This week Galaxy proudly announced that we have become the first publicly traded company to tokenize its shares on a major blockchain. Shareholders can now choose to convert their stock from traditional form to digital assets on Solana, which can then be transferred to any wallet whitelisted by our transfer agent, Superstate. It’s a small first step in what we believe will be a dramatic transformation of the global capital markets.
I co-authored a white paper with Thomas Cowan, Galaxy’s head of tokenization, and Michael Marcantonio, the firm's head of DeFi, explaining in depth what we’re doing and why. I also discussed the initiative on the Galaxy Brains podcast with Robert Leshner, founder and CEO of Superstate, a critical partner in our tokenization journey. Robert and I joined Mackenzie Sigalos on CNBC to explain further.
In the newsletter, Lucas Tcheyan explains the significance of Solana’s latest upgrade; I break down recent regulatory moves by the SEC and CFTC; and Thad Pinakiewicz examines the blacklisting of Justin Sun’s Ethereum address by the Trump family’s World Liberty Financial.
Have a great weekend,
Alex
Market Update
Data via Messari as of 7:20 AM 9/05/25
The total implied network value (market cap) of the digital assets market stands at $3.95tn, up 1.8% from last week (when it stood at $3.88tn). Bitcoin’s network value is 8.92% of gold’s market cap. Over the last 7 days, BTC is up 1.9%, ETH is up 1.4%, and SOL is down 0.54%. Bitcoin dominance is 58.66%, up 22 basis points from last week.
Stories of the Week
001
World Liberty – Terms and Conditions Apply
On Thursday, the World Liberty Financial team blacklisted the biggest investor in their public token launch, Justin Sun, freezing 2.3 billion of his WLFI tokens with a market value approaching $750 million. The WLF team blacklisted 269 wallets following their second round of KYC before the token launch on September 1st. The team then blacklisted three additional wallets post-launch, including Justin Sun’s. Given the scale of Justin Sun’s holdings, it seems hard to imagine the action was accidental. Sun’s wallet controls 3bn WLFI, 3% of the fully diluted supply, and now >99% of the blacklisted WLFI. This came as a shock to Justin Sun, who faces accusations of selling user tokens on Huobi but claims he has done nothing wrong, and is protesting the unilateral move.
The prelude to this blacklisting makes this particularly jarring. Sun didn’t just write a check; after his headline $30 million purchase last year, WLFI’s co-founder Zak Folkman publicly credited him with reviving the project and later welcomed him as an advisor, with both men appearing together on stage to promote the effort. Those ties extended across market infrastructure: HTX, an exchange owned by Sun, became an important distribution lane for WLFI’s stablecoin USD1 and related loyalty points campaigns. World Liberty promoted HTX’s “WLFI Earn Carnival”, offering 20% yield to WLFI holders who participate in the earn event, and even made an investment in Justin Sun’s TRX token, their third largest non-stable holding behind BTC and ETH. Against this backdrop of reciprocal promotion and investment between World Liberty Financial and Justin Sun; blacklisting Sun’s address reads like a break in the alliance that helped carry WLFI to launch, rather than a principled compliance measure.
Our Take
The first question that came to mind when this headline appeared was: Why does WLFI even have a blacklist function? It came as a surprise for three main reasons. First the blacklist wasn’t in the original contract, but was instead included in a proxy contract upgrade a week before the token became transferrable. Second, blacklists in crypto have been almost exclusively the purview of stablecoins, asset-backed tokens, and security tokens. This is primarily because of regulatory requirements: compliance with OFAC blacklists, freezing assets pursuant to law enforcement seizures, and various sundry TradFi security regulations. Blacklists are unusual for a token such as WLFI, a governance token that was designed to avoid investment status by having no connection or claim to the economics of WLF or the efforts of the WLF team, key elements of the Howey Test. Absent any regulatory requirements to blacklist addresses or holders, what is the point of a functionality to unilaterally freeze users’ tokens? It is not just to enforce KYC because they allowed Justin Sun to pass both rounds of KYC, unlock & vest his tokens, and do some transfers before blacklisting him. It is not just to enforce sanctions because they didn’t even cover the addresses on the OFAC list (e.g: 0x8576acc5c05d6ce88f4e49bf65bdf0c62f91353c)! It seems to only serve the purpose of enforcing WLF’s rules, and in the terms and conditions it’s clear that the WLF team makes the rules and interprets them, not token holders. Third, and finally, the Trump family has explicitly stated that their own experiences with debanking were major impetus for launching World Liberty. (New boss, same as the old?)
The obvious second-order question is what this means for WLF’s other deals, especially Aave. World Liberty Financial governance and Aave governance both agreed to a deal licensing an Aave v3 instance to World Liberty Financial in exchange for “approximately 7% of the total supply of $WLFI tokens”. Aave has yet to receive WLFI tokens, and WLF team has yet to deploy any version of code licensed from Aave. Furthering those concerns is an explicit risk notice in the WLFI Gold Paper that the Aave integration is a “potential” and “may not occur”. If the WLF team is willing to freeze a flagship investor’s wallet unilaterally, the rational takeaway for counterparties like Aave is to harden deal structures. If token allocations or revenue shares are part of any partnership, they must insist on objective, on-chain conditions and custody arrangements that remove unilateral switches.
For WLFI’s community, this episode is a test of narrative. The project sells freedom and community rule, but the fine print centralizes authority and imposes aggressive control rights. WLFI is a brand-driven governance token whose stewards reserve material discretion over who participates and when. That doesn’t preclude success, but it does compress the set of buyers who can tolerate discretionary counterparty risk baked into the contract and the T&Cs. Freezing the largest public investor on launch week without a word sets a high bar for future communications and governance processes to soothe concerns. If the WLF team meets that bar, by explaining the standard, documenting it, and binding itself to it on-chain, they can rebuild confidence.
Regulators Open Door for Stock Exchanges to List Crypto
On Tuesday, the SEC’s Division of Trading and Markets and the CFTC’s Divisions of Market Oversight and Clearing and Risk issued a rare joint staff statement addressing the treatment of spot crypto asset products. The initiative, which ties into the SEC’s Project Crypto and the CFTC’s Crypto Sprint, follows the recommendations of the President’s Working Group report on digital assets. That report urged regulators to coordinate in order to make the United States the best place to build blockchain innovation and participate in crypto markets.
The joint statement makes clear that the law does not prohibit registered U.S. exchanges -- whether SEC-registered national securities exchanges, CFTC-registered designated contract markets, or registered foreign boards of trade -- from facilitating trading in certain spot crypto products, including leveraged or margined retail commodity transactions. The agencies encouraged market participants to engage directly with staff and signaled that filings and requests for relief would be promptly reviewed.
Importantly, the statement outlines a framework of considerations for exchanges and clearinghouses, including margin, clearing, and settlement practices; monitoring of underlying markets; public dissemination of trade data; and principles for fair and orderly markets. The regulators also emphasized their willingness to work with innovators to encourage new technologies while maintaining strong investor and customer protections.
Our Take
Traditional finance and crypto are increasingly colliding. In 2024, the launch of bitcoin and ether ETFs brought crypto into investors’ favorite vehicle and served as a launchpad for widespread retail and institutional ownership. This year has seen a flurry of allowances for the movement of crypto into the traditional world, from bankingregulatorsremovinglimitations to marketregulatorsprovidingclarityandguidance to Congress codifying stablecoins and the White House issuing executiveorders. (Read this Galaxy Research report for a comprehensive list of H1 2025 crypto regulatory reforms). Now, market regulators are clarifying that national securities exchanges (such as New York Stock Exchange or Nasdaq) or other commodity trading venues are allowed to facilitate spot crypto trading.
This is all great for the adoption and growth of crypto assets. But increased involvement from traditional capital markets firms will also create new forms of competition for the crypto industry. We may see ETFs, for example, increasingly buy their spot bitcoin on Nasdaq and custody it with BNY Mellon rather than Coinbase. Crypto firms have matured significantly and bring significant expertise and quality, but it’s only a matter of time before the biggest capital markets firms in the world are playing in our pool, too.
But the convergence is not just about letting Wall Street enter crypto – it goes both ways. Crypto is increasingly looking to enter Wall Street. Galaxy announced this week that it has tokenized its Nasdaq-listed Class A Common Stock, and tokenization of equities, fixed income, and other real-world assets is a large and growing segment in the market. (Read our white paper from Wednesday Introducing Tokenized GLXY.) If traditional finance is getting involved in crypto, expect crypto to get involved in traditional finance.
There’s no doubt that the push and pull will affect both sides of the financial industry – traditional and decentralized finance. Traditional firms have plenty of opportunities to interact with crypto assets, even directly onchain, but as the financial plumbing inevitably becomes updated with public blockchain infrastructure, expect crypto firms to increasingly interact with regulated assets like securities. In this push and pull, the future of capital markets probably lies somewhere in between the traditional and the fully decentralized. Over time, as the two worlds collide, even identifying the demarcation line might become difficult.– Alex Thorn
003
Solana’s Glow-Up
On Tuesday, Solana validators voted to adopt a new consensus mechanism called Alpenglow. Once implemented, the upgrade is expected to cut Solana’s block finality time and shrink operating costs for validators.
Solana’s current consensus combines two key mechanisms: Proof of History (PoH) and TowerBFT. PoH acts as a decentralized clock, producing a verifiable sequence of hashes that timestamps transactions and establishes their order. TowerBFT builds on this timeline by having validators vote to include blocks and progressively lock in their choices, ensuring safety and finality once enough votes accumulate. Together, PoH provides the speed of pre-ordered events, while TowerBFT enforces agreement and prevents forks (for a full overview, refer to our 2022 Ready Layer 1 report on Solana).
Alpenglow introduces two major upgrades: Rotor and Votor. Rotor revamps block propagation by upgrading Solana’s multi-hop Turbine design with a streamlined, single-hop model. Stake-weighted relay nodes distribute blocks directly to all validators, cutting latency, simplifying data dissemination, and laying the groundwork for future bandwidth incentives. Votor replaces TowerBFT and PoH’s role in finality with an offchain direct voting system. By eliminating the need for onchain votes, Votor is expected to reduce validator costs and slash block finality from 12.8 seconds (longer than an Ethereum block) to ~100-150 milliseconds (faster than the time it now takes to produce a Solana slot). Alpenglow also aims to improve Solana’s resilience, using a “20+20” approach where the network is resilient to disruptions even if 20% of stake is controlled by adversarial actors and an additional 20% is unable to participate in consensus due to non-malicious reasons.
Alpenglow was developed by researchers from ETH Zurich (a Swiss university; no relation to Ethereum), who in 2024 highlighted potential vulnerabilities in Solana’s consensus design. While an exact rollout date for Alpenglow remains uncertain, the team at Solana software development firm Anza has said they are targeting the community's annual Breakpoint conference in December.
Our Take
As stated in the launch announcement, Alpenglow is the “biggest change to Solana’s core protocol since, well, ever.” But Alpenglow represents more than just a change to Solana’s consensus mechanism; it’s symptomatic of a broader initiative across the ecosystem to push Solana to its limits and position it as the de facto home for onchain activity.
This mission is best captured in three slogans the Solana community has coalesced around: Increase Bandwidth and Reduce Latency (IBRL), Only Possible on Solana (OPOS), and Internet Capital Markets (ICM). Together, these slogans reflect Solana’s ambition to deliver unmatched performance, enable novel applications that can’t exist elsewhere, and ultimately build a financial system as open and efficient as the internet itself.
This moment feels reminiscent of Solana’s breakout years in 2021–2022, when the network first captured industry attention for its raw throughput and explosive ecosystem growth. That period showcased Solana’s unique strengths including fast settlement, cheap transactions, and a developer culture unafraid to experiment. It also, however, exposed the protocol’s limitations. Congestion and network outages during peak activity highlighted the need for fundamental improvements. Solana engineers stepped up to the plate.
The ecosystem undertook a series of major upgrades. QUIC was adopted to improve the networking stack by reducing packet loss and improving stability. Stake-weighted quality of service (QoS) was introduced to ensure that validators prioritized transactions proportional to stake, mitigating spam attacks. Local fee markets were deployed so that congestion in one account (say, a hot NFT mint) wouldn’t stall the entire network. And Firedancer, a new validator client, began development to diversify Solana’s client base and push performance even further. At the time, many of these innovations were overshadowed by the overhang of the FTX collapse (the failed exchange’s incarcerated founder, Sam Bankman-Fried, was an early Solana backer, and it took time for the chain to live down the association). But collectively they hardened the protocol and laid the foundation for the next wave of adoption, culminating in the substantial network activity the chain facilitates today.
If 2021-2023 was about stabilizing Solana’s core and addressing the cracks revealed under early stress, the current phase is about systematically upgrading every layer of the stack. Recent changes include a 25% increase in block capacity with proposals for another 66% jump in the coming months and the introduction of P-Token, which cuts compute costs for token program calls by more than 95%. On the client side, Firedancer has already demonstrated over 1 million transactions per second (TPS) in testing and 100,000 TPS on mainnet while promising greater resilience through client diversity. Solana market microstructure, the latest area of focus, is being reshaped through innovations like Application-Controlled Execution (ACE) and Jito’s Block Assembly Marketplace (see here for Galaxy’s prior coverage), each designed to improve control over transaction ordering, and DoubleZero’s low-latency fiber network. All aim at creating a fairer and more efficient environment for onchain activity.
Not everything will work, and challenges will emerge along the way. But, as one Anza engineer put it recently, Solana developers know to “stay paranoid” and ossification of the chain is not an option. That ethos of relentless iteration, paired with a willingness to rethink core assumptions, is what carried Solana through its early growing pains and why it consistently ranks as the top chain by decentralized exchange (DEX) volumes and application fees.
In short: Solana doesn’t ossify. It iterates. As long as that remains the case, it will likely keep pulling further ahead. – Lucas Tcheyan
Leverage in the system continues to expand to new highs across the board, with onchain borrows at all-time highs and crypto-backed loans as a whole at multi-year highs.
Alex Thorn talks with Superstate founder and CEO Robert Leshner about tokenizing Galaxy’s Class A Common Stock on Solana. Alex and Robert also discuss the archaic tech stack of traditional capital markets, how blockchains can simplify and improve capital flows, and what the future of tokenization will look like. Alex also talks with Beimnet Abebe (Galaxy Trading) about markets, positioning, and catalysts.
For the first time in a month, bitcoin ETFs are attracting substantially more capital than their ether counterparts. For two consecutive days, net BTC inflows have exceeded $300 million while the ETH funds saw net outflows. BlackRock’s IBIT took in $362.7 million over the two days, and Fidelity’s FBTC added $142.5 million.
The inflows broke a bad streak for BTC ETFs, which suffered massive outflows at the start of August and again in middle of the month. Even when they saw inflows, the bitcoin vehicles usually lagged the ETH ETFs.
During this period, ETH ETF inflows likely reflected growing interest and improving sentiment toward ETH DATCOs, themes explored in Galaxy Research’s recent DATCO overview. That support faded on Thursday after news outlets reported that Nasdaq may tighten oversight of listed firms that issue stock to acquire tokens, and crypto treasury stocks came under pressure, creating heavy sell flow from ETH DATCOs. Major Bitcoin DATCOs such as Strategy (formerly MicroStrategy, ticker: MSTR) did not see the same heavy selling pressure because their bitcoin acquisition strategies rely primarily on issuing debt.
BTC ETF flows turned positive even though spot prices slipped. The combination of strong net inflows with outflows for ETH ETFs over two straight sessions might suggest a gradual rotation from ETH to BTC. — Christopher Rosa
