains that these projects might bring.

Also Read: Kraken Brings DeFi Yield In-App With Morpho-Powered Earn

Digital asset manager Bitwise has taken its first direct step into decentralized finance (DeFi) by launching non-custodial on-chain vaults in partnership with lending protocol Morpho. 

The firm confirmed the launch on January 26, and it was a change of direction in its traditional emphasis on exchange-traded products and research targeting institutional investors. 

A shift beyond ETFs and traditional crypto products

The new product allows users to earn yield on stablecoins while retaining full control of their funds. Instead of transferring custody, investors deposit assets into an onchain vault that is managed through smart contracts. Bitwise curates the strategy and oversees risk, but all execution happens transparently on-chain. 

According to Bitwise, the first vault focuses on stablecoins and deploys capital into overcollateralized lending markets on Morpho. The strategy currently targets returns of up to 6% annually, though actual yields may vary depending on market conditions.

“Finance is moving onchain. Vaults are a key part of that, offering investors a transparent way to earn digital yield on their assets,” Bitwise said in a post on X announcing the launch.

Finance is moving onchain. Vaults are a key part of that, offering investors a transparent way to earn digital yield on their assets.

Today, we’re excited to announce that Bitwise is launching non-custodial vault strategies as a curator on @Morpho.

The quick details:

-… pic.twitter.com/pUz9Upk4lV

— Bitwise (@BitwiseInvest) January 26, 2026

How the vault works and why it matters

The vault allocates deposited funds to lending pools where borrowers provide excess collateral, reducing counterparty risk compared to unsecured lending models. All positions remain visible on-chain, and users can withdraw funds at any time, unlike some staking or locked-yield products.

Strategy design and real-time risk oversight are led by Jonathan Man, CFA, Bitwise’s Portfolio Manager and Head of Multi-Strategy Solutions. The firm said the vault leverages infrastructure and risk frameworks it has developed over several years managing crypto investment products.

“Decentralized finance, or DeFi, offers compelling yield opportunities, but the complexity of managing onchain risk has kept many investors on the sidelines,” Man said. “Bitwise provides value-add by layering professional guidance and  risk management experience onto these non-custodial tools.”

The move comes as asset managers increasingly explore blockchain-based financial infrastructure rather than relying solely on regulated wrappers such as ETFs. While Bitwise has been best known for serving traditional investors, the Morpho vault signals a broader industry trend toward treating DeFi as core financial infrastructure.

Morpho’s growing institutional footprint

Morpho has become a prominent platform of curated lending strategies, where professional managers can create custom vaults with standardized smart contracts. The protocol is now the seventh-largest DeFi platform by total value locked (TVL), having a fund of approximately $6.7 billion, as per DeFiLlama. 

The platform’s growth accelerated in late 2025 following partnerships with Coinbase, Crypto.com, and Société Générale’s digital asset unit SG-FORGE. Earlier this week, Morpho also announced that curated vaults from Sentora had been integrated into Kraken’s DeFi Earn program. 

Kraken's DeFi Earn has integrated @SentoraHQ curated vaults that allocate to Morpho.

DeFi Earn connects users to the best onchain yield opportunities, all within @krakenfx. pic.twitter.com/dbY3wCp8qL

— Morpho 🦋 (@Morpho) January 26, 2026

“Bitwise joining Morpho as a vault curator highlights growing institutional demand for allocating capital onchain through noncustodial infrastructure,” Morpho Co-Founder and CEO Paul Frambot said.

What comes next for Bitwise’s DeFi strategy

Bitwise has not disclosed performance data or timelines for expanding its vault offerings. However, the firm previously predicted that on-chain vaults, often described as “ETFs 2.0” could double assets under management in 2026. 

The Morpho launch appears to be an early step in that longer-term strategy, as traditional asset managers cautiously deepen their involvement in decentralized finance.

Also Read: Bitwise Launches BPRO: The First Actively Managed ETF Combining BTC & Gold