Crypto Regulation’s Jenga Tower

In her remarks at the SEC Speak event, SEC Commissioner Caroline Crenshaw said that the regulatory agency is undermining its decades of work while staring at “alarming market volatility, emerging risks, and calls for deregulatory action in all corners of our markets.”

The Democratic Commissioner affirmed on Monday that the watchdog is “playing a game of regulatory Jenga,” with their “proverbial Jenga Tower,” comprised of “a set of discrete but interrelated rules and laws, deeply and carefully developed over the years.”

Criticizing the SEC’s new regulatory approach, Crenshaw questioned how many blocks the Commission can pull “before the tower gives away,” arguing that it has already shaken the tower by pulling institutional integrity, failing to enforce laws, and ignoring potential market risks.

She affirmed that the “most devastating” Jenga piece to go was the SEC staff, which has declined by nearly 15% in the past four months. Additionally, Crenshaw blasted the agency’s recent use of guidance on topics like memecoins and crypto mining “to walk away from rules and upend longstanding practice.”

In particular, our statements on these crypto-related issues are the equivalent of a wink and nod intended to convey that we do not plan to rigorously apply our laws in certain, specific situations. For example, the statements pull at the threads of our most foundational case law while meekly suggesting – in footnotes – that we still might do the required facts and circumstances analysis in each case.

The Commissioner stated that crypto presents “certain novel risks,” which could lead the agency to “repeat hard lessons with high stakes” if they fail to address them as crypto becomes increasingly entangled with traditional finance.

SEC’s New Regulatory Approach

One of Crenshaw’s key remarks also addressed the SEC’s long-criticized “regulation by enforcement” approach, slamming the new “regulation by non-enforcement” of the Trump administration.

According to the Democratic Commissioner, the term was a “total misnomer” as the agency staff didn’t try to create new laws with the cases. Instead, these actions “applied decades-old precedent to address violations of existing securities laws.”

She alleged that the SEC has abandoned its duty to enforce existing law with the shutdown of its enforcement program “in anticipation of creating new crypto-friendly rules.”

On the contrary, the SEC’s new chairman, Paul Atkins, criticized the agency’s previous “head-in-the-sand” regulatory approach, affirming that it stalled innovation and created an uncertain state for the crypto industry.

At the SEC Speak event, Atkins shared his vision for a more welcoming and constructive regulatory environment, contrary to the previous administration’s aggressive “shoot-first-and-ask-questions-later” strategy.

He detailed that this approach led to a communication breach and a lack of trust between the SEC and the crypto industry, which made working together on complex legal matters difficult.

Ultimately, Atkins directed the Division of Corporation Finance to address these issues by maintaining transparent interactions with the public. He also announced that the SEC’s policy Division has started drafting rule proposals related to crypto.

“As I begin my tenure as Chairman, I can tell you that we are getting back to our roots of promoting, rather than stifling, innovation. The markets innovate, and the SEC should not be in the business of telling them to stand still. It is a new day at the SEC, and I look forward to what we are going to be able to accomplish for investors and the markets,” he concluded.

The following is a guest post and analysis from Vincent Maliepaard, Marketing Director at IntoTheBlock.

DeFi has matured into a complex web of lending markets, stablecoin ecosystems, and liquidity pools. While this growth comes with a broad range of opportunities, new forms of risk can emerge suddenly and require significant expertise to navigate effectively.

The Growing Complexity and Volatility of DeFi Markets

The DeFi market has grown significantly over the past years, and currently boasts around $88 billion in total value locked. However, the space is also fragmented, with hundreds of DeFi protocols across different chains, some with strong user bases and a good track record, and others with more novel designs. This complexity requires a well-thought out risk management framework that considers the most common economic risk in a variety of ways. To help put you in the right mindset, let’s consider a few major risk events that could occur.

• Sudden Liquidity Crunches: In times of market stress, lenders often rush to withdraw funds, causing utilization in lending pools to skyrocket. For example, in March 2023 the DAI market on Aave reached near 100% utilization, forcing interest rates to spike sharply to entice repayments and new deposits – a mechanism that barely averted a liquidity crunch. Without such intervention, users remaining in the pool might have found themselves unable to withdraw as liquidity dried up.
• Stablecoin Depegs: Stablecoins can lose their peg with little warning, sending shockwaves through markets. A notable case occurred on April 2, 2025, when First Digital USD (FDUSD) – normally fixed 1:1 to the dollar – plunged to $0.93 after allegations of insolvency against its issuer. Such depeg events not only erode trust but also threaten any protocols or liquidity pools relying on that stablecoin (e.g. causing imbalance in Curve pools and panic withdrawals).
• Cascading Liquidations: A sharp price drop in a major asset can trigger chain-reaction liquidations across DeFi lending platforms. Falling prices force leveraged positions to unwind, which can depress prices further and liquidate even more loans in a vicious cycle. For instance, the “Black Thursday” crash of 2020 where a 50% single-day drop in ETH led to a wave of liquidations and even protocol insolvencies.

These examples show how quickly things can go wrong if you’re not on top of a wide range of risk metrics relevant to your positions. Sudden liquidity shortfalls, peg breaks, and mass liquidations highlight the need for continuous, in-depth risk monitoring. In fast-moving markets, timing is everything – by the time an average investor reacts to Twitter rumors or price charts, the damage might already be done. 

Spotting Risk Early in Aave

Aave, one of DeFi’s largest money markets, is a key protocol to watch when determining potential risks in the market. If you’re an institutional investor in DeFi, chances are high you’ve deployed capital in the protocol. But even if you’re not deploying into Aave, the protocol’s strong position could be important when watching out for potential risk events in the broader market. Let’s take a practical example of how you’d watch for risk on Aave.

High-Risk Loan alerts on Aave

We can categorize each loan on Aave by a health factor (based on collateral vs. debt); when that health factor approaches 1.0 (the liquidation threshold), the loan is at high risk of being liquidated. 

A sudden increase in high risk loans can be the result of extreme price movements, causing the collateral in the loans to drop. When this is significant enough, it can force liquidations and even create cascading liquidations as mentioned before. Continuously monitoring the amount of high risk loans is somewhat impractical, but nonetheless essential. Tools like IntoTheBlock’s risk Pulse can help spot these conditions automatically, as shown in the example below.

Watching Liquidity Flows

Another key signal on Aave is large movements of assets into or out of the protocol. Peaks in liquidity flows, specifically in outlfows, can indicate risk conditions. For instance, a large withdrawal of WETH from Aave may suggest that a whale is pulling collateral, perhaps out of concern over market volatility or to deploy elsewhere. 

This sudden outflow can tighten the available liquidity on Aave. If a lot of WETH is taken out, there’s less WETH liquidity to borrow, and utilization for remaining WETH might shoot up, driving interest rates higher. 

Conversely, a surge of WETH deposits could temporarily boost Aave’s liquidity and signal that big players are gearing up to lend or provide collateral for borrowing. 

Watching Liquidity Flows

Another key signal on Aave is large movements of assets into or out of the protocol. Peaks in liquidity flows, specifically in outlfows, can indicate risk conditions. For instance, a large withdrawal of WETH from Aave may suggest that a whale is pulling collateral, perhaps out of concern over market volatility or to deploy elsewhere.

This sudden outflow can tighten the available liquidity on Aave. If a lot of WETH is taken out, there’s less WETH liquidity to borrow, and utilization for remaining WETH might shoot up, driving interest rates higher.

Conversely, a surge of WETH deposits could temporarily boost Aave’s liquidity and signal that big players are gearing up to lend or provide collateral for borrowing.

Both scenarios carry implications: a liquidity drop raises the risk of higher slippage or inability to withdraw for others, whereas a big influx might precede increased borrowing (and leverage in the system).

Curve: Depeg Alerts and Market Depth Changes for Stablecoin Pools

Another leading DeFi protocol is Curve. Curve is the backbone of stablecoin liquidity in DeFi, hosting pools where users trade and stake stablecoins and other pegged assets. By design, Curve pools are stable swap pools meant to hold assets at equal value, which makes any depeg event or imbalance immediately concerning. Risk monitoring on Curve focuses on peg stability and market depth: essentially, are the assets in the pool holding their expected value, and is there sufficient liquidity on each side of the pool?

Depeg Risks

When a token in a Curve pool drifts from its intended peg, LPs are often the first to feel the impact. A small price deviation can quickly spiral into a pool imbalance — the depegged asset floods the pool as others exit, leaving LPs holding the riskier side.

Recent events like FDUSD’s depeg on April 2, 2025, highlight the importance of rapid detection. As redemptions hit and rumors spread, FDUSD-heavy Curve pools skewed sharply. LPs caught unaware faced mounting impermanent loss and poor exit liquidity.

Early alerts flagging the initial drift (e.g., FDUSD < $0.98) would have given LPs time to exit or hedge.

And it’s not just fiat stables. Staked tokens like sdPENDLE have also shown dislocations in Curve. When these wrappers slip in price versus their underlying assets, their share in pools can balloon, a signal that LP risk is rising fast.

Liquidity Depth as a Signal

Curve risk isn’t only about price, it’s also about depth. When liquidity in a pool is thin, slippage worsens, and the ability to swap out becomes constrained. It’s therefore crucial to watch for sudden shifts in pool liquidity. There’s a couple of reasons why you might see a sudden shift in liquidity. The most obvious answer is that market events, like extreme price moves, cause uncertainty, which causes people to withdraw their liquidity.

An often less explored factor is that pool liquidity can consist of just a few large providers, meaning that just a few entities withdrawing can significantly alter market depth, exposing you to risk.

For funds managing liquidity on Curve, real-time alerts that combine large transactions with depth changes are critical. They offer a chance to exit, rebalance, or even deploy capital to stabilize the peg,  before the rest of the market catches up.

Whale Concentration: Large Players that Move Markets

One recurring theme in the above discussions is the outsized influence of whale investors, entities or addresses that control very large positions. Whale behavior can move markets or distort liquidity precisely because of their scale.

On-chain analytics reveal these “whale concentration” risks by flagging pools where a few large lenders dominate. If three addresses supply half a pool’s liquidity, that pool is fragile: the first whale to exit could lock everyone else in until fresh capital arrives or high rates force borrowers to repay.

Mentioned in this article

Brighty is an all-in-one financial app founded and headquartered in Zug, Switzerland (a global hub for crypto innovation).

In essence, it merges the reliability of traditional institutions with the flexibility of crypto, allowing you to use crypto for such daily things as buying your coffee or filling gas. Of course, it offers more than that.

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Think of it as your regular bank but tailored for the crypto age, offering virtual and physical Visa cards, seamless fiat-to-crypto exchanges, and earning opportunities.

Security First, Always

Fully regulated and licensed within the EU, Brighty is a member of the Financial Services Standards Association (VQF) of Switzerland, which means that it maintains rigorous regulatory compliance.

Your assets on Brighty are protected by advanced encryption, multi-factor authentication, and thorough audits. Fiat funds are safeguarded by being completely separated from Brighty’s operational funds. Your crypto assets are stored in bank-grade vaults, insured for up to $250 million, and feature offline key storage as well as extensive transaction monitoring.

Additionally, Brighty requires users to complete identity verification (KYC) and handles personal data in compliance with GDPR standards.

Brighty’s Key Features

There are several things you can do with Brighty.

Pay Your Way, Instantly

Brighty lets you use crypto as easily as you’d use traditional fiat currency. Just order a Brighty card (physical or virtual) and top it up with fiat like EUR, USD, GBP, stablecoins like Tether
USDT


$0.9981

Once you do that, you can easily pay anywhere Visa, Apple Pay, or Google Pay are accepted using either crypto or fiat in your account. Plus, you can quickly exchange your crypto to fiat, crypto to crypto, and vice versa at competitive rates.

Grow Your Crypto in Vaults

Besides spending and exchanging, with Brighty’s earning vaults, you can make your funds grow daily. They offer up to 10.41% APY on your crypto with no locked funds. Just open a vault and deposit the supported assets into it. You can withdraw anytime, fee-free. Do note that the possible earning percentage depends on your subscription plan (more on that below).

AI Investments: Investing Made Smarter

Brighty’s AI Investment tool uses sophisticated AI-driven algorithms to offer diverse, commission-free portfolios based on sectors like Nasdaq, S&P 500, dividends, real estate, energy, and more.

These portfolios are continuously adjusted based on real-time market data, trends, and news, with past performance reaching up to 21% annually. You just have to pick a portfolio and invest in it with a single click. By the way, you can withdraw anytime.

For Businesses and Digital Creators

Now, Brighty isn’t just for individual users; it’s also optimized for businesses and creators. Businesses can perform crypto-to-fiat transactions, manage bulk payments via APIs, conduct OTC trades without slippage, and enjoy fast onboarding with thorough compliance.

Digital creators benefit from a specialized neobank experience, receiving payments swiftly without complex transactions. Creators can even showcase their art on custom Brighty VISA cards used by thousands across Europe, spotlighting their work through everyday transactions.

Brighty’s Pricing Plans

You can use Brighty for free, but you will not get all the benefits with the free plan, including the allowed fee-free monthly exchange of a set limit. Here’s a comparison of its plans to give you the full picture:

Table: Brighty’s Pricing Plans

As you can see, the free plan is a bit limiting and doesn’t offer the highest earning potential. So, for the full Brighty experience, it would be best to go with the Plus or the Pro plans. However, if you only need a virtual card for using your crypto as fiat, the One plan should suffice.

Regarding other fees and limits, all plans have a fiat account limit of €100,000 and unlimited crypto balances. Receiving money (crypto or fiat) is free and unlimited. Sending fiat has daily (€8,000) and monthly (€30,000) limits with low fees (lowest on Plus and Pro). Crypto transfers are unlimited, with modest transaction fees depending on the cryptocurrency network.

How to Get a Brighty Card?

It’s very easy to get a Brighty card. Just follow these steps:

• Download the App. Brighty is only accessible via a mobile app.
• Enter Your Phone Number. This will act as a base for creating your account. You’ll also have to verify it by filling in a code you’ll get via a message.
• Create a Passcode. Once you confirm your phone number, you’ll have to create a passcode. After that, you’ll also have an option to enable biometric authentication (like Face ID).
• Choose Your Country of Residence. You’ll be asked to indicate your country of residence because the conditions and services you can get depend on it.
• Verify Your Identity. You cannot use Brighty’s services without verifying your identity. To do that, you’ll have to provide an identity verification document, take a selfie, and answer a few questions.
• Order a Card. Once you’re verified, you can order your Brighty card. If you’re using the free plan, though, you’ll only be able to get the virtual card. You should get the virtual card instantly, so you can start using it for purchases immediately after topping it up.

Summing things up, Brighty blends the stability of traditional banking with the freedom and innovation of crypto, creating an approachable, secure platform for anyone looking to navigate digital finance easily and effectively.

As we spend more time online—collecting digital goodies, and exploring virtual worlds—we might need better ways to prove who we are and protect what we own. Passwords and security questions don’t always cut it anymore. That’s where a new idea comes in: Biometric NFTs. These special tokens combine blockchain technology with unique parts of your biology, like your face or fingerprint, to keep your digital assets safe.

What Are Biometric NFTs?

An NFT is like a one-of-a-kind digital asset stored on a blockchain. It could represent a piece of digital art, fractionalized real estate, or an asset in a video game. Now imagine tying an NFT to your biometric data—for example, your facial features. This creates a direct link between you (a unique human) and your NFT. Instead of just hoping a password is strong enough, your face or fingerprint helps prove you own something. In other words, it’s a more personal and foolproof way of proving ownership and verifying identity in the digital world.

Why Better Security Matters

Digital assets—from rare digital art and virtual collectibles to entire digital worlds—have greatly increased popularity and value. But as more people buy, sell, and trade these items, the risk of fraud and theft also grows. Traditional logins can be guessed or stolen; even two-factor authentication can fail against determined scammers.

Biometric NFTs could add an extra layer of security ensuring that no one else can slip into your accounts or snatch your tokens without passing the ultimate test: being you.

How Biometric Authentication Works for NFTs

Biometric authentication uses physical traits that are uniquely yours. It might scan your face, read your fingerprint, or listen to your voice. When you access your NFT marketplace or digital wallet, a quick facial scan can replace typing long passwords.

The blockchain then confirms the NFT belongs to the person with these unique traits. Because these traits are hard to fake, scams and break-ins are much less likely.

When you want to transfer or sell your NFT, you need transaction confirmation. Using your biometric data means you’re essentially “signing” the transaction with your own face or fingerprint.

This biometric digital signature ensures that even if someone got hold of your device, they still couldn’t move your NFT without passing that biometric check.

Government and Services

Biometric NFTs can also help governments and large organizations manage identities online. Instead of carrying multiple IDs or memorizing many passwords, you could use a single token tied to your face or fingerprint.

Governments could control access to sensitive information or secure virtual reality spaces, confident that only the right person gets through. This kind of identity management could streamline everything from logging into public services to proving who you are in a digital voting booth.

Looking Ahead: Virtual Worlds and Beyond

The future looks bright for NFT technology. As we spend more time in virtual reality spaces—whether for entertainment, shopping, or work—we’ll need better ways to confirm who we are.

Biometric NFTs could make these virtual experiences more trustworthy. When you enter a virtual world to see a digital art gallery, for example, your face or voice could let you in, give you access to your unique collection, or even unlock special features.

Privacy Matters: Protecting Your Data

Of course, nobody wants their personal information floating around online. That’s why privacy-preserving methods are so important. An example comes from a South Korean company called Privasea, which developed an app called ImHuman.

This app uses fully homomorphic encryption (FHE), a fancy way of saying it can process your biometric data—like a face scan—while it’s still encrypted. In other words, even if someone got into the system, they’d never see your raw data.

With ImHuman, you simply use your phone’s camera to prove you’re a real, unique person. The app then creates a secure, encrypted NFT tied to your biometric data. You can use this NFT as proof without revealing your name, email, or other personal information. Privasea is currently working on its mainnet and testnet to bring this technology to more users, letting them safely access services, airdrops, and rewards in the crypto space.

Putting It All Together

Combining biometrics with NFTs and blockchain technology may sound complex, but it could be the key to a safer digital future. Instead of trusting easily stolen passwords, we trust something unique to each of us—our biology—backed by the secure mathematics of encryption and blockchain.

As developers figure out the best ways to store and manage this data, we could see more tools that let everyday people, governments, and companies tap into biometric NFTs.

Biometric NFTs offer a fresh, practical way to protect digital items, confirm our identities, and ensure we deal with real humans online. They take the security of NFTs to a higher level, making it easier to buy and sell valuable collectibles, manage digital identities, and interact safely in virtual environments.

Editor’s note: Written with the assistance of AI – Edited and fact-checked by Jason Newey.