U.S. SEC commissioner Hester Peirce has come to the attention of the crypto community once again, commenting on some of the problems with regulating decentralized finance on a recent BIC panel. The Bank for International Settlements hosted its inaugural Innovation Summit that took place from the 22-25 March. The theme of this year’s summit was “How can central banks innovate in the digital age?”.
Affectionately given the moniker ‘Crypto Mum’ by the crypto and blockchain community, Peirce has long been an advocate of innovation in the markets. She gained her nickname in 2018 when she dissented in the SEC’s decision to reject Cameron and Tyler Winklevoss’s application for a bitcoin-related ETF. She argued that the rejection sends a “strong signal that innovation is unwelcome in our markets”.
In the recent innovation summit Peirce commented on decentralised finance, and the challenge this poses to regulators. DeFi enables users to access financial services without the need for an intermediary but governed by smart contracts. Peirce described what areas would fall under the scrutiny of the SEC, as well as noting that many elements of DeFi are outside of the SEC’s regulatory capacities as DeFi is more about banking than securities.
The issue of decentralization was brought up by Peirce, who described the difficulty in regulating it when there is no central counterparty.
“Often, people aren’t really thinking about regulation until there’s actually a problem. And then when there is a problem, they really want there to be a regulator to go to. And they really want there to be a way to reverse the bad thing that happened.“In the case of DeFi there could be neither. And that could be really problematic for people. And they’ll only find out about it, or they’ll only really focus their thinking on that point when something does happen.”.
Peirce commented on her Safe Harbor proposal that she first brought up last year. The initial proposal came about as a response to the difficulty many entrepreneurs and businesses in the crypto space face with the lack of regulatory clarity. Peirce commented at the time:
“When we see people struggling to find a way both to comply with the law and accomplish their laudable objectives, we need to ask ourselves whether the law should change to enable them to pursue their efforts in confidence that they are doing so legally.”
The Safe Harbor proposal would provide projects with a three year grace window to build their networks without being classes as securities. Peirce stated in the panel discussion that she has plans to update the Safe Harbor proposal, and hoped to share it with SEC Chairman Gary Gensler.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
DeFi Total Value Locked Hit ATH as Crypto Market Sees Resurgence
The decentralized finance (DeFi) ecosystem has printed its highest Total Value Locked (TVL) today, riding on the back of the resurgence in the broader market. Per data from DeFi Llama, the TVL covering all blockchain protocols is now pegged at $223.23 billion, a massive uplift from the $21.4 billion recorded from January 1 this year.
Per the DeFi Llama data, decentralized exchange liquidity pool on Ethereum designed for efficient stablecoin trading, Curve Finance, maintains the largest share of the pie with a value of $17.08 in TVL. Lending protocol, Aave ranks next with a total of $17.02 billion, while Maker also comes off with a total value locked of $15.43 billion. The growth of the DeFi ecosystem has largely maintained an upward trajectory, as more investors, including retail and institutional investors, began leveraging the earning options the emerging protocols that make up the ecosystem offers.
DeFi creates the most direct threat to traditional finance as the emergence of lending protocols for instance has lowered the barrier to entry for accessing loans. Many new investors also find it easy to commit their funds into the DeFi ecosystem as these protocols are governed by smart contracts, which makes them non-susceptible to the lapses of human-fueled organizational management.
Future Growth to be Backed by Mainstream Market
There is a more positive outlook in the broader digital currency industry, fueled by the optimism of approval of the first Bitcoin Futures Exchange Traded Funds (ETF) in the U.S. Per an earlier Coingape report, the ProShares Bitcoin Strategy ETF could be coming as soon as next Monday, October 18, marking an end to the undying anticipation from investors about such a product.
With the advent of the ETF, more funds will be pumped into the entire industry, and there is bound to be a trickle into the DeFi ecosystem. A number of investment managers, including Grayscale, are beginning to provide funds that track the performance of DeFi protocols, opening up additional avenues for more embrace of the DeFi tokens.
Besides the TVL, the tokens of DeFi projects are also seeing an additional boost with all protocols inking a market cap of $137.47 billion according to data from CoinMarketCap.
Report: Driven by DeFi, North America’s crypto volume increased 1,000% year-over-year
Digital analytics firm Chainalysis reported that the growth in North America’s crypto market has been driven by the rise in popularity of decentralized finance.
In its 2021 Geography of Cryptocurrency Report, Chainalysis said the monthly crypto transaction volume across North America grew by more than 1,000% from July 2020 to June 2021. The monthly volume reached a peak of $164 billion in May 2021 before dipping to just over $100 billion in June.
According to Chainalysis’ report, decentralized finance, or DeFi, was largely responsible for North America continuing to maintain its position as one of the largest crypto markets worldwide. DeFi transactions represented 37% of North America’s overall transaction volume from July 2020 to June 2021, with residents sending roughly $276 billion in crypto to platforms in the DeFi space.
The Central, Northern and Western Europe region sent the most in crypto overall — $389 billion, roughly 40% of its overall transaction volume during the same time period. Chainalysis said “DeFi whales” were responsible for turning the region into the world’s biggest cryptocurrency economy, with the majority of institutional-sized transfers going towards platforms in decentralized finance.
However, the report said North America’s DeFi transactions were led by retail investors in the last year, with many transactions under $10,000. Uniswap was the most popular DeFi platform in North America, with users having sent more than $100 billion in transaction volume between July 2020 and June 2021.
“Right now, DeFi is targeted towards crypto insiders,” said dYdX growth lead David Gogel. “It’s people who have been in the industry for a while and have enough funds to experiment with new assets.”
In addition, Eastern Asia’s crypto market has been declining, likely driven by the regulatory crackdowns on China’s crypto industry and mining in the region. Chainalysis reported P2P trade volume in China had dropped significantly over the last year, ranking the country in the 155th position worldwide compared to 53rd the year prior. Though Eastern Asia still received $591 billion in crypto transactions between July 2020 and June 2021 — a growth of 452% year-over-year — the firm labeled the region as the “slowest-growing” in its analysis.
“Mining isn’t the only part of China’s cryptocurrency economy affected by the crackdown,” reported Chainalysis. “The government has taken other actions such as campaigning against cryptocurrency in state-sponsored media, placing official warning messages on cryptocurrency-related apps, and potentially leaning on social media companies to suppress cryptocurrency-related content.”
DeFi Presents Multi-Billion Dollar Use Case To Disrupt Foreign Exchange Market, According to Shark Tank Star Kevin O’Leary
Shark Tank star Kevin O’Leary is saying that the foreign exchange market is a multi-billion dollar use case for decentralized finance (DeFi), a form of blockchain technology that supporters claim can revolutionize financial services by eliminating the need for intermediaries.
During this year’s SALT conference in New York City, O’Leary relates how investors must rely on foreign exchange middlemen to invest in overseas markets. He says the extra steps required in such dealings are often unnecessary and burdensome.
“Let’s say a traditional mandate, such as I want to go long Europe, I’m going to buy 50 stocks. I have to buy Swiss francs, Euro-based stocks and British pounds because I want to trade them on their domestic exchanges.
In between me and that transaction is what’s called the bane of the earth – the FX trader, the currency trader who clips me every time I buy and sell. Adds zero value and sucks friction out of the system. I can’t wait until we solve this problem and give them a new career shining shoes, because they add no value whatsoever.”
The celebrity investor believes that DeFi has the potential to eliminate costly middlemen from the foreign exchange market system.
“This is where DeFi can take us, on just one use case. But it’s a multi-billion-dollar one, and I want to be alive to have a regulator domestically allow me a payment system to a Swiss franc, back and forth if I want to trade it 50 times a day, with zero FX traders. That’s my mission in life, to help them find a real job.”
In May 2020, O’Leary led a $20 million fundraising round for what is now WonderFi Technologies, a Canadian firm that plans to launch a platform to simplify access to DeFi.