March 29, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits ✍️✍️✍️

  • Digital asset investment product inflows totaled $193 million last week – the largest influx of capital since mid-December.

  • Grayscale is considering suing the SEC over the yet-to-be-approved bitcoin ETF.

  • A $350,000 Bored Ape Yacht Club NFT was sold for $115.

  • Thanks to additional crypto tax reporting requirements, the Biden administration believes it can bring in $10 billion+ in revenue over the next ten years.

  • $140 million in BTC shorts were liquidated during Bitcoin’s rise above $48k.

  • The US Treasury is working with the IRS to gather more information on offshore crypto holdings.

  • Former Mt. Gox CEO Mark Karpeles is launching an NFT collection to commemorate the infamous exchange.

  • World of Women NFTs is one of the most popular collections on the market right now.

  • Google searches for The Merge hit an all-time recently.

Today in Crypto Adoption…

  • A new proposal from the SEC has crypto experts worriedabout DeFi projects in the US.

  • Rio de Janeiro plans to accept tax payments for real estate with crypto in 2023.

  • US lawmakers are exploring “ECASH.”

The $$$ Corner…

  • Greenridge Generation Holdings, which owns a large mining facility in New York, received $40 million in funding to expandoperations in the US.

  • Bitcoin miner Iris Energy received $71 million in funding from NYDIG.

  • NFT marketplace Blur raised $11 million in a seed funding round.

What Do You Meme?

What’s Poppin’?

An SEC ‘Shadow-Attack’ on DeFi?


The US Securities and Exchange Commission (SEC) proposed a change to the definition of a “government securities dealer” yesterday that, if passed, would bring automated market makers and liquidity providers with platforms larger than $50 million under the jurisdiction of the SEC. While not ostensibly written in the context of digital assets, a footnote on page 15 of the proposal suggests that it could be used against the digital asset industry.

“​​Proposed Rule 3a5-4 would apply to securities as defined by Section 3(a)(10) of the Exchange Act, and proposed Rule 3a44-2 would apply to government securities as defined by Section 3(a)(42) of the Exchange Act, including any digital asset that is a security or a government security within the meaning of the Exchange Act.”

The proposed rule could potentially shoehorn many DeFi entities under the SEC’s purview. According to data from CoinMarketCap, over 20 dexes facilitated $50 million in volume yesterday. While volume is not a direct parallel to liquidity, it is somewhat related. Furthermore, data from DeFi Llama shows that 289 dApps hold $50 million+ in total-value-locked. (However, it is unclear if the rule would extend beyond AMMs and their liquidity providers to other dApps.)

“The SEC just proposed a rule that would expand the definition of regulated “dealers” to include people who “employ passive market making strategies” that have “the effect of providing liquidity” to others,” explained Blockchain Association’s Jake Chervinsky on Twitter. “Unfortunately, the SEC continues to introduce massive confusion & uncertainty into the very same markets it seeks to regulate. In a healthy rulemaking process, we wouldn’t have to guess at the SEC’s intent or its underlying goals.”

Chervinsky noted that in the SEC’s 200-page proposal, “DeFi” was not mentioned once, despite the seemingly drastic consequences the proposal could wreak on the crypto space.

According to Gabriel Shapiro, the SEC is proposing an “all-out shadow attack on decentralized finance.”

Shapiro believes that the SEC’s proposal would characterize every AMM liquidity provider as an unregistered dealer – which is a felony. “SEC will argue that all AMM LPs are unregistered dealers. That would be like saying all Bitcoin miners are VASPs–if enforced, it would kill the tech. Many of us warned SEC could take this view, but never thought they’d secretly rewrite the rules to avoid having to prove it,” Shapiro argued.

According to Shapiro, adding such a requirement puts an unrealistic burden on the government. “I think [it] also shows that the SEC has 0 interest in DeFi participants ‘coming in & registering.’ Can you imagine FINRA processing 100,00 [sic] dealer applications from individual DeFi liquidity providers?” he posited.

Crypto lawyer Collins Belton agreed with Shapiro. “Even assuming some process where millions could self reg/report, there’s no feasible way for SEC/any SRO to oversee that,” he tweeted.

That being said, Belton thinks tighter regulation could have a bright side – as it would force DeFi protocols to truly decentralize. “That said, my attitude has shifted on this feckless approach & IMO rules like this will simply separate the truly decentralized wheat from the CeDeFi chaff,” wrote Belton.

Recommended Reads

  1. Tascha Che on whether crypto is in a bear or bull market:

  1. Ethereum’s best threading pastry on what to look for as The Merge approaches:

  1. Mario Gabriele on Multicoin:

On The Pod…

Do Kwon Is Backing UST With Bitcoin – And Here’s What Else He Is Building

Do Kwon is the CEO of Terraform Labs and a director at Luna Foundation Guard. On Unchained, he explains why LFG is spearheading a plan to partially back Terra’s $15 billion stablecoin UST with Bitcoin. He also dives into another project idea that would transform developer salaries into financial assets that, as far as I can tell, he has not yet spoken about publicly.

Part 1: Everything you need to know about Terra, UST, and BTC.

  • how Terra works and why Do thinks UST will soon be the third-largest stablecoin

  • why Do and LFG decided to back UST with bitcoin

  • why Do thinks LUNA’s price will continue to appreciate despite UST’s new dependence on bitcoin

  • how UST might perform if the price of a bitcoin were to crash

  • why diversifying UST with different types of collateral could help Terra politically

  • how LFG plans to use bridges, smart contracts, and an AMM reserve pool to secure its bitcoin

  • why Do thinks Terra is now a Layer 2 project for Bitcoin

  • who is deciding to purchase bitcoin and who determines what other assets to purchase as collateral for UST

  • how a bitcoin reserve pool would help UST not de-peg from the dollar

  • whether Do thinks Anchor’s 19%+ yield is sustainable and why Anchor is moving to other chains

Part 2: Do, the self-described “toymaker” of DeFi.

  • why Do is fascinated with creating a fungible labor market

  • how developer working hours could become a token traded on an AMM and used to take out loans

  • why Do thinks developer salaries in crypto should be cyclical

  • how on-chain identity and history will be similar to credit scores

  • why Do is a personal fan of Thorchain – but is reticent to use it as a bridge for LFG

  • why Do is interested in Prism Protocol

  • what Do thinks the impact of a pro-crypto president will have on South Korea

Book Update

My book, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze, which is all about Ethereum and the 2017 ICO mania, is now available!

You can purchase it here: