Regulatory Battle: DeFi Week of May 14

Happy weekend Defiers! Here’s what we covered this week!

The battle over how to regulate crypto in the United States wages on, with the Securities and Commission refusing to respond to a legal action from Coinbase asking the agency to deliver regulatory guidelines for the crypto industry on Monday.

Coinbase wants the SEC to develop clear web3 regulations informed by public input per its formal rulemaking process, and to end its current campaign of regulation-by-enforcement. Industry stakeholders criticize the SEC for claiming every cryptocurrency barre Bitcoin is a security per the 1933 Securities Act.

On Thursday, Republic House majority whip, Tom Emmer, entered the fray by proposing the ‘Securities Clarity Act’. If passed, Emmer’s bill would amend the Securities Act to exempt assets sold via investment contracts that are otherwise not securities from being legally classified as securities, potentially reigning in the SEC’s anti-crypto crusade.

Across the pond, the EU Council approved a regulatory framework for crypto for the first time, providing certainty to the region’s digital asset firms. The Markets in Crypto Assets legislation includes licensing and reporting guidelines for exchanges, wallet providers, and stablecoin issuers.

Memecoin mania continues to simmer, with users sending $7M worth of Ether to Ben.eth for the pre-sale of PSYOP. Ben.eth, the pseudonymous creator of BEN, asked buyers to simply send their ETH to his wallet to secure an allocation, providing no terms of sale or smart contract-based assurance he would just run off with the funds.

PSYOP launched on Thursday, but Ben.eth seeded the token’s Uniswap pool with roughly $700,000 worth of ETH, keeping the remaining Ether for himself. Ben.eth has received threats of a class action lawsuit if he does not return funds to pre-sale investors. The incident serves as a cautionary tale for both memecoin investors and creators.

The crypto community is also up in arms after Ledger, a major hardware wallet manufacturer, launched an optional feature allowing users to recover the seed phrase for their wallet after passing ID verification. Privacy proponents fear the service could create new attack vectors for hackers and criminals, but Ledger says the feature will help onboard millions of new users to crypto.

And in this week’s podcast, Polygon co-founder, Mihailo Bjelic, brings us up to speed on what his team is currently working on to scale Ethereum, and how the project inked major deals with the likes of Starbucks and the NFL.

Enjoy!

Podcast

Polygon Co-Founder Mihailo Bjelic: Layer 3's, zkEVM, and NFL, Starbucks, Disney, Reddit Brand Deals

This week, Tegan Kline was joined by Mihailo Bjelic, co-founder of Polygon. We get into the juicy details behind what went on with the zkEVM launch a few months back, Mihailo’s thesis on Layer 3’s, how Polygon secured brand deals with the NFL, Starbucks, and others, and what he's most excited about in 2023. But first, Mihailo shares what he's been focused on at Polygon.

Defiant Video

Ledger Outrage😈 - is your crypto SAFE?

The crypto community is up in arms after Ledger, the popular hardware wallet manufacturer, rolled out an optional wallet recovery service for Nano X on Tuesday. The question is, should hardware wallet users link their seed phrases to their passports?

When will we run out of $ETH? (sooner than you think...)

Ultra Sound Money. You’ve probably heard the phrase from people discussing Ethereum becoming deflationary, but may not be sure exactly what it means. Today, we’re answering two questions: what is the ultrasound money meme, and is there a chance we could run out of Ether?

Automate Yield Looping With Metronome's Smart Farming

In a world where traditional banks and exchanges are losing trust, DeFi continues to break new ground and challenge the status quo. Today, we're exploring Metronome Synth, a multi-collateral and multi-synthetic protocol that's looking to change the way users trade and farm digital assets.

Special Guest: Ian Rogers discusses Ledger Recover. EU's MiCA, Tether Buys BTC, SEC Pushes Back

Ledger's Ian Rogers discusses Ledger Recover in an exclusive interview with The Defiant writers in our Weekly Recap.

Friday

Ripple Wants to Integrate CBDCs With DeFi James Wallis, the vice president of central bank engagements and CBDCs at Ripple, said his firm is working on a project backed by the Hong Kong Monetary Authority to explore a CBDC-powered lending protocol supporting tokenized real estate as collateral.
Congressman Emmer Introduces ‘Securities Clarity Act’ While early buyers of memecoins have enjoyed a great start to the month, the broader market is losing ground with BTC, ETH, and BNB shedding more than 5% in the past seven days.
Novel Token Launch Model Ripples Through DeFi White Lotus pioneered a novel token launch mechanism on Arbitrum, billing itself as a ‘partially backed asset with no inflation and unlimited liquidity.’

Thursday

NFT Collector Turned Memecoin Creator Nets $7M in Sketchy Presale Fearless speculators have forked over more than $7M worth of ETH to Ben.eth, a pseudonymous memecoin creator who has quickly risen to prominence over the past two weeks.
Crypto Custodian Anchorage Enables Institutional Clients To Participate In DeFi Governance Anchorage has integrated support for Snapshot voting, a popular governance platform used by many leading DeFi projects, including Arbitrum, Curve, and ENS. Snapshot tallies votes off-chain, enabling gas-free voting.
Tether To Continue Buying Bitcoin With Profits The company said on May 17 that it would direct up to 15% of its operating profits towards purchasing Bitcoin. “Tether’s decision to hold Bitcoin is in line with our strategic approach to diversifying our reserves and ensuring their stability,” Paolo Ardoino, the CTO of Tether, told The Defiant.

Wednesday

Ledger's New Wallet Recovery Feature Sparks Community Backlash The optional service allows users to recover their seed phrase - the string of words that grants access to a crypto wallet - by verifying their identities with Ledger.
EU Approves Landmark Crypto Licensing Regime The Markets in Crypto Assets (MiCA) regulations provide guidelines for cryptocurrency exchanges and wallet providers, in addition to utility tokens, asset-backed tokens, and stablecoins.

Tuesday

SEC Pushes Back Against Coinbase’s Request For Regulatory Clarity “The SEC's response is just the latest instance of them punting rather than engaging,” Amanda Tuminelli, Chief Legal Officer at advocacy group DeFi Education Fund, told The Defiant.
Lido Enables Staked ETH Withdrawals With V2 Rollout Lido, the top DeFi protocol by TVL and Ethereum’s largest staking entity, deployed its v2 iteration on Monday, introducing staked ETH withdrawals alongside measures to expand its validator set.

Monday

MakerDAO Founder Proposes Dedicated Blockchain and New DAI and MKR Tokens Rune Christen, the founder of MakerDAO, wants the DeFi stalwart to roll out a new stablecoin, governance token, and even a whole new blockchain, in an update to Maker’s controversial Endgame roadmap.
US Court Excludes 48,000 BlockFi Users From $297M Payout On May 11, bankruptcy judge Michael Kaplan permitted insolvent crypto lender BlockFi to return $297M worth of assets to customers’ non-interest-bearing “Wallet” accounts.
Ethereum Researchers Remain Mystified After Blockchain Briefly Fails To Finalize Two incidents rattled the Ethereum ecosystem on Thursday and Friday, with blocks failing to finalize for three and eight epochs (roughly 20 minutes and one hour) in separate events.