Banks Racing to Own On-Chain Settlement Rails

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Happy Friday. This is Converge, The Defiant's weekly recap of tokenization, stablecoins, and real-world assets, by Chris Storaker.

Follow @ConvergeDefiant.

TOP NEWS THIS WEEK

• Incumbents scrambling to own on-chain rails
• Crypto's rented infrastructure shows its costs

ALSO IN THIS ISSUE

• Morgan Stanley lists spot ether and Solana ETPs that stake
• Banco Santander discloses spot Bitcoin and Ether ETF positions
• Securitize adds an adviser license
• Franklin Templeton backs CLARITY
• Ether ETFs out-draw bitcoin again

STABLECOINS / MARKET INFRASTRUCTURE

FIs Scramble to Own the Tokenized Rails

• Ten European financial institutions launched Regulated Layer One, a jointly owned blockchain for regulated markets structured as a Luxembourg cooperative in which every member holds equal governance rights. The founding cohort runs ABN AMRO, Cecabank, Chartered Investment, Crédit Mutuel Alliance Fédérale, DekaBank, DZ BANK, LBBW, Natixis CIB, SC Ventures and Seturion, with NatWest listed as joining soon, per the launch.
  RL1 inherits SWIAT's production network, which has settled more than 50 transactions worth over €700 million ($815 million) across three years. SWIAT's BaFin-supervised electronic securities registries move onto it, and Henning Vollbehr leaves the SWIAT managing-director seat to run the cooperative.
• SoFi's commercial clients began settling in real time through SoFiUSD, the company said in its second-quarter results. That’s the first confirmation that enterprise payments are running on the rail, seven months after SoFi became the first nationally chartered U.S. bank to issue a stablecoin on a public blockchain.
  The traffic sits inside Big Business Banking on the SoFi Exchange Network. The economics are still thinner than the milestone: crypto transaction revenue of $134.3 million against $133.1 million in costs left $1.2 million net.

Our take: The pilots are over and the ownership musical chairs has started

RL1: “Ten European institutions with equal governance rights in a Luxembourg cooperative” doesn’t scream agility or innovation to anyone. Equal governance means ten vetoes and diluted competitive advantage. Consortium chains die of committee, not of technology; Fnality took a decade to move real money, we.trade and Marco Polo never got there at all.

However, it solves a problem that has killed several bank chain pilots: nobody wants to settle on infrastructure a competitor controls. It also also inherits SWIAT's production network and BaFin-supervised registries, so it opens with regulatory standing instead of a whitepaper.

SoFi: is the counterfactual, with SoFiUSD settling live for commercial clients is the first evidence that a nationally chartered US bank can issue on a public chain and route enterprise payments through it.

PAYMENTS / INFRASTRUCTURE

Crypto's Rented Infrastructure Shows Its Costs

A card issuer's collapse and a shrinking fee line at the largest L2 landed in the same week, and both trace to the same place.

• Ready shut down its card program on Wednesday after its issuer wound down with no warning. “We were given no notice, so if you were relying on the card today, you found out at roughly the same time we did,” co-founder Itamar Lesuisse wrote on X. Solflare's card went dark the same way a day earlier, with co-founder Vidor Böjthe citing solvency issues.
• The issuer was Kulipa, the Paris startup behind card programs for roughly 20 wallets and fintechs. Kulipa closed a $6.2 million seed co-led by Flourish Ventures and 1kx on April 1, four months before the collapse.
• Both wallets pull funds at the moment of purchase, so no customer balances sat at Kulipa when it failed. “You have many card programs sitting on the same two or three vendors,” SquareFi co-founder Anton Lobintsev told The Defiant. “Self-custody still didn't stop the outage, because the issuing rail underneath it was still rented.”

Our take

Card programs are cheap to launch because the issuing, processing and BaaS layers are rented from a handful of vendors. Cheap to rent.

Two self-custodial wallets did the risk work correctly — funds stayed in user wallets until the swipe, so nobody became a creditor in a bankruptcy estate — yet their cards still stopped working overnight. Custody risk and availability risk are separate exposures, and the marketing language of self-custody speaks to only one of them.

THIS WEEK'S INTERVIEW

Where Bitcoin Yield Actually Comes From

From the Converge archive: Anchorage Digital head of research David Lawant on how covered calls and options desks manufacture yield on an asset that has none of its own, why Bitcoin options grew as fast as they did, and what allocators should check before chasing the return. Worth a rewatch in a week when Morgan Stanley listed staking ETPs and Wall Street's crypto product shelf widened again.

OTHER STORIES WORTH YOUR TIME

Morgan Stanley Launches Spot Ether, Solana ETPs on NYSE Arca

Morgan Stanley Investment Management listed the Morgan Stanley Ethereum Trust and Morgan Stanley Solana Trust under MSSE and MSOL, each charging 0.14% and tracking CoinDesk's 4PM NY settlement rates. Both will stake a portion of holdings and pass the rewards through, with MSIM keeping none — a feature the first wave of U.S. spot crypto funds added only after regulatory treatment loosened. They follow the Morgan Stanley Bitcoin Trust, which held more than $381 million through July 16. The in-house suite now covers the three largest crypto assets for a wealth manager whose advisors spent years restricted from soliciting these products.

Banco Santander Discloses Spot Bitcoin ETF Stake in 13F Filing

The Spanish group reported 129,615 iShares Bitcoin Trust shares worth $4.31 million as of June 30, alongside 297,947 iShares Ethereum Trust shares worth $3.54 million, its first disclosed positions in either fund. Both sit with SAM Investment Holdings, the Madrid holding company for Santander Asset Management, which reports shared investment discretion over the shares. Against $16.08 billion in reported U.S. equity holdings across 929 line items, the two funds are roughly 0.05% of the book. A 13F does not separate proprietary bets from positions held for clients.

Securitize Registers Capital Affiliate as SEC Investment Adviser

Securitize Capital's registration took effect July 22, lifting the caps it operated under as a Florida exempt reporting adviser since 2023 and adding an advisory license to a U.S. stack that already spans a broker-dealer, an ATS, a transfer agent and a fund administrator. The timing is pointed: SEC Commissioner Hester Peirce warned five days earlier that “involvement in managing vaults and lending strategies also may implicate investment adviser issues.” Risk-curator platforms hold $8.1 billion in total value locked, per DefiLlama. Citi initiated coverage at Buy with a $10 target, flagging BUIDL client concentration among the risks.

Circle bought IBM's blockchain patent portfolio

More than 680 patent families and close to 1,000 issued patents worldwide, terms undisclosed — and says the haul makes it the largest U.S. blockchain patent holder. The company tied the purchase to USDC, Circle Payments Network and Arc, its enterprise chain.

Coinbase's Base is moving record volume and earning less for it.

The “other” transaction revenue line that carries Base sequencer fees fell 11% quarter-over-quarter to $47.4 million, down from $68 million in Q3 2025, per the Q2 earnings deck, while Base stablecoin volume grew seven times year-over-year to about $32 trillion over 12 months. Brian Armstrong called Base “number 1 now in terms of stablecoin volume” on the call and floated where the L2 race ends: “how might there be sort of an M&A-type process in the world of blockchains?”

Coinbase is explicit about where. Base gives away transaction economics to drive USDC usage, and the company captured roughly 50% of USDC economics over the past year, booking $292.1 million of stablecoin revenue in the quarter. The sequencer is a loss leader for a float business. Anyone building an L2 without a stablecoin franchise attached is running the loss leader alone.

Even more this week:

• Magic Labs sold its embedded-wallet business to Kraken parent Payward — and rebranded as Newton Labs to work on a transaction-authorization layer. The wallet infrastructure behind Polymarket and WalletConnect, 60 million wallets and 200,000 developers, transfers to Payward on Aug. 1.
• Franklin Templeton backed the CLARITY Act — The $1.79 trillion manager joined BlackRock, Fidelity and Goldman Sachs in endorsing the market-structure bill as senators review the merged Senate text. No floor vote is scheduled.
• Ether ETFs out-drew bitcoin for a second week — $103.8 million against $33.9 million in the week ended July 24, per Farside. BlackRock's ETHA absorbed $96.3 million while IBIT posted a $95.5 million net outflow.
• OFAC sanctioned two Iranian marine insurers — Treasury says HormuzSafe, developed by Iran's Ministry of Economy, accepts Bitcoin and other digital assets for mandatory Strait of Hormuz transit coverage that protects vessels against seizures Iran itself threatens.
• Kansai Electric's rewards app now converts loyalty points into JPYC on Polygon — wallet developer HashPort said. NORM points earned in the MOACT app swap into Japan's first FSA-registered yen stablecoin, land in users' own HashPort Wallets, and connect out to DeFi. Polygon says it processes more JPYC volume than all other chains combined, and 84% of JPYC holders use HashPort Wallet.
• Two exchanges announced wind-downs inside a week. BitMart will halt trading Aug. 26 and cease operations Jan. 31, 2027 after nine years, with BMX down about 59% in 24 hours on the notice, and BitMEX said the previous Thursday that it closes Sept. 23.

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Converge is produced by The Defiant. This briefing is for informational purposes only and does not constitute investment advice.