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Venezuela is moving closer to formal dollarization, with economist Steve Hanke drafting a bill to abolish the bolivar. According to reports, the National Assembly appointed him as a special adviser this month.

The Johns Hopkins economist drafted a full dollarization law that would abolish the bolivar and the central bank. He puts the odds of passage at 50% to 80%.

What Hanke’s Dollarization Plan Actually Proposes

According to Fortune, Hanke is working on the project alongside Assembly member Antonio Ecarri, founder of the centrist “Lápiz” party.

This marks Hanke’s second attempt at this cure in Venezuela. In 1995 and 1996, he designed a currency board as chief economic adviser to President Rafael Caldera, a plan that failed to win a majority in the National Assembly.

The economist argues that conditions look different this time. He told Fortune that surveys show most Venezuelans already want to dump the bolivar, and many already shop in dollars even though they get paid in local currency.

His plan would shut down the central bank entirely, ending the government’s ability to print money. Inflation currently runs near 400% annually, still the highest rate in the world.

“Venezuela would be the most competitive economy in the world. The bolivar has lost 78% of its value to the U.S. dollar in the past year,” the economist said.

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Venezuelans already live in a heavily dollarized economy in practice. Physical dollars circulate widely, though a digital alternative has quietly become even more central to daily transactions across the country.

“Taming inflation is the key to restoring stability in Venezuela, and all the other progress flows from that… Stability isn’t everything, but without stability, which means stable prices, you have nothing,” Hanke told Fortune.

Inflation has eased from the 700% rate recorded before Maduro’s capture, but it remains six times higher than Iran’s. That translates into an 8% weekly increase in the prices of eggs, beef, and rent, according to Hanke’s calculations.

Why Oil Sits at the Center of the Plan

Oil sits at the center of the diagnosis. Venezuela produces just 1.1 million barrels per day, roughly 1.3% of global output and only one-third of the 3.4 million barrels it pumped before Hugo Chávez took power in 1998.

That figure is barely 7% higher than production levels before Maduro’s ouster, despite the US Special Forces raid on January 3 that removed him. Venezuela’s external debt sits near $250 billion, roughly 150% of GDP, the fourth-highest ratio in the world.

Hanke argues that dollarization and rising oil production work together. He explains that the current instability, with inflation near 400%, makes it difficult to renegotiate that debt with creditors, including Russia, China, ConocoPhillips, and ExxonMobil.

ExxonMobil CEO Darren Woods called Venezuela uninvestable, citing the country’s history of expropriations. The government led by President Delcy Rodríguez has yet to pass laws that sufficiently protect private property rights.

Where Crypto and USDT Fit Into the Picture

Venezuela’s retail crypto volume reached $17.9 billion in the first quarter of 2026, according to TRM Labs. USDT dominated that market, accounting for 90.2% of all Binance P2P listings paired with the bolivar.

As of August 21, USDT trades near 919 bolivars on major peer-to-peer platforms. The official Central Bank rate sits closer to 780, leaving a gap of nearly 18% between the two.

That crypto dollar rate is the one most Venezuelans actually rely on daily. Stablecoins function less as speculation and more as survival tools, protecting purchasing power where banking infrastructure falls short.

In the short term, demand for USDT will likely stay strong. People and businesses will continue to prefer a liquid, instantly transferable dollar while physical cash and banking infrastructure catch up during any transition.

Over the longer term, successful dollarization could reduce the urgency of using crypto purely as an inflation hedge. Still, USDT’s advantages, speed, low remittance costs, and 24/7 availability are unlikely to disappear.

If Hanke’s plan succeeds, crypto would stop functioning as an emergency lifeline. The digital-dollar infrastructure Venezuelans already depend on daily would likely remain a permanent feature regardless.

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The post Venezuela Could Be Shifting to the US Dollar: Is It Bad for Crypto? appeared first on BeInCrypto.

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MANTRA halted its Layer 1 blockchain late Thursday after what the team called an incident in the chain's Cosmos EVM module, and said on Friday morning it had found the root cause and contained the threat. The network is still down. MANTRA disclosed the halt at 8:10 p.m. ET on Aug. 20, saying all… Read the full story at The Defiant

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Coinbase CEO Brian Armstrong expects US crypto regulation to move forward by mid-September, either through a Senate vote or new SEC and CFTC rules.

His comments came after a White House meeting with President Donald Trump and crypto executives, as lawmakers prepare to revisit the CLARITY Act.

Armstrong Lays Out Two Paths to Clarity

Armstrong posted on X on August 21 that “clarity is coming either way,” pointing to September 15 and September 16 as possible turning points. He expects more than 60 Senate votes for the CLARITY Act on September 15, or new rules from the CFTC and SEC the following day.

His post quoted CFTC Chairman Mike Selig, who had written hours earlier that his agency would not wait indefinitely on Congress if the CLARITY Act keeps stalling over what he called Democratic obstruction.

Selig said in a video shared with his post that “the CFTC will utilize its existing authorities to begin establishing a regime” for crypto markets, adding that the plan could let both registered firms and non-registered exchanges apply for a new designation permitting leveraged and margin crypto trading under CFTC oversight.

He also said he had directed staff to work with developers of on-chain finance protocols so they can offer their products legally in the US, and warned that if Democrats do not back a bipartisan version of CLARITY, he would move the CFTC’s own rules forward instead.

Armstrong, after Wednesday’s meeting with Trump and crypto executives, called the September 15 vote the thing that would make the administration’s crypto progress durable for decades to come. He credited the administration for the GENIUS Act, the strategic Bitcoin reserve, and, just days earlier, a new SEC proposal that would let crypto companies raise up to $5 million over four years or $75 million within 12 months. That new capital-raising proposal shows what agency-led rules might look like if the bill stalls again.

The Coinbase chief also pointed to hundreds of pages of changes contributed by Democratic senators, pushing back on the idea that support for the bill breaks cleanly along party lines.

Why the Senate Math Is Tight

Senate Majority Leader John Thune filed for cloture on CLARITY before the August recess, setting the September 15 vote in motion, but the bill still needs 60 votes. Republicans hold 53 seats, so at least seven Democrats or independents have to join them.

Galaxy Research recently cut its odds of passage this year from 50% to 30%, citing unresolved fights over ethics provisions, illicit finance rules, and language from the Senate Agriculture Committee.

Meanwhile, a bipartisan proposal from Republican Senator Thom Tillis and Democratic Senator Ruben Gallego, which would tighten restrictions on public officials issuing their own cryptocurrencies and give state attorneys general a bigger enforcement role, has stalled after the White House did not respond to it in time.

The post Brian Armstrong: Crypto Regulatory Clarity Coming by Mid-September appeared first on CryptoPotato.

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Reopening a settled provision four weeks before a vote would sink the bill, argues Summer Mersinger, CEO of the Blockchain Association.

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An investor can sell a share in Morgan Stanley’s new Ethereum Trust during market hours. The trust may need weeks, or months during a stressed queue, to free some of the Ether (ETH) behind it.

Why such a large timing gap? The crypto exchange-traded product, or ETP, holds ETH behind shares that trade on NYSE Arca. Under normal market conditions, 50% to 80% of that ETH is expected to sit in Ethereum’s validator system, earning rewards while exposed to protocol penalties and withdrawal delays. 

Morgan Stanley launched the trust, ticker MSSE, on July 28 alongside a Solana product. Its annual sponsor fee is 0.14%. Figment, Galaxy Blockchain Infrastructure and Coinbase Canada operate as staking providers. The custodians and staking providers are expected to receive 5% of gross staking rewards, leaving 95% in the trust.

The wrapper makes the investment easier to buy and hold. It also converts validator performance, key security and Ethereum’s withdrawal mechanics into fund-level financial risks. The useful question is therefore wider than the quoted APR. Which balance sheet stands between a protocol loss and the shareholder?

There is a legal distinction worth keeping in view. The offering is registered with the US Securities and Exchange Commission under the Securities Act of 1933. The trust is not an investment company registered under the Investment Company Act of 1940, and its investors do not receive the protections attached to funds governed by that law. “ETP” is the more precise label.

BeInCrypto spoke with Eva Lawrence, Head of Revenue at Figment; Nitin Gaur, Head of Institutions at Nethermind; Benjamin Sarquis Peillard, Founder and CEO of Cap; and Edward Wu, Head of BloFin Research, about how the risk moves through the structure.

When a Validator Error Hits the Share Price

Ethereum pays validators for checking the network and following its rules. It can destroy part of their staked Ether and force them out after certain violations, including signing conflicting messages. A correlation penalty raises the cost when many validators are slashed around the same period. One faulty process repeated across a large validator fleet can therefore be more damaging than a series of isolated mistakes.

Slashing remains rare compared with the size of Ethereum’s validator set. Its distribution through time still matters because the largest spikes have tended to come from shared operational failures.

For an ETP investor, the protocol does not send a separate bill. The trust holds less Ether and its net asset value reflects the loss. Eva Lawrence, Head of Revenue at Figment, explains:

“In an ETP structure, slashing penalties (for misbehavior, downtime or misconfiguring) would hit the fund’s asset base and reduce NAV. Investors see this as a share price impact rather than a direct asset loss. But slashing on institutional-grade validators is rare and for a provider like Figment, we have never had a double signing slashing event on Ethereum. The best staking providers also carry slashing coverage.”

Morgan Stanley’s custody arrangement limits one obvious danger. Its staking providers receive validator keys used to perform validation duties. The custodians retain the private keys that control the trust’s assets and withdrawal addresses. A validator operator cannot transfer the principal to another wallet.

That protection does not settle the economic liability. The trust can retain ownership of its ETH and still lose assets through a penalty caused by the operator. Its prospectus says compensation may be subject to conditions, exclusions and evidentiary requirements. It may exclude protocol-wide events or software failures and may arrive late, cover only part of the loss or never become available.

Nitin Gaur, Head of Institutions at Nethermind, puts the issue in financial terms:

“A staking ETP is a yield product inside a fund vehicle sitting on an operational risk the fund documents may not have priced. The questions worth asking are not about the protocol: who absorbs a slashing event, is the indemnity backed by a balance sheet that could pay it, and what happens when the exit queue is longer than the settlement cycle.”

The result is a loss waterfall. Protocol code acts first. The trust then looks to the relevant provider agreement, its liability limits and any available coverage. NAV carries whatever remains.

The Provider’s Balance Sheet Becomes Part of the Product

Staking providers are often assessed like technology vendors: uptime, security controls and commission rates. An ETP makes their contractual liability and financial capacity part of the investment structure.

Benjamin Sarquis Peillard, Founder and CEO of Cap, said:

“Asset managers should judge providers on incident history, key management architecture, and what the legal contract says happens in the worst case: who gets made whole first and who’s left holding the bag for the loss. These asset managers should be underwriting the provider almost like any other critical piece of financial infrastructure. A high advertised staking yield means very little if the provider doesn’t have the operational controls, security architecture, and financial capacity to manage an incident when something goes wrong.”

The same scrutiny applies to diversification. Three provider names do not necessarily create three independent risk pools. They may run the same validator client, depend on the same cloud region or use similar key-management processes.

Lawrence said:

“When all validators for a provider run on the same cloud region or software stack, a single outage affects the full position simultaneously. Operators with concentrated infrastructure can fail synchronously, while providers with multi-cloud, multi-geography architecture remain operational. Note that diversifying across multiple providers does not guarantee resiliency: if those providers rely on the same cloud vendors, client software, or geographic regions, they share the same failure points.”

This turns provider selection into a correlation exercise. An asset manager needs to map the underlying client software and hosting footprint, then test how key-management and anti-slashing systems behave during maintenance or failover.

Gaur argues that the apparent provider count can obscure a common dependency:

“Concentration, meaning their share of network stake and whether their infrastructure correlates with everyone else’s: if your provider and half the network sit in the same cloud region running the same client, you do not have independent risks, you have one. Key management and anti-slashing architecture, and whether your stake is segregated or commingled.”

The September 2025 SSV Labs post-mortem shows how this can happen. Two incidents affected one validator and then a cluster of 39. SSV said its protocol had not been compromised. The larger event came from a maintenance mistake that ran the same validator keys simultaneously in two infrastructures. The code behaved as designed; duplicated operations created the loss.

A Liquid Share Sits over a Withdrawal Queue

Staking changes the liquidity profile of the asset held by the trust. Ethereum limits how many validators can enter or leave over a given period. That protects network stability and prevents a large set of validators from moving at once.

For a fund, the constraint appears on both sides of the trade. Ether waiting to enter the validator set earns no staking rewards. Ether waiting to exit cannot be sold to meet redemptions. Morgan Stanley’s prospectus says unstaking may take days in quiet conditions and multiple weeks or months when exit demand rises.

The queue can move sharply. On July 6, the prospectus recorded roughly 2.71 million ETH waiting to enter and an estimated activation delay of 47 days. On August 21, Rated Network showed an activation queue of about 38 days, an exit queue below one hour and a withdrawal queue close to ten days. A liquidity policy built around one observation can age quickly.

Lawrence describes the issuer-level risk as follows:

“Staking may require assets to be locked for a period of time and in the case of Ethereum, queued for exit during an “unbonding” period, creating potential liquidity mismatches, particularly if redemptions exceed available unstaked assets.”

The trust manages that mismatch by leaving part of its ETH unstaked. More liquidity gives it a larger pool for redemptions. It also reduces the share of the portfolio earning rewards. The expected 50% to 80% staking range is therefore one of the product’s most important economic variables.

The Math Behind the 95% Reward Pass-Through

Morgan Stanley’s 0.14% sponsor fee sits below several large US crypto ETPs. The existing comparison is straightforward: investors can see the annual fee charged against NAV.

The staking charge uses another denominator. Custodians and staking providers receive 5% of gross staking rewards. They do not receive 5% of the trust’s assets. The trust retains 95% of rewards earned on the portion of ETH that is actually staked.

So, a 3% protocol yield does not create 3% of gross income across the trust when only 50% to 80% of its Ether is working. It creates a gross portfolio yield of 1.5% to 2.4% before the reward charge and sponsor fee.

The current network rate offers a useful illustration. Rated Network showed a 2.81% Ethereum network APR on August 21. Rounding that to 2.8%, a 50% staking allocation would produce gross rewards equal to 1.4% of NAV.

After the 5% staking charge and 0.14% sponsor fee, the estimated contribution falls to about 1.19%. At an 80% allocation, the equivalent estimate is about 1.99%.

These figures are illustrations, not forecasts. They assume a constant protocol APR and exclude activation delays, penalties, taxes and extraordinary expenses. They show why “95% of rewards” is incomplete without the staking ratio and the fixed fee.

The fixed sponsor fee also takes a larger share of income as protocol rewards fall. Scale matters because the issuer still has to pay for custody, monitoring and operational controls when the yield pool shrinks.

Sarquis Peillard sees an important commercial test here:

“A fee like a 0.14%-with-95%-pass-through only works at scale when the economics of the fee make sense; a smaller issuer copying that fee without the volume to cover secure custody and slashing coverage should raise some suspicion. That’s the part of the economics investors should pay attention to. Low fees and high reward pass-through look attractive, but staking still requires secure infrastructure, custody, monitoring, and risk management. If the economics don’t appear to pay for those things, investors should be asking what is actually being sacrificed to make the numbers work.”

Who Pays When Staking Goes Wrong?

Disclosure tells investors where a loss may land. A funded protection mechanism changes the order in which capital absorbs it.

Edward Wu, Head of BloFin Research, argues that regulated staking products could create a first-loss layer between provider failure and investor capital:

“Asset managers could require providers to post funded bonds, maintain dedicated slashing reserves, or contribute a portion of staking revenue to a pooled protection fund. These mechanisms would give regulated products a more explicit loss-absorption layer and reduce the immediate impact of smaller staking penalties on investors.”

That would make the promise measurable. A reserve has a disclosed size. A funded bond can be compared with the value at risk. Contractual compensation without ring-fenced capital depends on exclusions, the provider’s solvency and the time required to enforce a claim.

Legal design can fail independently of validator performance. In February 2023, Kraken agreed to end its US staking-as-a-service programme and pay $30 million to settle SEC charges. Its validators did not need to malfunction for the product to become unworkable. Regulatory treatment changed the business around them.

Staking ETPs give investors a listed share and familiar brokerage settlement. Their financial architecture sits in the staking ratio, exit policy, provider agreements and the balance sheets standing behind compensation promises. The APR can be compared in seconds. The loss waterfall still has to be read line by line.

The post Morgan Stanley Put Ethereum Yield in an ETP. Who Carries the Risk? appeared first on BeInCrypto.

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