BIS Consults on Proposal to Apply the Same Principles as Financial Market to “Systemically Important” Stablecoins

BIS Consults on the Proposal to Apply the Same Principles as Financial Market to “Systemically Important” Stablecoins

The Bank for International Settlements (BIS) and the IOSCO group of securities regulators published proposals on Wednesday on how the current rules for clearinghouses and payments services should also be applied to “systemically important” stablecoins.

These proposals are currently put out for public consultation before they can be finalized early next year.

With nearly a $70 billion market cap, USDT is currently leading the stablecoin market with its share at 57.2%, followed by the rapidly growing USDC, which accounts for 25.4% of market share with its market cap at $32.8 billion.

According to the report, regulators don’t intend to create additional standards for stablecoin instead build on the principles developed for critical financial market infrastructure in 2012.

As per the rules, a stablecoin operator must set up a legal entity. These rules will also need to be followed by countries that allow stablecoins to operate.

The principles further include clear disclosure of management structure and arrangements with affiliates.

The author of the report said stablecoins should have “little or no credit or liquidity risk.” He further advised the stablecoin regulatory framework to consider whether the holder is making a legal claim against the issuer or underlying asset.

“This report marks significant progress in understanding the implications of stablecoin arrangements for the financial system and providing clear and practical guidance on the standards they need to meet to maintain its integrity.”

Ashley Alder International Organization of Securities Commissions (IOSCO) Chair

Discussed on the proposed framework will last for eight weeks.

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Author: AnTy

Third Largest Bank of France Submits a Proposal on MakerDao for $20M Security Tokens Refinancing

Third Largest Bank of France Submits a Proposal on MakerDao for $20 Million Security Tokens Refinancing

Société Générale, the third-largest bank in France with 29 million clients, is directly interacting with decentralized finance through the original DeFi protocol MakerDAO.

This week, the bank submitted a proposal for “[Security Tokens Refinancing] MIP6 Application for OFH Tokens” on the MakerDao forum.

The European investment firm’s blockchain subsidiary made a collateral onboarding application to Maker for $20 million backed by EUR bonds. The proposal reads,

“This first experiment at the crossroads between regulated and open source initiatives is intended to refinance a Covered Bond Token that has been issued last year on the Ethereum public blockchain.”

The bank’s OFH Tokens issued by Societe Generale SFH are covered bonds benefiting from a statutory privilege, which can only be traded over-the-counter (OTC).

Through this pilot use case, SG-Forge aims to refinance the OFH Tokens held by the banking giant and integrate with one of the largest DeFi protocols, MakerDAO.

As per the proposal, this transaction will allow the peer-to-contract lending platform that enables over-collateralized loans to have a different types of collateral assets from the cryptocurrencies. These will be non-volatile types of collateral assets, it added.

The DAI loan will be for up to $20 million for a maturity period of 6 to 9 months. DAI is a fully collateralized stablecoin native to Maker’s decentralized autonomous organization (DAO).

“The DAIs have been characterized as digital assets as defined under French Law,” notes the proposal.

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“Turns out it was the future of France all along!” said Rune Christensen, founder of MakerDAO.

“Amazed that I had no clue about this at all the whole time. This is one of multiple recent examples in Maker Governance of how the post-foundation model of organization is proving to be more scalable.”

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Author: AnTy

Kryptoin Files for a Physically-backed Ethereum ETF

Investment advisor Krypton has filed a proposal with the US Securities and Exchange Commission (SEC) for an Ethereum exchange-traded fund (ETF) Trust. Back in May, VanEck filed for a similar ETH investment vehicle.

The Delaware-based firm said in its filing that the trust would not purchase or sell ETH directly, rather will do so in ‘in-kind’ transactions in blocks of 100,000 shares.

However, the Trust will be paying its Sponsor a unified management fee in “ETH only,” and the Sponsor will pay all of its operating expenses out of this fee, it added.

With this Trust, the firm’s investment objective is to provide exposure to the second-largest cryptocurrency with a market cap of $378.5 billion, at a price “reflective of the actual Ethereum market where investors can purchase and sell Ethereum.”

The trust provides direct exposure to ETH, and its shares will be valued on a daily basis. Investors who want to buy or sell shares of the Trust will do so through their brokers.

The company has chosen Gemini as its custodian, while a Delaware trust company will act as the Trustee, and the Bank of New York Mellon will serve as its administrator and the transfer agent.

Kryptoin’s application for a Bitcoin ETF submitted in October 2019 is already under SEC’s review.

More than 20 cryptocurrency-related ETFs have been filed so far, but a single one has yet to be approved. Krypton’s Ethereum ETF might not get approved any time soon either as SEC Chair Gary Gensler is more open to futures-backed ETF for greater investor protection, four of which have been filed in less than the last two weeks.

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Author: AnTy

Infrastructure Bill Amendment Calls for A Level Playing Field with TradeFi, Without Penalizing Crypto

Senator Cynthia Lummis (R- Wyo), Ron Wyden (D-Ore), and Pat Toomey (R-Pa) are behind the amendment proposal that integrates crypto into the financial system and protects American innovation while ensuring taxes are paid.

Crypto supporter Senator Cynthia Lummis (R- Wyo), along with Senator Ron Wyden (D-Ore) and Senator Pat Toomey (R-Pa), has filed an amendment to the bipartisan infrastructure bill. For approval, it would need to gain at least 60 votes in the Senate. Lummis, who is also a Bitcoiner since 2013 said,

“Digital assets are here to stay, and while more work needs to be done, the Wyden-Lummis amendment integrates them into the financial system while leaving room for innovation.”

The purpose of the amendment is to clear up confusion about what constitutes a “broker” for reporting information to the IRS. Also, the update aims to ensure the term excludes validators, hardware and software makers, and protocol developers. Wyden, chair of the Senate Finance Committee, said in a statement,

“Our amendment makes clear that reporting does not apply to individuals developing blockchain technology and wallets. This will protect American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe.”

If the changes are included in the final bill, that would be a big win for the crypto industry. The bill’s broad definition of “broker” includes entities that don’t have customers whose information is needed to be reported to the IRS. Toomey, a ranking member on the Senate Banking Committee, in a statement, said,

“By clarifying the definition of broker, our amendment will ensure non-financial intermediaries like miners, network validators, and other service providers — many of whom don’t even have the personal-identifying information needed to file a 1099 with the IRS — are not subject to the reporting requirements specified in the bipartisan infrastructure package.”

However, clarifying the provision would not affect the reporting requirements on crypto exchanges like Coinbase that operate on behalf of customers, which the crypto market participants have said they support. Brian Armstrong, Coinbase CEO said,

“Coinbase is happy to help customers fulfill tax obligations just like the rest of the financial services industry. We’ve been doing this for years, and issuing more 1099s is a great idea.”

Armstrong did argue that the bill imposes sweeping and unprecedented reporting requirements that will force exchanges and others to surveil their customer’s transactions in a more intrusive way than the rest of traditional finance.

“All we ask for is an even playing field with traditional finance that doesn’t penalize cryptocurrency unfairly,” he added.

Blockchain Association, a crypto trade association that works to change public policy at the federal level, said it supports the amendment, sensible reporting requirements consistent with those applied to traditional financial services, in a joint statement published with the crypto policy-focused nonprofit Coin Center, Square, Coinbase, and VC Ribbit Capital. The Blockchain Association said in its statement,

“The development of crypto, and financial innovation generally, has enormous potential for the American economy and the American people through increased job creation and GDP growth.”

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Author: AnTy

Uniswap’s Latest Proposal Calls for Funding an Organization for Regulatory Defense of DeFi

Leading centralized exchange (DEX) Uniswap is currently running a voting process on its latest proposal that wants to know if the UNI governance should allocate 1-1.5 million UNI, worth $26 million – $40 million at the current price, to fund a policy operation to defend the protocol and DeFi from legal and regulatory threats.

As of writing, 68.69% of votes are in favor of the proposal, but there are still three days left in the voting process.

According to the proposal called Funding a Political Defense of DeFi, the idea is to create and fund a community-overseen organization that would finance existing and new political groups engaged in crypto policy/lobbying.

Given that governments are weighing how to regulate decentralized finance, “we need to defend the ecosystem and decentralized ideals,” it suggests.

The goal will be to educate policymakers to preempt regulatory, legal, political, and tax threats to DeFi, achieving regulatory clarity, advancing laws to support the space, and spurring other DeFi protocols’ governance communities to contribute to the effort.

The need for such an organization is urgent because governments around the world are rushing to regulate the projects without being properly educated on their benefits.

“Currently, DeFi is not at the table—but on the menu,” it warns.

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Author: AnTy

China Bans Crypto For the 100th Time; Hong Kong to Restrict Retail Traders From Exchanges

Breaking: China Bans Crypto For the 100th Time; Hong Kong Proposal Seeks to Restrict Retail Traders From Exchanges

Cryptocurrency exchanges in Hong Kong are set to be prohibited from offering services to retail crypto traders following a new government proposal.

Hong Kong Floats New Proposal On Licensing Crypto Firms

The legislative proposal, which Hong Kong’s Financial Services and Treasury Bureau (FSTB) floated, has now moved past its consultation period, Reuters report.

During its consultation conclusions, the FTSB disclosed that all virtual asset service providers (VASPs) or cryptocurrency exchanges operating in Hong Kong would need a license to do so once the law is passed.

The regulator also said the services of cryptocurrency exchanges would now be restricted to only professional investors. The exchanges would be prohibited from offering services to retail traders until the initial stage of the licensing regime is over.

According to Hong Kong law, an individual must have a portfolio of HK$8 million ($1.03 million).

Hong Kong has one of the largest cryptocurrency exchanges in operation. Its opt-in approach under which exchanges can either choose to apply to be licensed by the regulator or not has provided a flexible environment for exchanges to operate in.

This new rule could drive exchanges out of Hong Kong and push investors onto unregulated venues.

Hong Kong Tightening The Noose On Anti-Money Laundering Regulations

Like many other countries, the Hong Kong Government has been assessing how they can regulate the cryptocurrency industry. Lack of investor protection and money laundering are particular concerns of the country.

Today’s announcement forms the conclusion of a consultation process that ran from November 2020 to the end of January 2021.

The Hong Kong government is also reportedly planning to empower the city’s Securities and Futures Commission (SFC) to withdraw the licenses of already authorized crypto exchanges.

When signed into law, the proposal would see the SFC provided with necessary intervention powers to impose restrictions or prohibit companies from providing crypto services.

Away from the companies, the proposal would also bring the SFC more powers to protect clients against potential misconduct from VASPs.

Other Asian countries like Singapore and China also have their regulations regarding cryptocurrency. Singapore requires all crypto exchanges to be licensed before they can operate, however unlike Hong Kong, retail traders can invest.

China recently reiterated its tough stance on cryptocurrencies. On Tuesday, the country announced a ban on banks and payment companies offering crypto-related services.

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Author: Jimmy Aki

MakerDao Proposes D3M to Integrate with AAVE & Expand Stablecoin DAI Across DeFi

MakerDao Proposes D3M to Integrate with AAVE & Expand Stablecoin DAI Across DeFi

The proposal will help MakeDAO gain capital efficiency, make DAI the primary choice for borrowers on Aave, accumulate AAVE, and proliferate DAI across Aave markets on every L2.

MakerDao proposes a Direct Deposit Dai Module (D3M) to join Maker with another DeFi blue-chip lending protocol Aave more closely.

This will allow the Maker protocol to enforce a maximum variable borrow rate on the Aave DAI market.

MakerDAO is the protocol that mints the DAI stablecoin, which has a market cap of $3.19 billion and acts as a hedging tool and medium of exchange directly on-chain.

DAI, USDT, and USDC are the dominant stablecoins in the decentralized finance sector currently, with the lending rate going as high as 10-12% and borrowing rate up to 19%, as per DeFi Rate.

According to the proposal, over-collateralization is the basis of DeFi with more collateral present than the asset minted, providing room for incentivizing a third party to pay back the debt on behalf of borrowers.

And “MakerDAO protocol is heavily overcollateralized,” it states. The proposal further mentions that the protocol has also proved itself to be resilient during the March crash.

The D3M explores an alternative path to bring more liquidity in secondary DAI venues by minting DAI backed by aDAI and a potential new tool to stabilize DAI peg. aDai is an automatically-generated, native token to the Aave protocol issued to a user who supplies DAI into the Aave protocol. AAVE 5.71% Aave / USD AAVEUSD $ 377.85
$21.585.71%
Volume 261.74 m Change $21.58 Open $377.85 Circulating 12.48 m Market Cap 4.71 b
6 h MakerDao Proposes D3M to Integrate with AAVE & Expand Stablecoin DAI Across DeFi 1 d Bitcoin Takes A Dive & Altcoins’ Drop Hard, But People Are Still ‘HODLing and Not Selling’ 1 d Balancer Labs Has ‘Zero’ Involvement in Algorand; V2 Launch is the Sole Focus

According to Sam MacPherson, smart contracts facilitator at Maker (MKR), this will benefit both the protocol. For Aave leverage seekers, it means not getting stuck in a position with double digits interest rates, and for Maker, DAI supply expansion to reduce reliance on USDC.

This proposal will further help Maker attract borrowers, more revenue, expand DAI supply, and if Aave starts a Liquidity Mining program, then collecting AAVE and earning governance rights in it.

The Aave community is deploying new liquidity pools across various L2 solutions, which means more DAI can bridge into pools to transact affordably. Aave can essentially become the distributor for DAI on every L2.

All of this will be achieved by the D3M module mining and directly depositing freshly minted DAI into the Aave V2 protocol.

“The D3M has a target rate for limiting the size of the deposit and ensuring DAI to be the most competitive asset to be borrowed on Aave compared to other stablecoins,” states the proposal.

MakerDAO basically aims to expand its stablecoin across DeFi and ensure its market position amidst the rise of new stablecoins.

“Yet another example of how deeply integrated Maker is across DeFi,” commented Ryan Watkins, a researcher at Messari. “Now becoming a bank for banks.”

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Author: AnTy

Vitalik Buterin: EIP1559 Will Make Ether “Ultrasound Money,” Scaling is “Coming Very Soon” too

Ethereum co-founder isn’t concerned at all about the chain split due to the proposal. Also, a PoS chain is already here and running; it just doesn’t have sharding because the priority is currently the merge.

Ether is seeing some red today, much like the broad crypto market. Still, it is trading above $1,750, up nearly 140% YTD. However, the big thing is the upcoming upgrade, EIP 1559, that the market believes isn’t priced in yet.

The proposal is facing some pushback from miners, some of them even come together to attack the blockchain, but the market isn’t really concerned. This is because of the multi-billion decentralized finance (DeFi), especially the stablecoins, which collectively now surpass 56 billion in supply, built on the second largest network, as shared by Arthur of DeFianceCapital on “UpOnlyTV” recently.

Ethereum co-founder Vitalik Buterin isn’t concerned either, as he explained on The Tim Ferriss’ Show.

When asked by AngelList founder Naval Ravikant who is bullish on crypto and DeFi, if there’s a possibility that some miners and people will stay on Eth1 instead of Eth2, Buterin said, “the risks are much lower.”

Buterin attributed being very open about proof-of-stake and sharding from the first day as the big part of the reason. Not to mention, the market has gone through it already with Ethereum Classic (ETC). He said,

“Why stay on the chain where the core developers and lots of people are eagerly expecting a proof-of-stake change if you can just move on to a platform already that accepts your values? So I think that was one of the factors that did actually end up making the Eth2 transition a bit more secure.”

According to him, Ether is all about having more scalability which is going to deliver great environments for Ethereum users and everyone is roughly on board with the idea.

More Direct Connection Between Users & ETH’s Value

Ethereum Improvement Proposal 1559 was accepted a week back to be included in the London hard fork scheduled for July.

“It basically creates this more direct connection between people using the Ethereum blockchain and ETH having some value,” described Buterin.

He further explained that the proposal redesigns how the transaction fee market works, which means the majority of fees, instead of going to the miner or corporate who creates the block, would get burned. “It would just literally get deleted out of existence.”

“If demand to use Ethereum is high enough, then there would actually be more ETH being destroyed than is being created,” says Buterin adding, it would make Ether “ultrasound money” to Bitcoin’s sound money.

Before the London hard fork, however, the Ethereum Proof-of-Work (PoW) is undergoing a mainnet upgrade, called Berlin, on April 14, 2021.

A backward-incompatible fork will require updating the software to continue to follow the mainnet. As such, stakers are required to upgrade their Ethereum PoW nodes before April 14, 2021, and if you run the Pyrmont testnet, you must upgrade your Goerli nodes before March 17, 2021, shared developer Danny Ryan.

PoS is Already Here and Running Stable

While EIP-1559 would cement Ether’s economic value within the Ethereum platform, the big thing that would change the network and the market is eagerly awaiting is ETH 2.0, which will give the network 100 times improvement over the current processing.

While the Beacon Chain, Phase 0 has been launched with 3.2 million ETH deposited for staking, the full transition will take time. This multi-step approach is taken to “give proof-of-stake sometime to prove itself before the entire ecosystem is asked to upgrade over,” said Buterin.

Talking about the ETH 2, Buterin said, “there’s already a proof-of-stake chain. It does not yet have sharding, but the proof-of-stake system is running. The thing that has not yet happened is the event that we call the merge,” where the existing activity on Ethereum will be fully moved over from the proof-of-work chain to the proof-of-stake chain which would make PoW irrelevant.

The PoS not only exists but has been running stable ever since its launch, and “at some point fairly soon, we are going to actually go and merge all of the proof-of-work activity onto it,” he added.

As for sharding, Buterin said there are prototypes of parts of it, but they are prioritizing the merge rather than sharding because of rollups which still provide 100x factor scaling. Buterin said,

“So rollups are coming very soon, and we’re fully confident that by the time that we need any more scaling of that, sharding will have already been ready for a long time by then.”

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Author: AnTy

FTX CEO Proposes Building SushiSwap on Solana and Serum

FTX CEO Proposes Building SushiSwap on Solana and Serum

A proposal has been made to build the DEX SushiSwap on Solana and Serum, codenamed Bonsai. With Sushi emerging as “having one of the most vibrant and influential communities” and “the sky’s the limit” for it, the proposal states it’s important to keep growing.

“The purpose of this proposal is to lay out an efficient and effective method for SushiSwap to evolve and build out its leading platform on Solana and Serum,” it reads, adding, “To reinforce perceptions of SushiSwap as a DeFi leader and innovator.”

As per the proposal shared by Sam Bankman-Fried, CEO of FTX, who is also building the DEX Serum on Solana, on Twitter, the team has been farming, staking, and investing in DeFi for the past eight months and Sushi from its beginning.

Now, they want to bring SushiSwap on Solana to provide the community additional liquidity, fast transactions, and significantly low fees on Serum.

The Layout

In the light of the cost of the Ethereum network making DeFi out of the reach of smaller users, they built Raydium. Having been worked on since last year, the AMM was launched just over this weekend.

The proposal also talks about the Raydium roadmap, which involves completing the development of liquidity pools and staking, launching mainnet along with the website and platform launch in Q1.

This AMM will work as a bridge for SushiSwap, and the protocol is already able to support Sushi’s liquidity pools for the Serum orderbook.

As a first step, Raydium will work alongside the DEX and then deploy on its testament. The next step would be the deployment of Bonsai pools and staking on the mainnet.

As an incentive, the double yield is also proposed for the first Decentralized Franchise Pool. The additional rewards will be in the form of a native RAY token, which means Sushiswap stakers on Raydium would get SUSHI rewards plus free yield from RAY.

The new project, Bonsai, is anticipated to launch on testnet within Q1 of 2021.

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Author: AnTy

Yearn Finance Mints 6,666 YFI Tokens ($225M) After Supply Proposal Vote Passes

Yearn Finance Mints 6,666 YFI Tokens ($225M) After Supply Proposal Vote Passes

  • Andre Cronje goes back on his “fair release” mantra.
  • The proposal aims to keep key contributors and attract new talents

Yearn Finance stakeholders have uniformly passed a proposal seeking to increase the amount of YFI tokens currently in the market. The proposal was initiated after Yearn Finance’s creator, Andre Cronje, made a medium post on why the community should make the change.

New Mints To Address “Competitive Disadvantage”

An earlier proposal for YFI tokens to be increased has seen it passed. Andre Cronje, the creator of the Yearn.Finance protocol published a poll asking for input on how best to move forward with the YFI tokens’ supply.

The poll began on January 28. It received input from over 2,000 participants. In the end, 1,671 voters (roughly 84%) supported the move to increase the supply of tokens, while 331 of them (16.5%) voted against it.

Currently, there is a hard cap of 30,000 YFI tokens in circulation. As the results of the poll have shown, the token’s market cap will be increased by 6,666 tokens. The proposal aims to reward key contributors with a third of the minted tokens (2,222 YFI), while the remaining two-thirds (4,444 YFI) will be reserved in the protocol’s treasury.

The expansion proposal aims to use the newly minted tokens to motivate new contributors, fund liquidity mining and staking rewards, acquire talent, and provide new cross-platform incentives. However, most users who voted against it claimed that it contravened the token’s social contract, a problem that could lead to an erosion of the token’s value in the open market.

Eventually, the proposal’s authors decided to increase the token’s supply by just 22 percent, adding that this slight increase will maintain YFI’s competitive advantage over the tokens of other decentralized finance (DeFi) protocols.

It is unclear how the protocol plans to distribute the newly minted token. However, it is expected that the distribution process will be handled by a Compensation Working Group. The group will present its recommendations to the multisig committee (YFI’s version for a board of directors) for a review. Once approved, the compensation plan will be executed. Yearn has stated that the process of minting new tokens will take three days.

The decision to reward key contributors shows a change of perspective in the community who are known for not giving preferential treatments for insiders. Andre Cronje began this practice and it has stuck. But the new proposal sets out to break this practice citing cases of some of their contributors being “poached” by other projects.

Cronje Backtracks

The decision to make this change started when Andre Cronje, creator of the YFI space, spoke on the difficulties of operating in the decentralized finance industry. In a medium post from February 2020, Cronje explained that many people demanded too much from him, and running the Yearn Finance platform was getting costlier by the day.

The developer additionally questioned his decision to limit the number of YFI tokens in his “fair launch,” adding that minting more tokens could be the best way to reward developers. Although a lot of reactions followed his public address, Cronje has expressed his pleasure at the proposal’s acceptance.

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Author: Jimmy Aki