4 August

“U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler said he believes the vast majority of crypto tokens and initial coin offerings (ICOs) violate U.S. securities laws.

Generally, folks buying these tokens are anticipating profits, and there’s a small group of entrepreneurs and technologists standing up and nurturing the projects. I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight.

While each token’s legal status depends on its own facts and circumstances, the probability is quite remote that, with 50 or 100 tokens, any given platform has zero securities

Gensler reiterated earlier comments that stock tokens and “stable value tokens backed by securities” qualify as securities in his view, meaning they must be registered and their issuers must abide by existing federal law.

Gensler also briefly hinted at how his agency might approach exchange-traded funds (ETFs). While Gensler didn’t comment on the proposals themselves, he called out the importance of having investor protections codified into law.

Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures.”

See Also: SEC Boss Gensler Eyeing Robust Regulation of Crypto Market: Report
See Also: ‘Nakamoto’s innovation is real,’ says SEC Chair Gary Gensler
See Also: OCC Acting Director Tells Senate Panel Crypto Custody Charter Is Under Review

“The 20 largest decentralized autonomous organizations (DAOs) hold $6 billion worth of digital assets, according to the latest DeFi report from ConsenSys, an Ethereum software company. The ConsenSys DeFi report highlights that DAOs have flourished in the second quarter and now represent a new type of coordination when it comes to dealing with financial decisions for fundraising or deploying capital.

The biggest DAOs include decentralized finance (DeFi) projects such as Compound, Uniswap, Bankless and public-funding entities such as Gitcoin.

What makes DeFi so alluring is that anyone with an idea can coordinate, pool funds, and even create tokens that represent your share within the organization.”

The $1 billion digital assets manager said Wall Street-type clients are demanding more exposure to DeFi’s biggest names.

Hedge funders – at least those with an appetite for crypto – have been warming up to the DeFi markets this year. A May study by consultancy PwC estimated that 31% of crypto hedge funds have used decentralized exchanges to execute trades and more than a quarter were invested in AAVE.”

The leading opposition party in Spain, has introduced a bill that would allow for the payment of mortgages with cryptocurrencies and create a national crypto assets council to analyze the implications of the use of crypto and blockchain in that country.

According to the text of the “Digital Transformation Law,” homeowners would be able to use cryptocurrencies to pay their mortgages, while the real estate sector would be able to use crypto to invest in mortgage pools. Banks, on the other hand, would be able to use blockchain as a system to manage mortgages and insurance, and streamline the payment of indemnities with digital currencies.

The proposal adds that cryptocurrencies may be accepted as means of exchange between two parties, in the ‘fulfillment of private obligations, to the extent that they are freely agreed upon by the parties to the transaction as alternative, contractual and immediate methods of payment and are used for no other purpose than to serve as such.’

According to the PP, the bill seeks to ensure that transactions with cryptocurrencies ‘are carried out in a framework of trust, security and transparency.’

See Also: BTC payments coming to certain Quiznos shops, thanks to Bakkt collaboration

Miami will launch its very own cryptocurrency tomorrow, MiamiCoin, which will be used to fund infrastructure projects or events in the city. MiamiCoin will be the first CityCoin released. CityCoins is a project that allows people to invest in a city by buying tokens.

If the project takes off and becomes popular by more people holding it, investors will be able to passively earn Bitcoin simply by owning the MiamiCoin. This is because MiamiCoin is built on Stacks, a crypto project which allows users to lock up their tokens and earn rewards to keep the system running.”

Bitcoin SV (BSV) has reportedly suffered a “massive” 51% attack beginning around 11:45 am Tuesday, resulting in up to three versions of the chain being mined simultaneously.

For over 3 hours, attackers were able to take over the chain. All exchanges that received BSV deposits during that time might have been double spent.

Someone is seriously trying to destroy BSV.

The latest update from Coin Metrics confirmed that its FARUM nodes witnessed a “deep reorg with a max depth of 14 blocks.” Although no further reorganization events were observed, “synchronization conflicts” are still taking place across major mining pools. BSV currently has a market capitalization of just over $2.6 billion.”

See Also: HSBC UK Blocks Payments to Binance Exchange

The decentralized computing power-sharing network Golem has partnered with software firm Allchemy for a program exploring the origins of life on Earth. The program, called LIFE@Golem, harnesses Golem’s computing power in an attempt to recreate billions of chemical reactions and molecular bonds to trace how the first forms of life could have started on the planet.

Although research in this arena is decades-old, it has never been conducted on similar scales, boosted by a state-of-the-art computerized synthesis engine deployed on a global platform such as Golem.

The project demonstrates to the blockchain community that reputable life-sciences partners such as Allchemy see practical potential in Golem and can prove it by utilizing the protocol.”

3 August

“On Sunday, the language was fine-tuned in the final draft of the bill to clarify the broker definition as ‘any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.’

Coin Center, tweeted about the changes and claimed that there is still room for improvement. The Blockchain Association, which represents 46 member companies including Compound, Binance.US, and Ripple, also issued a statement this morning suggesting that although the bill language has improved, there’s still work to be done.

We didn’t get the language we wanted in the final bill text. It’s better than where it started, but still not good enough to clearly exclude miners and similarly situated persons.

This provision is written in a way that could be interpreted to apply to persons in the crypto ecosystem who don’t have access to the information required for information reporting. If these network participants—who don’t have any customer relationships—are required to provide such information, it will be impossible to comply, driving innovation and business overseas.

According to Brito, an amendment process will begin today, and he is working with “our friends and allies in the Senate,” as well as “a committed group of crypto orgs and firms” to try and clarify the language in the final bill.

We’ve made progress, but the language is still unacceptable. Next, we’ll advocate for an amendment on the Senate floor. If that fails, we’ll take our fight to the House.”

See Also: Updated US Infrastructure Bill Narrows Crypto Reporting Requirement (Video)

“NCR Corporation (NYSE: NCR), one of the world’s largest makers of automated teller machines (ATMs), agreed to acquire cryptocurrency software provider and ATM-network firm LibertyX. NCR said it plans to integrate LibertyX capabilities and make them available to banks, retailers and restaurants through its digital wallet and mobile applications.

Due to growing consumer demand, our customers require a complete digital currency solution, including the ability to buy and sell cryptocurrency, conduct cross-border remittance and accept digital currency payments across digital and physical channels.”

“Digital-asset management firm Arca launched its Arca Digital Yield fund Monday, which it says is the first actively managed income fund in the digital-assets sector.

The fund seeks to offer a digital-asset investment with minimal volatility and is targeting effective yields in the low double digits.

NFT marketplace OpenSea saw record trading volume on Saturday and Sunday as CryptoPunks, ArtBlocks and Bored Ape Yacht Club prices soared. Trading volume of NFTs on Ethereum reached $171 million, up 338% from the equivalent week in the previous month.”

See Also: NFTs are next for enterprise Ethereum, says ConsenSys founder Joe Lubin (Recommended Read)

Out of the blue, a U.S. lawmaker who previously showed little interest in cryptocurrency has introduced what may be the most sweeping legislation yet to regulate the market. Rep. Don Beyer’s (D-Va.) bill would allow the Treasury Secretary to veto the creation of stablecoins, direct regulators to define rules for decentralized finance (DeFi) and possibly create a charter for crypto exchanges, among other measures.

The 58-page “Digital Asset Market Structure and Investor Protection Act,” seeks to create an exhaustive regulatory regime for digital assets. It would do so in part by defining which sorts of cryptocurrencies might be securities, which can be treated as commodities, and bolster tax data collecting for reporting purposes. The bill also appears to authorize the Federal Reserve, the U.S.’s central bank, to create a central bank digital currency (CBDC).

It’s unclear what sort of support the bill has, or what a possible timeline for its passage might look like, but its breadth and depth have raised eyebrows in crypto policy circles.

For a proposed legislation that seemingly came out of nowhere, it is incredibly comprehensive and the authors clearly have an understanding of the underlying technology. It’s going to take some time to unpack and see how it could impact the industry and it will be interesting to see if this bill has legs, but this is the most well-written draft of crypto legislation to date.

If passed, the bill would create a definition for “digital asset securities,” referring to cryptocurrencies or tokens that provide holders with any sort of equity. If a holder has a right to equity, profits, interest, dividend payments or voting rights, the token would fall under the bill’s definition of a digital asset security.

Perhaps most importantly, however, is a provision on “desecuritization.” The section lays out a path for a token that is treated as a digital asset security to become a cryptocurrency that will not be treated as a security, echoing SEC Commissioner Hester Peirce’s longstanding efforts to create a safe harbor for crypto projects to get off the ground.

[Further], the bill would have these two agencies publish a proposed rulemaking to classify the 25 most-traded cryptocurrencies and the 25 cryptocurrencies with the highest market capitalizations (so up to 50 total) as either securities or commodities.

The second section codifies bitcoin, ether “and their hardforks” (splinter currencies) into law as commodities. This would help enable exchanges to launch derivative products and crypto trading platforms to more comfortably list and trade these assets.

Beginning on the date of the enactment of this section, no person may issue, use, or permit to be used a digital asset fiat-based stablecoin that is not approved by the Secretary of the Treasury under subsection.”

Universal Basic Income with Proof of Humanity

“The FSC will suspend operations of at least 11 mid-sized crypto exchanges in South Korea due to alleged illegal activities and fraudulent collective accounts. The sources argued that the mentioned crypto exchanges will be unable to get approval for operation by the FSC. The exchanges were not yet disclosed.

South Korean crypto exchanges have been under stricter regulatory scrutiny recently as authorities have required local digital asset service providers to register their businesses until September and set up real-name trading accounts and reporting. Particularly, smaller- and medium-sized crypto exchanges have been reportedly struggling to secure licenses from appropriate authorities.”

“Riccardo Spagni, the former maintainer for privacy coin Monero, was arrested in Nashville, Tenn. on July 20 and will be extradited to South Africa to face fraud charges for crimes unrelated to crypto.

Spagni, known online as “Fluffypony,” is accused of stealing approximately $100,000 from his former employer, Cape Cookies, by generating false invoices from fictional entities and routing payment to his personal bank accounts between 2009-2011.

Though Spagni stepped down from his day-to-day leadership role at Monero in 2019 after five years with the privacy-focused project, he was still a public representative of Monero and often took responsibility for coordinating Monero’s press and public-facing information.”

The Disrupt Weekend

Jake Chervinsky Breaks Down the Crypto Implications of the US Infrastructure Bill (Highly Recommended Read)

See Also: ‘Not a Drill’: Infrastructure Bill Could Sink American Crypto Industry
See Also: Is there a right way to regulate crypto? Yes, and this is how

“MEV is ‘the measure of the profit a miner can make through their ability to arbitrarily include, exclude or re-order transactions within the blocks they produce.’ Miners can exploit and profit from front-running, back-running and sandwiching transactions in any block they mine. These types of activities are not well received by DeFi users as they translate to higher costs for executing transactions, and have a higher chance of paying for a failed transaction.

There are multiple ways in which dapps or users can combat MEV, but the most realistic approach is to have a trading mechanism (protocol) that enforces batch auctions. Batch auctions, or batch trading, is when an exchange’s order book processes orders across a time range with the goal of executing all trades within a batch simultaneously. Batch settlement forces the miners to execute transactions regardless of the order they have.”

London contains five Ethereum Improvement Proposals (EIPs), each featuring code changes aimed at optimizing and improving the world’s second-largest cryptocurrency.

While EIP 1559 does not introduce a bitcoin-like supply cap on ETH, it does activate a mechanism to curb total supply growth over time by taking a variable amount of ETH out of circulation each time a transaction is executed. Simulations of EIP 1559 as of June 8 suggest the activation of EIP 1559 over the trailing 365 days would have burned a total of 2,967,937 ETH for a net reduction of 76% in ether supply growth over that period.

In addition to creating a bitcoin-like narrative of limited supply to ETH, EIP 1559 is expected to improve transaction wait times and remove fee-market uncertainty that damp developer and user adoption of dapps.

Finally, EIP 1559 is expected to solidify ether’s role as a form of payment for using Ethereum’s computing resources and interacting with the network’s broad system of dapps by requiring payments of transaction fees on the network to be exclusively paid in the network’s native cryptocurrency.

At its core, EIP 1559 is designed to make transaction fees on Ethereum less volatile and more predictable. Beyond that, however, the code change poses several risks and potential rewards to Ethereum that will be important to watch for in August.”

See Also: Ethereum Devs Grapple With Worst-Case Scenarios

“Algorithmic stablecoins are still in their early stages, which means their success is far from guaranteed. Nevertheless, this emerging asset class is unique for its regulatory profile, potentially positive impact on DeFi and ability to facilitate niche use cases.”

Stablecoin experimentation is happening in real-time with billions of dollars at stake in this vast permissionless lab we call DeFi.

The basic notion here is that if a stablecoin protocol has the ability to automatically manage supply by minting and burning assets in response to market conditions, it can ensure that the asset remains close to its peg. This can lead to less reliance on governance, as well as lower collateralization requirements.

RAI, FRAX and FEI have all received various levels of support from the crypto community, though FEI is the largest of the three in terms of market capitalization at roughly $350 million.

RAI follows a “redemption price” protocol that targets secondary-market sales, which allows it to maintain stability over time versus the underlying ETH-based asset. RAI is a more suitable option for traders as opposed to long-term investors. FEI differs markedly from these projects by using a bonding curve that sells FEI for ETH. Wealth entering the system is locked in something called Protocol Controlled Value, which is used to maintain the peg through liquidity management on exchanges.”

Users are now able to use cBridge to instantly transfer tokens across Ethereum, Arbitrum, Polygon and Binance Smart Chain, with many more side chain and layer-2 chain integrations planned for in the near future. This marks an important milestone for Celer to create a key interoperability infrastructure to unite all the fragmented liquidity back together in the future of a multi-layer-2 and multi-chain blockchain ecosystem.

Celer cBridge, as a new layer of abstraction on top of this multi-chain/multilayer future, allows users to bridge liquidity (and soon state) with much lower cost and time friction in a completely trust-free fashion.”

See Also: Introducing $IMX To Power Ethereum’s First Layer-2 for NFTs

“The EY Organization today announces the completion of a multi-stakeholder project that successfully tested how the TaxGrid™ blockchain solution could address certain inefficiencies and complexities in the cross-border withholding tax process.

In addition to addressing the decades-old “withholding tax challenge”, this solution would help tax authorities move toward near-real-time compliance. It would help financial intermediaries to coordinate the timely exchange of investor information, across an extensive and complicated network; and allow them to meet contractual obligations and, potentially, regulatory requirements, while protecting the confidentiality of investor information.

To safeguard data privacy and confidentiality, the WHT solution uses zero-knowledge proof (ZKP) and other privacy preserving technologies, which help protect investors’ sensitive information and commercial confidentiality, while providing tax authorities with near real-time access to the data.”

“In a report published last week, analysts at the bank said El Salvador’s decision to recognize BTC as legal tender could streamline remittances, promote financial digitization, provide consumers with greater choice and open up the country to American firms and digital currency miners.

The bank noted that remittances account for a staggering 24% of El Salvador’s gross domestic product, but a sizable chunk of that goes toward transaction fees.

More than 70% of the adult population of El Salvador does not have a bank account. For that reason, democratizing access to electronic payments, through Bitcoin, has a progressive touch.”

See Also: Moody’s Lowers El Salvador Rating, Maintains Negative Outlook Partly Due to Bitcoin Law

Beginning on August 2, 2021, German institutional funds will be able to hold up to 20% of their assets in cryptocurrencies, possibly setting the stage for wider mainstream acceptance of Bitcoin (BTC) and other crypto assets by the nation’s pension funds.

Spezialfonds currently manage about $2.1 trillion, or 1.8 trillion euros, worth of assets. As much as $415 billion worth of investments could flow into cryptocurrencies as new laws governing German Spezialfonds go into effect.”

GoldenTree Asset Management, a New York-based company with $45 billion under management, has been adding an undisclosed number of bitcoin to its balance sheet.

GoldenTree is also considering hiring experts in cryptocurrency investments as it turns its attention to the industry.”