April 20, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits ✍️✍️✍️

• LUNA is surging, with UST beming the third-largest stablecoin and Terra buying a significant portion of Convex (CVX) tokens.

• DeFi OG Andre Cronje is back – and he is working on building out “regulated crypto” applications.

• Compound might be ditching its reward mechanism for yield farmers.

• Decentralized staking service Lido (which is covered in-depth in the recommended reads section) voted to allocate $6 million in LDO tokens to support Ethereum development.

• Crypto investment funds saw their second week of outflowslast week.

• Blockchain.com is planning on going public in 2022.

• Bitfinex temporarily shut down trading on Tuesday.

• Okcoin announced an NFT marketplace that will offer zero fees for Ethereum, Polygon, and other blockchains.

Today in Crypto Adoption…

• Australia’s first bitcoin ETF is set to be listed next week.

• The IMF issued a warning that Russia could use crypto mining to evade sanctions.

• Block CEO Jack Dorsey is uninterested in building products on Ethereum due to the network having, in his words, “many single points of failure.”

The $$$ Corner…

• The Sandbox is reportedly raising a $400 million funding round at a valuation of $4 billion.

• Framework Ventures unveiled a $400 million fund to invest in blockchain gaming.

• CoinDCX, an Indian crypto exchange, raised $135 million at a valuation of $2 billion.

• BlockApps, an enterprise blockchain firm, raised $41 million.

What Do You Meme?

What’s Poppin’?

Crypto Comments

On January 26th, the SEC proposed a rule that would expand the definition of “exchange” and “Alternative Trading Systems” in a way that could affect the crypto industry – despite not mentioning crypto or DeFi once in its 200 pages. On March 18th, the proposal was published in the Federal Register, opening up the proposal to 30 days for public comment – which ended yesterday.

Overall, the SEC received 163 letters from traditional and crypto entities. Various crypto-heavy hitters like Coin Center, Blockchain Association, a16z, DeFi Education Fund, Paul Grewal (the chief legal officer of Coinbase), Delphi Digital, and ConsenSys each expressed discontent with the proposal this week, cutting it quite close to the 30-day deadline.

Coin Center’s Peter Van Valkenburgh wrote one of the more poignant letters of comment. “The Commission’s proposed redefinition of “exchange” violates the First Amendment by requiring a license to speak–even of open source developers,” Van Valkenburgh explained. “The effect of the definition on open source software developers is nonetheless clear: anyone writing or distributing DEX software would be violating the law if they don’t register.”

Delphi Digital’s Gabriel Shapiro also had sharp words for the SEC. “The proposal will give rise to an anti-competitive regulatory moat…If imposed on AMMs, this securities exchange regime would create impossible regulatory burdens (such as FINRA registration) on open-source software devs, while ironically completely failing to address AMMs’ actual risks.”

Shapiro went on to explain that crypto technology, such as AMMs already addresses issues such as “fair access, public pricing, [and] auditability” due to the inherent, public nature of blockchains.

As for what can be done to rectify the situation, many entities, like ConsenSys, are calling on the SEC to narrow the definition of a “securities exchange” to exempt crypto protocols:

“Moreover, the proposal does not mention cryptocurrency, blockchain, or decentralized finance, let alone explain how the rigorous requirements of the ’34 Act could sensibly be applied in the blockchain context. We certainly would never expect or be inclined to believe the Commission would take the extraordinary step of covering blockchain-based systems without meaningful notice or consultation. Nevertheless, for the sake of providing regulatory clarity for the burgeoning blockchain sector, we urge the Commission to declare expressly that blockchain-based networks do not fall within the scope of the amendments at issue here.” 

Recommended Reads

1. CoinDesk’s David Z. Morris on The Cryptopians:

2. Sure Sats on why Ethereum’s largest staking service could pose a threat to the network’s decentralization:

3. Tascha Che on what L1s need to learn from nation-states:

On The Pod…

Why Crypto Twitter’s Disrespect Toward Regulators Is a ‘Really Bad Business Decision’

Two policy experts, Chris Lehane, chief strategy officer at Haun Ventures, and Niki Christoff, the founder of Christoff and Co., discuss how the crypto industry has performed in Washington and how it can better educate more regulators and politicians about the technology. Show highlights:

• Niki and Chris’s background

• how Niki and Chris would grade the performance of crypto companies in Washington

• what parallels Chris can draw between crypto in the 2020s and FAANG in the mid-90s

• whether having a plethora of crypto policy groups helps or hurts crypto in Washington

• whether calling politicians and regulators names and making memes of them helps or hurts the crypto industry

• an effective way crypto companies can prompt lawmakers and regulators to prioritize crypto policy

• why it can be strategically smarter to try to convince incumbents to adopt pro-crypto policy over supporting challengers

• why Chris thinks crypto could be a bipartisan topic

• what Chris and Niki think about the fact that Democratic candidates received more donations from people working in the crypto industry than Republicans did

• the three types of crypto users that are valuable to political candidates

• what Niki and Chris would tell Senator Elizabeth Warren about crypto if they were to meet with her today

• what effect crypto might have on midterms

• why the terminology native to crypto may have to change

Book Update

You can purchase it here: http://bit.ly/cryptopians