Crypto Dragnet: DeFi Week Feb.12

Cryptocurrencies are securities, full stop.

This was the unavoidable takeaway from the SEC’s complaint accusing Do Kwon and Terra of fraud. As Owen Fernau reported in a fine piece of analysis, this is huge. For months, the agency has been defining certain tokens as securities or investment contracts subject to existing laws.

Now, in an anti-climactic action against the project that triggered the cascade of failures across crypto in 2022, the SEC has come right and said what many most feared. All crypto projects must now register their offerings the same way as stocks and bonds or face legal jeopardy. The industry will never be the same.

Clampdown

To garner a deeper understanding of the forces at work, and what’s at stake, be sure to pour yourself a cup of coffee and read Aleks’ Gilbert’s superb big read on how the regulatory push has reached this important moment. Aleks reported how banking regulators have been just as worried about crypto as their counterparts at the SEC. And that’s driving the clampdown from an array of agencies in what Nic Carter calls Operation Chokehold 2.0.

Aleks also presented two must-watch video segments on The Defiant’s YouTube channel on the crypto regulatory crackdown. The first surveys what’s happening in the U.S., and the second one is really special — it examines how the European Union has taken a different, and many say, more enlightened approach to the problem.

Andre

Meanwhile, The Defiant’s chiefess, Camila Russo, caught up with one of the most influential figures in DeFo — Andre Conje — in this week’s podcast. The founder of Yearn Finance covers a range of pressing issues, from his work with Fantom, the Layer 1 he co-founded, to regulation to what it’s like to be a “niche micro-celebrity”.

Rounding out the week are a couple of solid DeFi dives that you won’t find anywhere else but The Defiant: Owen Fernau plunged into the oft-overlooked Balancer exchange to learn why it’s surging in the past few weeks. Hint: its unorthodox model is supporting hot new protocols like Aura. And Sam Haig delivered a cracking exclusive on Arthur Hayes’ big bet on GMX, which soared more than 50% the day his story hit (just by chance, we’re sure).

Enjoy!

Today’s Sponsors

MetaMask Learn is an educational and entertaining platform designed to immerse you in the world of web3: what it is, why it matters, and how to get started. You will learn core concepts in visually engaging lessons from the world’s leading self-custodial wallet.

Cartesi is an application-specific rollups execution layer with a Linux runtime. Cartesi’s RISC-V virtual machine allows developers to import decades of open-source wisdom to blockchain applications and build decentralized applications with their favorite libraries, compilers, and other time-tested open-source tooling. Learn more.

Podcast

DeFi, Fantom, Regulations, and the challenges of being a niche micro celebrity with Andre Cronje

Andre Cronje is the co-founder of Fantom, a layer 1 blockchain, and also the founder of Yearn Finance, one of the first yield aggregators in DeFi.

Andre is certainly a key figure in the DeFi space who at time’s been seen as a rockstar, and other time’s been criticized for his controversial takes.

Before we get into it, let’s first hear about Andre’s backstory: How did he get into crypto in the first place and why did he decide to build in DeFi?

DeFi Alpha

DeFi Alpha: Set Up a Streaming Payment with Superfluid

Best of the Week

Weekend Read

It Isn’t Just the SEC — Feds’ Dragnet Targets Crypto Banking, Too

Spate of Enforcement Actions Poised to Reshape Industry

By Aleksandar Gilbert

The Securities and Exchange Commission. The Office of the Comptroller of the Currency. The Federal Deposit Insurance Corporation. The National Council of Economic Advisors. The U.S. Justice Department.

This year, an alphabet soup of U.S. agencies have scrutinized the crypto industry like never before. They are wielding indictments, lawsuits, investigations, and penalties to rein in the largely unregulated market. No surprise, crypto folk are none too pleased with the development.

Read the full story in The Defiant

The Defiant Interview

Hayes Shares Why He Loves GMX and Is Bullish on DeFi

Crypto Investor is No. 1 Individual Investor in Yield-generating Token

By Samuel Haig

Arthur Hayes, the co-founder and onetime CEO of the centralized derivatives exchange BitMEX, believes that both CeFi and DeFi are here to stay, and he’s putting his money where his mouth is.

Read the full story in The Defiant

DEXs

Balancer Shakes Off Rivals’ Shadow With Novel Strategy

Exchange’s TVL Surges 20% With Play in Red Hot LSD Market

By Owen Fernau

In an industry teeming with drama, Balancer has kept its cool. The decentralized exchange’s community has been content to let Uniswap, Curve, and the volatile SushiSwap grab the headlines. There have been times when Balancer seemed to disappear from the DeFi conversation altogether.

Read the full story in The Defiant

Crypto Crackdown

SEC Defines ‘Interrelated’ Terra Tokens as Securities

Feds Charge Do Kwon and Terra With Fraud in Case With Deep Implications For Crypto

By Owen Fernau

In a case that appears to broadly define cryptocurrencies as securities, the U.S. Securities and Exchange Commission on Thursday charged Do Kwon and Terraform Labs, the crypto firm he co-founded, with orchestrating a multi-billion fraud.

Read the full story in The Defiant

Ethereum Scaling

zkSync Counters Polygon With ‘Mainnet’ Rollup

Layer 2s Escalate Battle to Rule Ethereum Scaling Solutions

By Owen Fernau

That didn’t take long. A day after Polygon released a zero-knowledge-based scaling solution for Ethereum, zkSync opened up registrations for developers to deploy applications to its blockchain-based platform, known as a “mainnet.”

Read the full story in The Defiant

Defiant Video

Weekly Recap

Friday

News

SEC Defines ‘Interrelated’ Terra Tokens as Securities In a case that appears to broadly define cryptocurrencies as securities, the U.S. Securities and Exchange Commission on Thursday charged Do Kwon and Terraform Labs, the crypto firm he co-founded, with orchestrating a multi-billion fraud.
Hackers Use ‘Emergency Withdraw’ Flaw to Raid Platypus Platypus Finance, the team behind the USP stablecoin, suffered an $8.5M exploit on Thursday, sending the price of USP and its native PTP token into a sharp decline.
zkSync Counters Polygon With ‘Mainnet’ Rollup That didn’t take long. A day after Polygon released a zero-knowledge-based scaling solution for Ethereum, zkSync opened up registrations for developers to deploy applications to its blockchain-based platform, known as a “mainnet.”

Special Report

It Isn’t Just the SEC — Feds’ Dragnet Targets Crypto Banking, Too The Securities and Exchange Commission. The Office of the Comptroller of the Currency. The Federal Deposit Insurance Corporation. The National Council of Economic Advisors. The U.S. Justice Department.

Thursday

News

Balancer Shakes Off Rivals’ Shadow With Novel Strategy In an industry teeming with drama, Balancer has kept its cool. The decentralized exchange’s community has been content to let Uniswap, Curve, and the volatile SushiSwap grab the headlines. There have been times when Balancer seemed to disappear from the DeFi conversation altogether.
Flashbots Poised to Offer MEV to Ordinary Investors On Wednesday, Flashbots, the leading research team exploring Maximal Extractable Value, outlined a protocol that would let ordinary investors earn a share of the profits generated by the arbitrage bots that quietly reorder blockchain transactions.
Siemens Issues €60M Digital Bond On Polygon German industrial powerhouse Siemens AG has issued a 60M euro digital bond on the Polygon blockchain.

NFT News

NFT Market Gets A Boost From $400M Blur Airdrop Blur, currently the largest NFT marketplace on Ethereum as measured by trading volume, took a critical step toward decentralization this week, sending its users newly minted governance tokens that will give them a say in the protocol’s direction.

Wednesday

News

Polygon to Deliver Zero-Knowledge Powered Rollup Polygon, the Layer 2 blockchain, plans to deliver an Ethereum-compatible rollup powered by zero-knowledge proofs on March 27, the development team said on Tuesday.
NFT Collector Donates Prized On-Chain Art To Museum Cozomo de’ Medici, a pseudonymous NFT collector and longtime supporter of on-chain art, has donated 22 prominent artworks to the Los Angeles County Museum of Art (LACMA).

Tuesday

News

NY Orders Paxos to Cease Issuing Binance USD The U.S.-based stablecoin company Paxos will stop issuing the Binance USD after facing pressure from regulators, Binance, the largest centralized crypto exchange, said on Monday.
Institutional Investors Eyeing Return to DeFi: Survey For all the fire and brimstone of 2022, well-heeled investors are still looking to make a killing in crypto. Only they are now focusing on DeFi.
Flux Finance Enables Borrowing Against Tokenized Treasury Bonds Tokenized U.S. Treasury bonds may soon see increased DeFi utility after being listed as a collateral asset on a new lending protocol.

The Defiant Interview

Hayes Shares Why He Loves GMX and Is Bullish on DeFi Arthur Hayes, the co-founder and onetime CEO of the centralized derivatives exchange BitMEX, believes that both CeFi and DeFi are here to stay, and he’s putting his money where his mouth is.

Markets

Crypto Markets Falter Amid Latest Regulatory Crackdown Digital assets took a beating to start the week, with major tokens falling after U.S. regulators’ latest crackdown on crypto.

Community Love

Thanking all the amazing Defiers for the support and love this week (and always)!

That was one of the best #crypto events I've ever attended representing @DefiantNews.

The LATAM community is lovely, and it was a great chance to make new frens!

When next @ethlatam! 👀 https://t.co/xcNcssSznP

— DiegoCabral (✊,🦇🔊) 🔜 ETH Denver (@DiegoCabral__) February 16, 2023

In this week’s DeFi Alpha Degen Tutorial @yyctrader1 and @DiegoCabral__ go over @sommfinance, a platform connecting professional portfolio managers and validators to bring you automated, cost-effective investment strategies. 💵 pic.twitter.com/yP20amuYsG

— The Defiant (@DefiantNews) February 17, 2023

Check out these resources to donate with crypto 🙏🇹🇷🇸🇾 #TurkeySyriaEarthquake https://t.co/QT6SjRuQw9

— Crypto Nomads Club ✈️ (@CryptoNomads_gm) February 9, 2023