🐻 DeFi and stablecoins are getting regulated
Plus, how did the Ethereum Shanghai upgrade go?
GM friends. It was a big week last week. Bitcoin broke $30,000, Ethereum successfully completed its bullish Shanghai upgrade and Elon is apparently working on a ChatGPT competitor. This week is going to be another busy one too, particularly on the regulatory side. The targets? DeFi and stablecoins. Let’s dig into it today!
In this issue
📣The big story of the week. US regulators target DeFi and stablecoins.
🚀Bullish news. Solana starts rolling out its web3-focused mobile phone Saga and the bullish Ethereum Shanghai upgrade pushes up the price of ETH.
🐻Big, bad FUD. The creators of GoblinTown NFT gives a middle finger to zero royalties and FTT token goes back down after a mini surge.
📣The big story of the week
US regulators target DeFi and stablecoins
For the past few months, the SEC has been busy going after centralized crypto exchanges and platforms. Coinbase, Gemini and Kraken are just some of the major platforms hit with charges and fines from the SEC. But they don’t want to stop there. They want to take down all of crypto, including DeFi.
The SEC just voted to reopen comments on the definition of an exchange, specifically to consider how to incorporate DeFi into existing exchange rules, while also providing opinion that such rules already have DeFi applicability.
— Alexander Grieve (@AlexanderGrieve)
Apr 14, 2023
Earlier this year, the SEC proposed expanding the definition of the word “exchange” to capture a wider range of trading activity. The initial proposal apparently failed to provide enough clarity, but the updated amendments to the definition of “exchange’ under the federal Exchange Act Rule now explicitly call out DeFi trading platforms.
At least there is one person within the SEC team that seems to be on our side. SEC Commissioner Hester Pierce has publicly voiced her disapproval of the proposal arguing that it “sends a message that we are uninterested in facilitating innovation”. She even goes as far as to say that the “ambiguity undermines fundamental First Amendment protections." You go girl!
In just 60-something words, SEC Commissioner @HesterPeirce has managed to articulate all that hits awfully close to home. Thank you.
— paulgrewal.eth (@iampaulgrewal)
Apr 15, 2023
But DeFi isn’t the only area of crypto under scrutiny. Stablecoins are also coming into the spotlight with a new draft bill on stablecoin regulation following the collapse of LUNA and UST last year.
Key points from the stablecoin bill (from the article)
- Put the Federal Reserve in charge of nonbank stablecoins
- A (temporary) ban on new stablecoins without fiat backing
- Allow the government to set interoperability standards
- Direct the Fed to study a digital dollar
— borovik.eth (@3orovik)
Apr 17, 2023
Good news is that top licensed stablecoins like USDT, USDC and BUSD will likely come out as winners, which explains why the “Circle guy”, aka CEO of USDC is particularly happy about this draft bill.
Draft US Digital Dollar / Payment Stablecoin Bill Enters Congress
1/ A product of bi-partisan efforts, the first comprehensive proposed law for Payment Stablecoins has arrived in Congress. Some thoughts below:
— Jeremy Allaire (@jerallaire)
Apr 15, 2023
But where there’s a winner, there must be a loser. In this case, decentralized stablecoins like DAI, RAI and LUSD may be taking the hit and even fined a maximum of $1 million and 5 years in prison. Here is a good summary of the draft legislation 👇.
Stablecoin legislation has been drafted in Congress
I read the bill.
TL;DR decentralized stables become illegal in the US (DAI, LUSD, RAI, etc. become illegal🚨) while centralized stables, defi, Ethereum, and ETH win big.
- decentralized stables become… twitter.com/i/web/status/1…
— Ryan Berckmans ryanb.eth🦇🔊 (@ryanberckmans)
Apr 16, 2023
The hearing for the draft stablecoin legislation will take place on Wednesday.
Why does this all matter?
Crypto is still so new and regulators are clearly struggling to figure out how to deal with it. It’s a balancing act of wanting to protect consumers, but also wanting to enable innovation. But from what we’re seeing so far, the regulators and the government have their own agenda and they won’t let anything, especially crypto, get in the way of it.
📱 Solana starts rolling out their web3-focused phone, Saga. They really did it. The $1,000 Android phone comes with a built-in mobile wallet to easily connect to dApps and a seed vault to hold your private keys. It also comes with a Solana dApp store where you can easily find and download a number of web3 apps to use. Though it’s a bit buggy, it’s certainly another step towards integrating web3 into our daily lives and could eventually become the primary or only mobile phone you need.
📈 Ethereum’s successful Shanghai upgrade sends the price of ETH up 6%. Currently, over 754,000 ETH has been successfully unstaked and 1.1 million ETH are still pending. Meanwhile, 250,000 ETH are newly staked. It’s important to note that someone unstaking their ETH doesn’t mean that they are selling. In fact, more than half of the ETH stakers are in the red, so HODLing is likely expected.
🐻Big, bad FUD
🤦 Creators of GoblinTown NFT pulls a “soft rug pull” on holders. To protest against the emerging trend of zero creator royalties, Truth Labs thought it would be a good idea to change all of their projects’ artwork to an animated gif of a middle finger as a “fuck you” to zero royalties. In addition, they have temporarily paused all trading of their NFTs as they prepare to transfer all NFTs to a new smart contract that enforces creator royalties. So, it’s technically not a full rug pull, but it certainly leaves a sour taste in the mouth.
📉 FTT token slips back down after a mini-surge from the FTX 2.0 news. The degens got a bit too excited when they heard news of failed exchange FTX possibly reviving. However, it is unlikely that the FTT token will have anything to do with the revival because of the legal liability. Good.