The SEC proposal that could ‘cripple’ DeFi, and EU lawmakers vote to outlaw anonymous crypto transactions
Data from CryptoCompare shows that the price of Bitcoin dropped slightly last week. The flagship cryptocurrency ended March with a move toward the $48,000 mark but quickly plunged to $44,000 as April began. It has since recovered to $46,000.
Ethereum’s Ether – the second-largest cryptocurrency by market capitalisation – moved steadily upward over the last seven days, starting out at $3,300 and moving sideways before plunging to $3,200. The cryptocurrency has since surged and is now near the $3,500 mark.
Headlines in the cryptocurrency space this week were dominated by regulators acting on the nascent asset class, with a new proposal from the US Securities and Exchange Commission (SEC) looking to redefine what it means to be a securities dealer threatening to cripple the decentralised finance (DeFi) industry.
The proposal would expand the definition of ‘dealer’ to include individuals and businesses that use automated and algorithmic trading technology to execute trades and provide liquidity in the market.
While the proposal is aimed at electronic traders, a footnote within the 200-page document says the rule would also apply to digital assets deemed to be securities. On social media, crypto lawyers suggest the proposal includes an “all-out shadow attack on decentralised finance”.
The proposal would see automated market makers (AMMs) and liquidity providers with over $50 million in total assets be subject to the SEC’s regulatory umbrella and its registration requirements, something impossible for decentralised exchange.
Legislators in the US have also introduced a bill designed to bring transparency to stablecoins such as Tether. The proposed bill – The Stablecoin Transparency Act – would require stablecoins to be fully backed by dollars or short-term government securities.
In Europe, lawmakers have voted in favour of a widely-criticised measure that would outlaw anonymous cryptocurrency transactions of all sizes. Industry participants including Coinbase have objected to the bill and warned it could stifle privacy and innovation.
More than 90 lawmakers voted in favor of the proposed measure, which would also see anti-money laundering (AML) requirements extended to transactions in excess of €1000. The presented changes would also require that the payers and recipients of small cryptocurrency transactions be identified – even if they are via a self-hosted wallet.
Coinbase CEO Brian Armstrong warned that, as a result of the measures, Coinbase would be required to collect and verify information on the other party before users can send or receive crypto from a self-hosted wallet – even if they are not a customer of Coinbase before the transaction is allowed.
On a more positive note, the Brazilian city of Rio de Janeiro is looking to implement new pro-crypto tax laws in 2023 that would see the city accept Bitcoin for tax payments related to urban real estate, according to the Secretary of Economic Development, Innovation, and Simplification, Chicão Bulhões.
The cause, led by Brazilian Mayor Eduardo Paes, is also supported by Binance CEO Changpeng ‘CZ’ Zhao who recently announced that Binance was looking to open an office in the Latin American country.
Finally, Japanese authorities are looking to tighten cryptocurrency exchange regulations as the country wants crypto businesses not to process transactions involving cryptoassets subject to asset-freeze sanctions against Russia.
A new proposal would see crypto exchanges act like regular banks when it comes to verifying and flagging suspicious activities, including transactions related to sanctioned countries. It does not ban the country’s 31 cryptocurrency trading platforms from facilitating transactions with Russian-based wallets.
Axie Infinity’s Ronin Network hacked for $625m
Axie Infinity’s gaming-focused sidechain Ronin Network has been hacked for more than $625 million worth of USDC and ether (ETH). The hack saw an attacker use “hacked private keys in order to forge fake withdrawals” from the Ronin bridge.
According to a blog post from Ronin’s official Substack, the exploit affected validator nodes for Sky Mavis, who are the publishers of the popular Axie Infinity game and the Axie DAO. While the sidechain has nine validators and requires five signatures or withdrawals, the attacker “found a backdoor”, the post adds.
Despite the attack, the popular pro-cryptocurrency web browser has revealed its built-in crypto wallet and web 3.0 browser was adding support for Ronin, along with support for other networks including Solana, Nervos, Celo, IVO, and StarkEx.
Speaking of Solana, non-fungible token (NFT) marketplace OpenSea has all but confirmed that Solana NFTs are coming to its digital collectibles marketplace. The news comes after OpenSea published a video answering the question “wen solana?” with an April 2022 date.
Shortly after Ronin was hacked, decentralised finance project Ola Finance lost $3.6 million to an exploit. Later on, Ethereum-based DeFi lender Inverse Finance lost $15.6 million to a price manipulation exploit.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.
Featured image via Unsplash.