Welcome back to the starting block. It's Thursday. We've got a big show lined up today and a big guest, Stani Kulechov, of course, the founder of Aave Labs is going to be joining us a little bit later on the show to talk all things Aave. They've got a big announcement I think which should have just broken under embargo in the last couple of minutes. So, if you want to find out what that story is, you can go to theblock.co and read that story or you can stay with us for a few minutes and we'll be talking to Stani about their big announcement today exclusively live right here on the starting block. If it's your first time joining us, welcome to the starting block. This is The Block's new daily show. My name is Gareth Jeninson. I'm the head of multimedia here and the host of our show. It's been a fantastic two weeks since we launched last week Monday. If you missed that, we sat down for a live exclusive interview with Binance founder CZ in Abu Dhabi. The full interview is on our YouTube channel. So, please go ahead and check that out. And if you don't already, please subscribe to The Block's YouTube channel. And if you're enjoying this show and this live stream, please like and retweet so more people can join us for the conversation ahead. We're going to start off the show with The Block briefing, which is our brief roundup of the top headlines in the last 24 hours. So, let's get straight into it. Our first headline of the day, Swift is going on chain. The global payments network has launched a blockchain-based shared ledger with 17 banks across six continents piloting cross-border payments using tokenized deposits. Its first live use case for the technology. And we're talking heavyweights here. Citi, HSBC, UBS, BNP Paribas, Standard Chartered, Wells Fargo, BNY, DBS, and MUFG. So, all the biggest banks across the world involved in this. The ledger lets these banks move customer funds around the clock, overnight, and on weekends before final settlement runs through existing systems. Swift says the ledger was designed and built in 9 months, and that the pilot lays the groundwork for programmable money and agentic commerce down the line. So slowly then suddenly TradFi is moving on to blockchain rails which we've been using for the past 15 years already thanks to Bitcoin. Moving on to our next story. Sony wants in on dollar stablecoins. Japan's Sony Bank has secured conditional approval from the Office of the Comptroller of the Currency to set up a US national trust bank with plans to issue a dollar-backed stablecoin. The bank is standing up a wholly owned subsidiary called Connectia Trust this month capitalized with $40 million to issue and manage that coin. Launch is penciled in for sometime in 2027 pending final approval. And Sony Bank says the move builds a medium to long-term foundation for Sony Financial Group's digital asset business. The latest sign that major global corporates are also lining up behind stablecoins. Then onto our next story. Paradigm has closed a monster new fund and it's not just for crypto anymore. The venture firm has raised $1.2 billion for its fourth fund which will back crypto, AI, robotics, and other frontier tech startups. That follows reporting back in February that Paradigm was targeting up to one and a half billion under a broader investment strategy. For context here, the firm raised $2.5 billion venture fund in 2021 and an $850 million fund in 2024. And Paradigm isn't alone in this space. Firms like Framework Ventures and Horn Ventures have also been widening their mandates beyond digital assets.
Then onto a bad news story here. Grim news for users of Ascendex. The crypto exchange has shut down its operations effective from the 1st of July and it's warning customers they may not get their full balances back. The exchange points to the EU's MiCA regime which took full effect at the start of the month and for which Ascendex holds no authorization plus wider financial and operational troubles. It also says a strategic transaction was meant to provide liquidity collapsed when the counterparty failed to perform. Account access is now restricted to limited offboarding and the company says it's still assessing what options, if any, are available to account holders. Then a massive global fraud crackdown led by Interpol. Operation First Light spanned 97 countries and territories ending with 5,811 arrests and $293 million in illicit assets intercepted. The operation ran from mid January through the end of April, targeting social engineering scams, business email compromise, extortion, romance, and investment fraud, plus the money laundering behind them. Investigators also uncovered a crypto laundering network tied to a single wallet holding $122.5 million. More than 142,000 victims were identified worldwide. Over 31,000 bank accounts were blocked and nearly 24,000 cases were solved. A stark reminder of the sheer scale of crypto-linked fraud that the industry is still grappling with. Then Jack Dorsey's Block is paying up. The Cash App owner has agreed to a $45 million settlement with regulators in nearly every US state after prosecutors said it failed to adequately protect customers from fraud and misled users about the app's security. New York Attorney General says Block marketed Cash App as offering protections comparable to a traditional bank, which allegedly lacked a consistent fraud detection system and a functioning customer hotline for reporting scams. Attorney General Letitia James accused the company of exposing users to rampant fraud and caring more about profits than protecting its customers.
Then back here in the EU, barely a week after MiCA took full effect, Brussels is already looking at expanding it. According to a Euro News report, the European Commission is seeking comment from stakeholders until the 30th of September on whether to widen the rules to cover emerging areas like tokenization and stablecoin issuers based outside of the EU. MiCA is the bloc's comprehensive framework for crypto issuance, trading, and custody. Those rules came into effect in December 2024, but a grace period for many service providers only ran out at the beginning of this month. The commission reportedly wants the framework updated for developments since it was written, including the rise of tokenized securities. Our final story over in Washington, Senator Ron Wyden is going to bat for blockchain developers. The Oregon Democrat has written to Senate leaders John Thune and Chuck Schumer urging them to preserve Section 64, that's the Blockchain Regulatory Certainty Act, in future versions of the broader Clarity Act as market structure negotiations continue. That provision creates a safe harbor for non-custodial developers clarifying they are not money transmitters. It was introduced by Republican Senator Cynthia Lummis with Wyden as the only co-sponsor and it's emerged as a key point of contention as lawmakers try to push that wider crypto bill over the line. And if you missed it yesterday, we had Bitcoin and policy in the US. Very, very interesting conversation that is also up on our YouTube channel. We uploaded that overnight. So, if you missed that conversation, definitely go and check that out on our YouTube channel. All right, we're going to bring Stani Kulechov on, of course, you know him as the founder of Aave Labs, to join us in the conversation. Now, typically we do the market pulse and then we move into the hot seat interview. Again, like yesterday with Mike Bolshi, we're going to be amalgamating the two. So, Stani is now joining us on the show. First things first, Stani, thanks so much for coming. How are you?
Um, really, really good. Seems like based on the news it's been an eventful week.
It has been a very eventful week. And yeah, I mean I guess an eventful few months actually as we get into summer proper. But the one story I didn't have in my news bulletin is the story we have you on the show to talk about today. Aave has just launched Stable Vaults. I'm not even going to tell our viewers out there what it is. I'm going to leave it up to you because you know better than I do. Give us the TLDR on Stable Vault.
Yeah, definitely. Stable Vaults is a new product that Aave is releasing. Effectively what we understood from DeFi's evolution, so decentralized finance basically started with very early primitives into a very proven resilient ecosystem. Aave obviously is a great example of that. Over $22 billion net deposits and has proven the resiliency over the years. Now we think that for DeFi to scale, we need to integrate DeFi as the backbone financial infrastructure into the existing financial world, whether it's institutions, fintech, or going directly to consumers. Now to do that in the most simple and efficient way, we launched a product called Stable Vaults. So Stable Vaults is a vault architecture that allows to integrate into Aave and multiple other yield sources in a way where the users have predictable yield. Beyond that, beyond these predictable stable rates, we can set for the users rates based on categories. So for example, one of the interesting opportunities for DeFi integrations is fintech at the moment that are looking into how to plug DeFi into their offerings. And there might be different tiers of users, standard users, perhaps more premium users, and Stable Vaults allow to actually set different rates based on the tier of these users. And it supports multi-chain yield as well. So the actual Stable Vaults can be deployed on a network, EVM network that has high velocity for transactions, such as for example Arbitrum, and the actual yield can be harvested across multiple networks including many others. Also asset deposits, so you can deposit one stablecoin and then you can withdraw another stablecoin out of the Stable Vaults. So all this logic is abstracted away and wrapped into a really flexible architecture. And the first user of Stable Vaults will be the actual Aave app, the Aave consumer app that is using it for multi-network earnings and setting predictable yields for the users. So this is going to be the easiest way for fintech to integrate DeFi and get the best benefits out of it.
When it came to building this functionality, obviously predictable yields makes me immediately think of the sort of predictable yields I would get from a traditional bank. Is that kind of where you're going with this and trying to figure out the wild swings in yield that we've kind of seen in DeFi over the years?
Yeah. What DeFi is really fascinating for is that it does have different yield opportunities. So it might have different factors of how the yield is generated. And what Stable Vaults actually allows to do is that you can attach various yield strategies into the vault infrastructure. That can be for example particular of the V3 markets, of the V4 hub, it can be native ASCO or you can integrate third party infrastructure as well like Beta U, access various different protocols and yield opportunities across DeFi, and all that yield that is harvested is then accounted and quantified and streamed all the way to the users in a very nice predictable yield format. So it effectively takes the most valuable yield opportunities in DeFi, packages it into a form that is easy to distribute across consumers.
I found it interesting when I read the announcement that there's kind of a very clear disclaimer here that user deposits are safeguarded from being used to cover swap slippage and bridging costs. How does that work?
Yeah, the vault operator itself takes the cost over whatever is used for the bridging. So the actual infrastructure under the Stable Vaults accepts a wide range of bridging infrastructure, and these costs are absorbed into the vault itself. So the users don't have to deal with things like bridging your asset across one network to another and paying fees for that, or depositing one stablecoin into the vault and withdrawing another one. That is all automated and absorbed by the actual vault itself. I think what's interesting about Stable Vaults is it allows to consume multiple strategies. So typically when you are integrating into DeFi, you might choose for example a particular protocol in a market and you are sort of restricted to that opportunity. With Stable Vaults, there's unlimited opportunity what you can actually attach into the vault as a strategy. And this is really important especially now since DeFi is emerging beyond the typical crypto-backed lending. There's new use cases. We are seeing also RWA-backed lending as well, and Aave Horizon is a great example of that. And we are going to see more and more RWAs coming on chain and creating additional yield sources. And now there is a simple format of actually plugging in these different yield opportunities into a vault that then is distributing that yield directly to the users.
When we met earlier this year in can you were just rolling out or announcing a V4. I wanted to ask you if you can give us an update on the migration there because at the time you said that you were expecting this to take months and months for liquidity to flow from V3 to V4. What's the current status?
V4 is the latest protocol iteration that we launched roughly 3 months ago. And it was a complete overhaul of how we think about lending on chain. It allows to provide this modular architecture where you have ability to create isolated lending markets or lending markets with shared liquidity. V4 launched with three different hubs based on the risk and reward tier, and as of today it has grown over $250 million market size in the couple of months already. So it's been progressing substantially well and there's new deployments coming from V4 particularly in Avalanche and also Circle's ecosystem. We see also a lot of demand for V4 as a technology to be licensed. We have one particular proposal from the Etherfy team that is basing their product on card spending and being able to spend your crypto asset balances. And that particular deployment will allow to actually use those assets as a plat and extend liquidity to their users when they're spending with their card. So there's a lot happening in the V4 world. And we're excited to expand the protocol also beyond crypto-native assets into RWAs and down the line securities and securities lending.
It's been an interesting year for DeFi in general. I think at one stage it was like every day that there was some sort of exploit of a DeFi protocol or DeFi platform. Obviously, that's not a good situation, but I think context is important. About a month ago, we were in Miami for Consensus, and I sat down with Joe Lubin, who's of course one of Ethereum's co-founders, and he was kind of saying that it's inevitable, and it's actually a good thing that is comparable to many years ago when people were robbing stage coaches full of gold on the King's Road. And that was the value extraction that helped security improve. I think AI has a lot to do with the amount of DeFi exploits that we've seen in the last year. But does it make you slightly concerned that DeFi has been in the crosshairs and the main sort of surface area of attack in 2026?
