The biggest crypto news and ideas of the day |
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Crypto Doesn't Need More Guidance, SEC Chair Gensler Says: Securities and Exchange Commission (SEC) Chair Gary Gensler said the regulatory agency’s existing rules provide a clear roadmap for crypto companies, in an interview with CoinDesk’s Nikhilesh De. This bucks cliched calls for tailored regulation from insiders and outsiders. Just this week, for instance, Federal Reserve Chair Lael Brainard called for new crypto-specific regulations while Fed Vice Chair for Supervision Michael Barr said crypto activity needs similar oversight to traditional bank activities. Separately, in the first public response to President Joe Biden’s crypto executive order in March, the White House Office of Science and Technology Policy called for more research on the energy impact of crypto mining. Crypto Engineers, Investors Sue US Treasury Over Tornado Cash Sanctions: Six crypto users are suing the U.S. Treasury Department for blacklisting Tornado Cash last month, claiming the department’s sanctions watchdog overstepped its authority in prohibiting all American persons from interacting with the privacy tool. The suit, filed in the U.S. District Court for the Western District of Texas, argues the “decentralized, open-source software project” Tornado Cash should not have been sanctioned because it is not an entity, person or organization. Celsius Crypto Borrowers Called for Bankruptcy Trustee and Opposed US DOJ Move to Appoint Examiner: A group of six Celsius Network borrowers said while a bankruptcy court should appoint an independent examiner to investigate Celsius’ financials, the examiner should not work for the U.S. Trustee’s office, due to concerns a government agency would delay proceedings and cost them in restitution. Celsius filed for bankruptcy protections earlier this summer, costing its users hundreds of millions of dollars in lost funds. Celsius borrowers have filed numerous class-action lawsuits, and have claimed the firm has not been transparent about its financial condition. Crypto Lender Voyager Will Auction Off Assets on Sept. 13: Insolvent crypto lender Voyager Digital will auction off the remainder of its assets on Sept. 13 as it moves through the Chapter 11 bankruptcy process. The identity of bidders has not been revealed but exchanges FTX and Binance are known to have had interest in acquiring Voyager's assets. Israel's Markets Regulator Granted the First Crypto License to Private Company: Israel's Capital Markets, Insurance and Savings Authority granted a first permanent license to a private company, Hybrid Bridge Holdings Ltd., to engage in crypto activities. It's unclear what kind of crypto services the company intends to provide, but it has an active license as a financial services provider in the country. Elsewhere, Taiwan approved 24 crypto platforms for anti-money laundering compliance. “This is an important milestone for us as many foreign-owned firms are seeking to serve the Chinese-speaking market who are looking to diversify their portfolios," said Jack Tan, founder and CEO of WOO Network, one of the approved firms.– Xinyi Luo |
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Putting the news into perspective |
Why DeFi Protocols Are Limiting ETH Borrowing Ahead of Ethereum’s Merge The upcoming Merge – when Ethereum will undergo the most complicated upgrade in blockchain history – is already creating opportunities for those predicting it could have a positive impact on ether’s (ETH) price. ETH, at around $1,600, is setting fresh yearly highs ahead of the event scheduled for next week. ETH is trading at its highest price relative to bitcoin (BTC) this year, and also sucking the oxygen from other layer 1 blockchains. At least part of the reason, analysts said, are the many proposed tokens to be airdropped to ETH holders after the transition is completed – a free subsidy that people can either choose to hold or sell.
Several decentralized finance (DeFi) protocols are now setting limits around ETH lending, as speculators load up on the asset in anticipation of a potential windfall. Compound users, for instance, today passed a vote to set a borrow cap of 100,000 ETH and increased interest rates for large borrowers.
“The upcoming [Merge] has the potential to cause disruption to ETH lending markets due to the possibility of receiving airdrops of ETH fork tokens. This may incentivize excessive borrowing from ETH lending pools, which leads to negative user experience for depositors who cannot withdraw funds,” the proposal read. This comes a week after Aave, another “blue chip” DeFi lender, voted to temporarily ban ETH lending after users predicted the Merge could cause a surge in demand that would severely interfere with the protocol’s programmatic trading protections. |
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(Possessed Photography/Unsplash, modified by CoinDesk) The risks for both protocols, Compound and Aave, and perhaps other DeFi lenders, are similar: Airdrop speculators could suction up ETH deposits thereby creating liquidity constraints for other users. Indeed, other DeFi protocols are seeing users swap out ETH-derivatives, like Lido’s staked ETH (stETH), which won’t receive airdrops and is now trading at a significant discount, for ETH, which will. In Compound’s proposal, users note that “the vast majority of non-ETH assets are likely to become worthless on fork chains” – perhaps including the airdrop with the most eyes on it, ETHPOW – because there is such a high degree of consensus that switching to PoS is beneficial. But the short-term trade is attractive for many, and these alternative ETH varieties could still retain value. For some, such limits placed around “open finance” seem antithetical to aims of DeFi – an example of a group of people overriding the code meant to create fairer trading conditions for all. This is especially true considering how concentrated DeFi voting is among large token holders today. But these precautionary moves might also prove the value and viability of distributed protocol governance, protecting the long-term health of DeFi against shortsighted, individually-motivated traders. In either case, there’s a million ways to trade the Merge. – D.K. |
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Overheard on CoinDesk TV... |
"They don't just resemble securities, they are securities." – Securities and Exchange Commission Chairman Gary Gensler, referring to "the vast majority" of crypto tokens, on CoinDesk TV's "First Mover" |
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As Crypto Reels, Polygon Deploys Cash Hoard in Hiring Binge (Bloomberg) Inside the World's First No-Coiner Conference (Decrypt) Artists Say NFT Markets Betray Web3 by Nixing Royalty Payments (The Defiant) Tens of thousands of viewers watched a fake Apple crypto scam on YouTube (The Verge) |
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