GM Defiers!

We have a regulation-heavy newsletter today. But first, we take a look at the recent rally in memecoins like PEPE, which has rallied over 500x in just a few days. SEC chair Gensler dodged the question of whether ETH is a security while testifying on Capitol Hill. The SEC has sued crypto exchange Bittrex for allegedly selling unregistered securities, and is revisiting a potential rule change that may categorize many DeFi protocols as exchanges. Meanwhile, Congress is set to discuss a revived stablecoin bill on Wednesday.

✍️ In today’s newsletter:

• PEPE surges 500x and sparks memecoin fever
• SEC Chair Gensler refuses to call ETH a security when quizzed by Congress
• Potential SEC rule change could classify DeFi protocols as exchanges
• Revived stablecoin bill would require stablecoin issuers to register
• SEC sues Bittrex, calls many crypto tokens securities
• Uniswap V3 to deploy on Polygon zkEVM

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📈 Markets in last 24 hrs:

🎬 WATCH

Watch our video on the ongoing memecoin rally. And check out our podcast with Harsh Rajat, the founder of Push Protocol, who talks about the intersection of web3 and AI.

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Markets

PEPE Rallies 500x As Investors Pile Into New Wave Of Memecoins

TLDR Memecoins like PEPE and WOJAK are skyrocketing in value and attracting speculators reminiscent of the dog coin mania of 2021. While some find memecoins fun and accessible, others see them as a negative representation of the crypto industry, with tokens that lack any real utility beyond gambling. The surge in memecoin trading is also affecting Ethereum users by causing gas fees to spike.

SO WHAT Ultimately, while memecoins may be entertaining and lucrative for some, they may not offer substantial value or contribute meaningfully to the development of the crypto industry. Despite these concerns, some traders see memecoins as a source of hope in a bear market.

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SPONSORED

Tranchess is a structured asset management protocol that offers liquid staking on both Ethereum and Binance Smart Chain. Liquid staking allows users to earn staking rewards while their assets remain liquid, which they can use in other DeFi investments.

Tranchess mints liquid tokens equivalent to the amount of staked ETH or BNB (qETH or nQueen) and receives rewards as proxy validators. The NAV of these tokens increases with the value of the staked asset, including the yields from staking. Liquidity pools provided by both Tranchess and partners allows users to trade their liquid tokens for the staked asset with ease. 

Tranchess is unique in offering a tranche mechanism that allows users to split their liquid tokens into BISHOP and ROOK tokens. The ROOK token represents a high-risk, high-return strategy where users can take leveraged long positions on ETH, BNB, and BTC, whilst BISHOP represents a market neutral or stable coin like structure. Tranchess uses a combination of its Rebalance model and Time-Weighted Average Price (TWAP) to minimize any market risk to its ecosystem. 

Tranchess is a DeFi protocol that provides a differential layer of financial products and services by offering risk tranche options for investors with different risk levels. Tranchess’ novel tranche twists, QUEEN, ROOK and BISHOP, are unavailable on other liquid staking platforms. 

Follow @Tranchess on Twitter, @Tranchess on Telegram, Discord and be sure to visit https://tranchess.com/! 

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Regulation

Gensler Refuses To Call Ether A Security At Congressional Hearing

TLDR SEC Chairman Gary Gensler repeatedly declined to answer whether Ether, the world’s second-largest cryptocurrency, is a security during a Congressional hearing. Gensler previously stated that he considers Bitcoin a commodity such as gold or wheat, and most other crypto tokens to be securities.

SO WHAT The lack of a clear answer from SEC Chairman Gensler leaves the industry in a state of uncertainty. The distinction between commodities and securities has significant implications for the industry, and many crypto tokens could potentially face onerous registration and reporting requirements if deemed to be securities.

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DeFi

“Everybody” Should be Concerned About the SEC’s Proposed Rule Change for DeFi

TLDR The SEC has reopened the comment period for a proposed rule change that may categorize many decentralized finance (DeFi) protocols as “exchanges” under the law. The change would subject these platforms to regulatory frameworks, including know-your-customer and anti-money laundering rules.

SO WHAT The proposed rule change could have a significant impact on the DeFi industry, subjecting many protocols to regulatory requirements that may be difficult or impossible to comply with.

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Stablecoins

Congress Revives Stablecoin Bill

TLDR US lawmakers are set to discuss a revived draft bill on Wednesday that would require certain stablecoin issuers to register with authorities and prove that their tokens are backed by cash and other easy-to-sell assets on a monthly basis. The proposed legislation only focuses on “payment stablecoins,” or tokens designed for use as a means of payment, but does not name any specific stablecoin or issuer.

SO WHAT If the bill passes, it would be the first major piece of US legislation that explicitly targets stablecoins, which have been a growing area of interest and investment in the crypto industry. The lack of mandatory audits in the proposed legislation has raised some concerns among experts who worry that there is still potential for abuse by stablecoin issuers.

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Enforcement

SEC’s Bittrex Lawsuit Says ALGO, DASH are Unregistered Securities

TLDR The SEC has filed a lawsuit against crypto exchange Bittrex, alleging that it sold unregistered securities, including DASH and ALGO. The SEC claims that Algorand is a “common enterprise” whose investors can expect profit based on others’ efforts, a key criterion that determines whether an asset is a security under US law. Bittrex should have registered as a broker, exchange, and clearing agency, according to the lawsuit.

SO WHAT Despite the SEC’s allegations, crypto industry participants argue that the regulator has not provided a viable path to registration or listed the tokens it believes to be securities.

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Layer 2

Uniswap V3 To Launch On Polygon zkEVM

TLDR Uniswap, the leading decentralized exchange by trade volume, is set to deploy its V3 iteration on Polygon’s zkEVM Layer 2 network following a unanimous governance vote. The move comes amid competition among Layer 2s (L2s) as Polygon and Matter Labs have both launched rollups powered by zero-knowledge proofs, so-called zkEVMs, and are vying for early zkEVM dominance while looking to siphon market share away from the leading L2 incumbents, Arbitrum and Optimism.

SO WHAT The move is an attempt to solidify Uniswap’s place as the number one DEX while also competing for market share in the L2 space.

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🔎 FROM OUR REPORTERS

🌍 ELSEWHERE

• Trump Drops Second Series of Digital Trading Card Collection (Coindesk)
• FTX has $250M offer from Tribe Capital to restart exchange (Twitter)
• Coinbase is preparing to go to court with the SEC (CNBC)

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• Source: https://thedefiant.io/meme-coins-rally-like-its-2021/