Web3 Wavefronts - Digestible News on Crypto, DeFi and AI

On April 7 Deputy Attorney General Todd Blanche disbanded the Justice Department’s National Cryptocurrency Enforcement Team and issued a memorandum redirecting federal crypto enforcement, ordering a pause or review of platform-focused investigations, moving crypto work out of the Market Integrity and Major Frauds Unit, and directing personnel and resources away from routine platform probes. The memorandum instructs prosecutors to prioritize investment fraud and instances where digital assets facilitate terrorism, drug trafficking, cartels, human trafficking, ransomware and hacking, and organized crime, and to treat intermediary liability as dependent on deliberate, complicit behavior rather than as a default theory. The directive signals that DOJ will defer more to financial regulators for rulemaking and supervision and will reserve criminal prosecution for actors and conduct that meet the newly stated priority categories. Blanche was confirmed in March 2025, signed an ethics agreement to divest crypto holdings within 90 days and to recuse from matters that could directly and predictably affect his financial interests, and held more than $150,000 in digital assets when the memorandum was issued, prompting ethics scrutiny and questions under federal conflict-of-interest statutes, including 18 U.S.C. 208, and recusal rules. Companies and legal teams are advised that platform-focused criminal risk is reduced but not eliminated, that DOJ will continue to prosecute intermediaries knowingly complicit in investor fraud or in facilitating the listed priority crimes, and that regulatory enforcement of AML, KYC, sanctions, registration, and the travel rule by FinCEN, OFAC, the SEC, and the CFTC will continue and may involve multi-agency coordination. Operational actions recommended to teams include auditing features and controls against the memo’s priority crimes, mapping abuse paths and documenting mitigations, strengthening fraud detection, disclosures, incident response, and investor remediation, maintaining engagement with SEC, CFTC, FinCEN, and OFAC, and tracking the status of DOJ matters to adjust litigation reserves, disclosures, and product roadmaps. Open issues to monitor include whether Blanche completed divestment within 90 days and honored recusal commitments, how many platform investigations will be reopened, closed, or redirected, and whether state attorneys general or foreign authorities will increase enforcement; internally DOJ will reallocate personnel and budgets, retrain prosecutors to apply investigative tools to prioritized crimes, and redeploy analytics toward national security targets. Markets and builders should expect near-term case review and reclassification activity, potential impacts on liquidity, listings, and banking access as legal overhangs change, continued compliance obligations under financial regulators, and an opportunity to harden controls, update disclosures, and resolve legacy exposures while monitoring a fluid enforcement environment. Source: https://web3businessnews.com/policy/doj-crypto-shift-blanche-scrutiny/

Show description: Charles Hoskinson publicly backed Night and described it as a fourth‑generation cryptocurrency. Night launched on December 9, 2025. The token recorded a 24‑hour gain of 24.2 percent and a seven‑day gain of 54 percent, with 24‑hour trading volume of about $8.558 billion, market capitalization near $1.75 billion, and fully diluted value near $2.5 billion. On‑chain activity showed over 11,000 transactions and more than 1,500 makers across a recent 12‑day window, and the token’s early price movement showed low correlation to Bitcoin. Midnight describes Night’s technical design as a hybrid proof‑of‑stake architecture that aims to produce predictable finality, higher throughput, and bounded resource use to stabilize fees. Midnight positions Night to provide standardized proofs, verifiable data flows, and identity‑aware workflows for use cases including compliant tokenized asset issuance, permissioned settlements, attestations, and reporting, and describes the stack as modular and upgradable. Testnet activity is live, a mainnet target is set, and a Glacier distribution drop is planned with eligibility broadened to holders of BTC, ETH, SOL, ADA, and XRP. Wider institutional adoption is contingent on third‑party audits, custody coverage, exchange listings, developer tooling, enterprise pilots, asset manager partnerships, and cloud provider alignment. Delivering sustained low fees and high throughput under real‑world load remains a delivery risk until independent usage and dashboards confirm performance. Multiple competitors are pursuing scaling, privacy‑preserving computation, and identity‑aware access, and regulatory posture and custody readiness will affect institutional flows. Technical market levels cited to monitor sentiment include acceptance above $0.10 for continuation, pullback zones around $0.075, and an invalidation level near $0.06. For builders, opportunities exist to provide tooling, compliance layers, custody integrations, and enterprise pilots that enable institutional use. Night’s token mechanics anchor governance and utility within Midnight, making protocol upgrade paths, auditability, and change management material for institutional evaluation. Liquidity is currently substantial, and its durability depends on exchange depth, broad custody support, and enterprise distribution deals. Credibility of the fourth‑generation characterization depends on whether Midnight delivers a hybrid consensus that sustains low fees under load and an auditable universal proof layer that institutions can integrate; if those outcomes do not materialize, market repricing could follow once usage and regulatory clarity are assessed. Source: https://web3businessnews.com/crypto/hoskinson-night-fourth-gen-crypto/

Show description: Research finds futures contracts on major venues traded at an average premium to spot of roughly 7 percent annualized from 2019 through 2024. The basis behaved as a market-segmentation signal driven by differing pools of demand, leverage rules, and venue microstructure rather than a classical model-driven cost of carry. The basis widened during retail-driven bull runs and compressed after liquidation events, with perpetual swaps and quarterly futures showing different dynamics due to funding cadence and contract structure. Regulated venues such as the CME exhibited lower and less volatile basis levels, while crypto-native exchanges with higher allowable leverage and looser margin regimes showed larger and more variable premiums, indicating segmentation between institutional capital and smaller levered retail flows. Expansion of access via lower minimum contract sizes and micro futures correlated with increases in the basis. Fundamental factors including policy rates, volatility, and stablecoin funding explained part of cross-venue variation, while a substantial residual aligned with arbitrage capacity limits and operational costs such as KYC, capital controls, custody limits, transfer delays, and differing haircut regimes. Cash-and-carry arbitrage often proved unscalable in practice because funding, margin, and settlement frictions increased costs and slowed cross-market execution. Carry strategies produced positive average premiums but exposed allocators to funding liquidity risk and mark-to-market swings that created asymmetric drawdowns when margin calls, credit retractions, or haircut increases occurred. Empirical work documented venue-level distortions including thin liquidity, weak surveillance, wash-trading patterns, and price pushes by participants with cheaper funding that amplified basis levels on some venues. Policy prescriptions included harmonizing margin, collateral, and custody rules, broadening standardized access to regulated derivatives, and improving cross-market settlement and clearing to reduce frictions. Trading recommendations included treating the basis as a time-varying compensated risk, sizing positions to survive sudden basis spikes, precommitting de-risk thresholds, optimizing collateral across rails, diversifying funding lines, preferring venues with reliable margin and settlement mechanics, stress testing for historical basis blowouts including tightened credit and transfer delays, and building financing optionality with multiple lenders. Key metrics to monitor included cross-venue basis spreads and their stress correlations, term structure and perp funding rates, futures open interest by account size, roll slippage across venues, and stablecoin issuance and redemption activity. Near-term expectations included incremental policy harmonization, improved prime-brokerage services, and broader regulated retail access that may compress the gap over time while operational and cross-border settlement frictions persist. Source: https://web3businessnews.com/crypto/crypto-carry-market-segmentation/

Federal authorities and international partners dismantled E Note and seized production servers, prior server copies, full customer and transaction databases, mobile applications, and domains including e-note.com, e-note.ws, and jabb.mn, along with full ledgers, message logs, and service notes tied to more than $70 million in alleged laundering since 2017. The U.S. Attorney’s Office for the Eastern District of Michigan unsealed an indictment naming Russian national Mykhalio Petrovich Chudnovets as the alleged operator and charging him with money laundering conspiracy carrying a statutory maximum penalty of 20 years in prison. The FBI led the operation with assistance from the U.S. Attorney’s Office in Michigan, the German Federal Criminal Police Office, the Finnish National Bureau of Investigation, Michigan State Police, and the Michigan Cyber Command Center. Investigators prioritized cutting off live service, preserving logs and identifiers, and collecting historical artifacts to enable reconstruction of fund flow paths across wallets, intermediaries, and cashout partners and to support tracing, arrests, and asset recovery. Authorities allege E Note operated from 2011 through 2025, combined automated exchange workflows with hands-on brokering and a help desk to move funds quickly with limited customer screening, and facilitated fast conversions and brokered liquidity used by ransomware affiliates and other illicit actors. Recommended mitigation steps presented include confirming licensing and registration for fiat and crypto ramps, strengthening KYC and sanctions screening, implementing on-chain and off-chain transaction monitoring and wallet screening, and preparing playbooks for rapid legal response, data preservation, and cooperation with law enforcement. Source: https://web3businessnews.com/crypto/fbi-dismantles-e-note-exchange/

Sterling Heights will vote on January 6, 2026, on a proposed ordinance that would establish a two-tier licensing framework and operational rules for virtual currency machines. The ordinance would require new installs to obtain a host endorsement tied to the physical business location and a separate operator license issued by the City Clerk, with annual renewals and fees set through the city's appropriations process. Existing machines and operators would have to comply by March 31, 2026. Required operational standards would mandate photo ID checks at machines, prominent fraud warnings and consumer disclosures displayed on or near kiosks, printed receipts for every transaction containing date, amount, and a machine identifier, and a live customer service phone line maintained by operators. The proposal would introduce transaction controls including lower initial limits for first-time users, with local reporting citing an example cap near $1,000 per 24 hours for new users and final numeric caps to be set in the ordinance and administrative rules. Enforcement and oversight would be shared between the City Clerk and the Police Department, and violations could lead to suspension or revocation of host endorsements and operator licenses, with inspections, documentation checks, and requirements to produce records tying transactions to receipts and customer service interactions. The policy response follows 23 local cases this year linked to cryptocurrency machines with reported losses exceeding $500,000 and seniors disproportionately affected. Host businesses would have to hold an active city business license and obtain a machine-specific endorsement, and operators would have to implement or update KYC workflows to support photo ID checks, install signage and receipt mechanisms, staff or contract a live customer support line, and budget for application and renewal fees. The City Council could amend fee levels, first-time limits, and enforcement triggers during the council process, and other Michigan municipalities may consider adopting similar frameworks in 2026. Source: https://web3businessnews.com/policy/sterling-heights-crypto-atm-rules/

Show description: Bhutan announced an upper limit allocation of 10,000 bitcoin from sovereign reserves to finance Gelephu Mindfulness City, a planned special administrative region near the Indian border focused on mindfulness, sustainability, and innovation. The allocation was valued at roughly $860 million to $1 billion depending on bitcoin market price at reporting. Bhutan accumulated its bitcoin reserves through state-backed mining using hydropower since 2021, with state entities such as Druk Holding and Investments participating. The financing plan prioritizes collateralized and yield-managed structures over spot sales and identifies preferred mechanisms including secured credit lines collateralized by BTC, stablecoin liquidity facilities, and programmatic yield strategies sized to limit drawdown and avoid forced liquidations. Project design pairs physical infrastructure with tokenization and digital policy, including issuance of a gold-linked sovereign token called TER on Solana and preparatory legal and digital identity frameworks for the Gelephu zone. Gelephu is being positioned to attract investment in fintech sandboxes, green data centers, healthcare and agricultural pilots, and tourism, with a governance model that includes a regulatory perimeter, a governing board, an appointed governor, and a city-level master plan with digital identity and compliance layers. Officials and market participants identified financing terms, counterparty selection criteria, independent audits of sovereign crypto reserves, and final statutory texts as near-term disclosure items that will affect investor appetite and funding costs. Key risks cited include bitcoin price volatility affecting collateral ratios and financing costs, governance gaps or limited disclosure increasing sovereign balance-sheet risk, and execution delays similar to past bitcoin-city proposals. Near-term milestones include publication of financing term sheets and reserve transparency reports, finalization of regulatory statutes and governing board appointments, confirmation of the governor, utility and site-level buildout, timelines for pilot data centers and green mining deployments, partner roster announcements, and independent audits. Guidance for founders and corporate treasury teams includes monitoring collateral frameworks and disclosure schedules, aligning offerings with stated sector priorities such as fintech infrastructure and green data centers paired with efficient mining or cloud services, and preparing for partnership models involving blended public-private financing, tokenized instruments, and compliance tied to a digital identity layer. Source: https://web3businessnews.com/crypto/bhutan-10000-btc-mindfulness-city/

Show description: On December 17, Coinbase announced it will add equities trading to its core app and web experience, integrate Kalshi-powered prediction markets, and brand the initiative Everything Exchange; the company will let users manage stocks alongside bitcoin, ether, stablecoins, and other tokens in a single account and interface. Funding and settlement rails will tie into users' crypto wallets and the platform will support buying stocks with USDC, while Coinbase will provide unified balances, a single identity, and a consistent order entry experience across asset classes. Kalshi-powered event contracts will provide regulated exposure to outcomes such as economic indicators, interest rate decisions, and election timelines within the same account used for crypto and equities. Coinbase signaled a roadmap that includes tokenized stocks and a single onboarding flow with consolidated rails. The company said the changes can expand investable options, streamline treasury and portfolio allocations, enable stock funding with stablecoins, and add nearer-term hedging and price-discovery instruments for crypto-exposed positions. Coinbase identified execution risks including integration of balances, collateral, and real-time risk across asset classes; liquidity depth and fee competitiveness; system reliability under mixed workloads; and regulatory compliance for event contracts and any tokenized or synthetic equities. Stakeholders should monitor regional rollouts, asset coverage cadence, how USDC and other stablecoins are treated for collateral and settlement, initial liquidity and fee structures, institution-grade workflows and custody integrations, partner expansion beyond Kalshi, and regulatory signals on tokenized equities and event markets. Coinbase said the move broadens its addressable revenue across trading, custody, payments, data, and financing and positions the firm as an access layer for multiple asset classes. Source: https://web3businessnews.com/crypto/coinbase-stocks-prediction-markets/

Show description: Lincoln, Nebraska added Chapter 9.70 to the city code requiring a standardized Lincoln Police Department warning to be posted at the point of transaction on every crypto and Bitcoin ATM within city limits. The ordinance responds to reported losses exceeding $11,000,000 in the first eleven months of 2025. The rule defines crypto and Bitcoin ATMs and assigns shared responsibility to host businesses and device operators to display the notice where plainly seen during transactions and not obscured. The City Council passed the ordinance unanimously in November 2025 and set a compliance deadline of December 24, 2025. City staff will verify notice presence and legibility during routine checks and will enforce missing or obscured labels consistent with municipal code practices. The Lincoln Police Department and AARP Nebraska are conducting an education and labeling campaign, and volunteers and LPD staff began placing standardized warning stickers on kiosks across the city in December 2025. The LPD guidance lists common scam scripts including imposter schemes claiming overdue taxes, frozen bank accounts, or emergencies involving relatives and instructs consumers that no government agency, bank, or legitimate business requests payment in cryptocurrency or gift cards. LPD’s Technical Investigations Unit currently includes one sergeant and four investigators focused on tracing funds, preserving surveillance and ATM logs, and coordinating with platforms and exchanges, and an additional investigator will join in January 2026. Operators must also comply with Nebraska Department of Banking and Finance oversight and with the Controllable Electronic Record Fraud Prevention Act (LB609), effective September 2025, which added disclosures, transaction limits, holds, and defined refund rights in covered cases. Operators and hosts are instructed to inventory all Lincoln machines, obtain the official LPD written warning, post it on every machine by December 24, 2025, train field technicians and store staff to maintain visible and legible warnings, implement periodic audits with photo verification and maintenance logs, and retain records of inspections and installations. Consumers are directed to stop transactions if pressured to pay in crypto, verify requests with trusted sources before sending funds, and report suspected fraud to local police, the FBI, the FTC, and the National Elder Fraud Hotline. The ordinance does not ban crypto ATMs; machines may continue to operate if they meet the city posting requirement and applicable state rules. City officials expect continued municipal scrutiny as investigative capacity and outreach expand and expect state-level rules like LB609 to influence refund and reporting processes. Source: https://web3businessnews.com/policy/lincoln-crypto-atm-warnings/