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Monthly Report: Key US Senators submit new crypto guidelines in a bid to fund infrastructure deal

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From crowdfunding to cryptocurrency regulations, here is a recap of the top stories from the last week of July

Tether under investigation for possible fraud

Bloomberg reported on Monday that Tether was under investigation by the Department of Justice (DOJ) over its actions during the company’s early days in crypto. Citing three persons in the know but who preferred to remain anonymous, the media outlet explained that it was thought Tether executives might have misled banks by intentionally failing to disclose that the transacted funds were associated with crypto.

However, Tether has denied any truth to the news, explaining that it remained committed to open dialogue with the relevant authorities. Questions around Tether previously came to light when customers and experts in the crypto space determined that the firm reserved most of its backing under commercial paper, causing uncertainty about whether Tether had enough dollars backing it, as it claimed.

Controversy was rife back in February when New York Attorney General Letitia James disclosed that Tether had lied about having its entire crypto portfolio backed by fiat. Tether was at the time being investigated due to suspicions that it had moved money to cover up millions of dollars in losses. Following the investigation, an $18.5 million settlement agreement against Tether was reached. Tether plays a unique role in the digital assets ecosystem and thus any action by the DOJ would affect the market considering that it is currently the third-largest crypto token by market cap.

Binance to halt margin trading against the euro, pound and Australian dollar

In a cautionary move on Monday, Binance announced it would be halting margin trading for crypto pairs with the Australian dollar, the pound sterling and the euro from 10 August. It will automatically close any open positions, cancel the remaining orders and then delist all the affected pairs two days later.

Earlier in the week, Binance CEO Changpeng Zhao had revealed that since 19 July, the firm had started executing new regulations that reduced margin trading limits from an initial 100x down to 20x. The rules were initially implemented for new users, but Zhao said that the plan was to continually roll them out to include existing users.

Binance is making changes as it attempts to steer away from all the regulatory attention it has been receiving from various countries worldwide. Earlier this month, the firm said that it was ending support for its stock tokens, which had also been brought into question by regulators who felt that the tokens had been offered unlawfully.

Senate bipartisan infrastructure deal seeks to establish crypto tax

A United States Senate bipartisan infrastructure deal plans to net cash from taxing crypto transactions, and as such, would see more demanding regulations placed on digital asset investments. The deal would require a $550 billion package to facilitate development in areas such as the transport industry — and crypto is being mooted as a potential source of the necessary funds.

CoinDesk reported on Wednesday that it had determined from a fact sheet that the new bill proposed increasing the reporting requirements around crypto to help net the $28 billion. However, the report failed to specify the period across which the entire sum would be spread. The fact sheet suggested that the proposed bill would require all businesses to report transactions over $10,000 to the Internal Revenue Service.

It has been known for a while now that creating regulations for the crypto industry is a priority for the Biden administration. President Biden’s 2022 budget proposal, released in May, suggested scaling up crypto reporting requirements and the inclusion of crypto in the planned increase of the top tax rate for long-term capital gains from 23.8% to 43.4%.

Crypto exchange FTX makes progress towards carbon neutrality

Sam Bankman-Fried, the CEO of FTX asserted on Tuesday that the firm was making steps towards its carbon neutrality goal. This happened as a result of a commitment the company made back in May to offset its carbon footprint. Since then, FTX has channelled $1 million into purchasing carbon offsets to neutralise the carbon output stemming from the company’s activities and another $1 million towards permanent carbon capture.

Further, Bankman-Fried said that FTX had also provided funding to research efforts for fighting climate change. The FTX Foundation Group also launched its proprietary climate programme, dubbed FTX Climate, on the same day. The programme will help fund policies and initiatives that would address the climate change problem, and support the establishment of carbon removal solutions.

Speaking during a CNBC Squawk Box interview, Bankman-Fried acknowledged that Bitcoin and Ethereum were the biggest users of energy in crypto. He added that the usage was set to reduce as the major crypto assets were shifting towards less energy-intensive chains.

Crypto could bank the unbanked, according to Senator Warren

Senator Elizabeth Warren has been a crypto critic for a while now, but on Wednesday, she made comments suggesting that she had softened her stance towards digital assets. During a CNBC Squawk Box interview, the Massachusetts lawmaker noted that the current banking system had alienated a section of the population.

She lamented that low-income citizens had been hugely inconvenienced by the system. Warren proposed that digital currencies and a CBDC could well offer a solution to this problem citing their low transaction costs, which would, as a result, integrate more people into the financial system.

She still maintained that adoption of crypto had to take into account the risks that come with such a move and, in particular, the effect that it could have on the financial system. She also argued that establishing crypto regulation was necessary if the exploitative nature of the ‘big guys’ in crypto was to be tamed, adding that crypto, like any other form of wealth, needed to be taxed.

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Source: https://coinjournal.net/news/monthly-report-key-us-senators-submit-new-crypto-guidelines-in-a-bid-to-fund-infrastructure-deal/

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Watch Jack Mallers Send $10 To El Salvador Via Twitter’s Lightning Tips

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This man Jack Mallers has a way of finding himself in the middle of historic transactions. This time, the Strike CEO used the recently unveiled Twitter Tips Lightning integration to send $10 instantly to San Salvador. The person at the other end of the line then uses the money to buy coffee in a little-known independent coffee shop. We’re witnessing the fusion of one of the biggest social networks in the world with Bitcoin’s open monetary network.

In the linked blog post, Jack Mallers explains the transaction and its significance:

Related Reading | Jack Mallers Outlines Bitcoin Top Issues, How BTC Will Drive The Future of Payments

“In the above demo, I sent a $10 tip from my house in Chicago, USA to my friend David in San Salvador, El Salvador. The payment settled instantly for no fee. The singular, open, monetary network that allowed me to send an instant, free, cross-border payment to David is the same singular, open monetary network that allowed David to immediately use that money to buy a cup of coffee at Starbucks as soon as he got the Twitter notification that I had sent him money.”

BTCUSD price chart 09/25/2021 - TradingView

BTC price chart for 09/25/2021 on Exmo | Source: BTC/USD on TradingView.com

The previous time Jack Mallers found himself in the middle of a historic transaction

When Strike’s CEO sent $10 to Nigeria, he described that transaction in terms that also apply to today’s historic transaction. 

“If you don’t see how huge this is, think about it as Jack Mallers does. He “didn’t have to register the transfer through a financial intermediary such as Western Union, request private banking details of Bernard Parah, or wait days for the payment to settle.” On the other side, Bernard “didn’t owe any intermediary a percentage of the transaction, the payment wasn’t reversible and settled instantly.”

Bernard Parah’s Bitnob and Strike are interoperable because they both joined an open monetary network, Bitcoin and Lightning. This time, Twitter and its millions of users joined both of those companies. This is immense. 

Also, the previous time Jack Mallers proclaimed, “Today, Strike became the best remittance option from the US to Nigeria without even trying.” This time, he feels even more confident:

“Twitter’s integration with the Strike API turns Twitter into one of the best remittance experiences in the world, one of the greatest global creator marketplaces in the world, one of the greatest global payment experiences in the world, one of the best global micropayment marketplaces in the world, and allows an internet communications company to interoperate with the monetary standard for the world, enabling global payments for their users.”

Boom!

The Relationship Between Twitter And Strike

On the Strike API’s official site, they describe the product as:

“Connect your business to a global, instant payments network. Marketplaces use Strike’s API to enable payments between buyers and sellers or fans and creators.”

When Bitcoinist announced the integration of a Bitcoin and Lightning tip feature on Twitter, we said: 

“Twitter made the announcement today via an official company blog post, where it explained that Twitter users regularly add links in their bios so followers can help support them. Now this is built directly into Twitter.

Twitter has partnered with Jack Mallers’ Strike lightning wallet on the integration. As part of the Twitter Tips launch, Strike has debuted their Strike API platform to “serve marketplace and merchant businesses” like the social media company.”

And in the mentioned blog post, Twitter elaborates:

“In addition to the services currently enabled through Tips, people can now seamlessly tip with Bitcoin using Strike – a payments application built on the Bitcoin Lightning Network that allows people to send and receive Bitcoin. Strike offers instant and free payments globally.” 

In this first iteration of Twitter’s Tip feature, you need a Strike account to receive tips. That means, only people in the US and in El Salvador can receive at the moment. Everybody, all over the world can tip them via a Lightning Network invoice, though. 

Related Reading | El Salvador And Bitcoin: Jack Mallers Reveals The Inside Scoop

It’s a brand new world out there. Twitter’s Lightning integration might be as big as El Salvador’s Bitcoin adoption, as far as onboarding the next millions of users go.

Featured Image: screenshot from Jack Maller's video | Charts by TradingView

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Source: https://bitcoinist.com/watch-jack-mallers-send-10-to-el-salvador-via-twitters-lightning-tips/?utm_source=rss&utm_medium=rss&utm_campaign=watch-jack-mallers-send-10-to-el-salvador-via-twitters-lightning-tips

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DeFi: Who, what and how to regulate in a borderless, code-governed world?

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Hold onto your hats, boys and girls! It’s a new world — a financial system without intermediaries, that anyone can access 24 hours a day with only a mobile phone and a wallet! As Julien Bouteloup said to me: 

“In DeFi, what we are building is fully decentralised technology, fully transparent, run by mathematics. No one can beat that.”

He continued: “We are building on research papers, 40 years of research, fundamental research, discrete mathematics being built and put on-chain that no one can beat. You cannot beat that. GitHub didn’t exist in the ‘90s. First, the fact that we’re going at the speed of light, is because everything is open source, and everyone can participate.”

Related: DeFi literacy: Universities embrace decentralized finance education

A Novum Insights report stated back in August that since 2020, the DeFi market has grown by a factor 40, with the total value locked in DeFi at around $61 billion at the time (while the current TVL stands at around $165 billion). Stablecoins’ capitalization, an important part of DeFi, grew in the first half of 2021 to $112 billion.

Massive gains are being made but, at the same time, DeFi investors are also losing money because DeFi is not regulated, moderated, intermediated, hosted or validated by a central authority, only driven by smart contracts. So if a smart contract fails or is attacked, consumers have no remedy. Loretta Joseph, global digital asset regulatory expert, said to me: “Regulators protect consumers and investors. In DeFi, you don’t have any intermediaries to regulate, so it’s totally P2P. The question is how it will be regulated in the future. People are going to get scammed. When people start to get scammed, the first thing they do is complain to the regulator.”

Related: Will regulation adapt to crypto, or crypto to regulation? Experts answer

Indeed, since 2019, DeFi protocols have lost about $285 million to hacks and other exploit attacks. And as the experts stated, the majority of hacks were due to developer incompetence and coding mistakes. That’s significant when the sector is entirely reliant on the code.

Related: The radical need for updating blockchain security protocols

The challenges of regulation

The U.S. Securities and Exchange Commission’s Hester Peirce said in an interview with Forkast.News about DeFi back in February: “It’s going to be challenging to us because most of the way we regulate is through intermediaries, and when you really build something that’s decentralized, there’s no intermediary. It’s great for resilience of a system. But it’s much harder for us when we’re trying to go in and regulate to figure out how to do that.”

Regulatory concerns tend to be around the volatility of crypto markets as contrasted with government-backed fiat currency, the risk of money laundering and terrorist financing, the unregulated nature of the market, and the absence of recourse for financial losses. Nonfungible tokens are exploding, generating excitement, confusion, legal questions and massive gains. NFT markets are also attracting large crypto transactions, which will likely bother regulators, who may see the big money moves in NFTs as money laundering. At a macro level, the decentralization of the financial system and the ability to manage economic stability and protect consumer interests poses a further challenge to regulators.

Related: Nonfungible tokens from a legal perspective

DeFi decentralized autonomous organizations (DAOs) are popular as a means of transferring cryptocurrencies across different blockchains. This supports crypto lending and yield farming. DAOs, by conservative estimates, oversee more than $543 million. In a DAO, information technology governance and corporate governance are one and the same. The organization is governed and operated by smart contracts, which are monitored and enforced by algorithms. The code both governs and executes. Should the algorithms fail, who then is responsible?

In a joint article, dubbed “Regulating Blockchain, DLT and Smart Contracts: a technology regulator’s perspective,” a group of researchers outline some key points to consider: (1) the importance of identifying central points which can be used to apply regulation to, such as miners, core software developers, end users. They even raise the potential for governmental or regulatory players to be potential participants; (2) issues of identifying liability — could core software developers be held to account?; (3) the challenges with the immutability and lack of update-ability of smart contracts; and (4) the need for quality assurance and technology audit processes.

It is expected that exchanges and wallet providers will be a focus for regulators. Decentralized exchanges allow users to trade directly from their wallets in a P2P manner without intermediaries. Global money-laundering watchdog the Financial Action Task Force (FATF) has exchanges in their sights. Christopher Harding, the chief compliance officer of Civic, noted that the FATF proposed guidelines which suggest that DApps will need to comply with country-specific laws enforcing FATF, AML, and Counter-Terrorism Financing requirements.

Related: FATF draft guidance targets DeFi with compliance

A recent review of 16 leading exchange platforms by the London School of Economics and Political Science found that just four were subject to a significant level of regulation related to trading, so there is a clear gap. Getting listed on any major exchange now requires a project to have passed auditing, but meaningful security doesn’t end there. Toby Lewis, CEO of Novum Insights, made the point:

“Also, remember that smart contracts can be attacked. Even if they are audited, it does not give you a guarantee that it will be exploit-free. Do your own research before you start.”

In an open-source environment where projects are developing at an average compound growth rate of 20% per year, finding just the right moment to regulate, wherein people are protected from risk but innovation is not constrained, is a classic problem to solve. Some governments have addressed achieving this balance by using regulatory sandboxes (U.K., Bermuda, India, South Korea, Mauritius, Australia, Papua New Guinea and Singapore), while some have gone straight to legislating (San Marino, Bermuda, Malta, Liechtenstein).

Far from resisting regulation, leading DeFi figures embrace it as part of the maturing of the industry. In an interview with Cointelegraph, Stani Kulechov, the founder of DeFi lending platform Aave, suggests that peer review will be the future: “Auditors are not here to guarantee the security of a protocol, merely they help to spot something that the team itself wasn’t aware of. Eventually it’s about peer review and we need to find as a community incentives to empower more security experts into the space.” In the same article, Emeliano Bonassi spoke about ReviewsDAO, a peer review forum for connecting security experts with projects looking for reviews. Bonassi sees potential for this to become a learning opportunity where people with specialized knowledge can contribute to improving the security of the ecosystem.

Tan Tran, CEO of Vemanti Group, suggested: “Going forward, I do see accelerated adoption of platforms with permissionless financial products and services that can be used by anyone anywhere, but each will be governed by a regulated-party with centralized control to ensure accountability and compliance. This is not about stopping innovation. It’s more about deterring bad actors from exploiting unsophisticated consumers.” Giving an expert opinion on DeFi to Cointelegraph, Brendan Blumer, CEO of Block.one, concluded: “The real winners in the digital economy will be those that think long-term and take the time to ensure their products meet jurisdictional and professional service requirements.”

It certainly looks like exchanges and software developers could be in the sights of regulators. We anticipate regulators will look for ways to improve technology quality assurance processes and DeFi governance, which can only be done in conjunction with the industry. Mark Taylor emphasized that regulators need to continue to work in partnership with crypto industry players to protect consumers.

Julien Bouteluop explained: “We are actually building, in DeFi, everything that traditional finance has, but faster, stronger, more transparent and accessible by everyone that’s here. It’s really different. It means that anyone in the world can access technology and doesn’t need to ask permission from anyone. I think it’s necessary to push for innovation, and to build a better world.”

Who, what and how do we regulate in this global 24/7, borderless market? This is a whole new ball game. Regulators and industry will need to work hand in hand.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Jane Thomason is a thought leader on blockchain for social impact. She holds a Ph.D. from the University of Queensland. She has had multiple roles with the British Blockchain & Frontier Technologies Association, the Kerala Blockchain Academy, the Africa Blockchain Center, the UCL Centre for Blockchain Technologies, Frontiers in Blockchain, and Fintech Diversity Radar. She has written multiple books and articles on Blockchain. She has been featured in Crypto Curry Club’s Top 100 Women in Crypto, the Decade of Women Collaboratory’s Top 10 Digital Frontier Women, Lattice’s Top 100 Fintech Influencers for SDGs, and Thinkers360’s Top 50 Global Thought Leaders and Influencers on Blockchain.


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Source: https://cointelegraph.com/news/defi-who-what-and-how-to-regulate-in-a-borderless-code-governed-world

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Deutsche Bank’s analyst says bitcoin will be ‘ultra violate,’ but it is here to stay.

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Marion Laboure, an analyst at Deutsche Bank’s research division, said she could envision Bitcoin taking the role of digital gold in the future: lasting for centuries and largely not controlled by the government. Laboure said she could “potentially see Bitcoin become the 21st-century digital gold” but warned investors against the crypto asset’s volatility. According to the analyst, most Bitcoin (BTC) purchases are made for investments and speculation rather than keeping the coins for a medium of exchange. 

The analyst expects Bitcoin to remain ultra-volatile in the foreseeable future.

“Just a few additional large purchases or market exits can significantly impact the supply-demand equilibrium,” said Laboure. “Bitcoin is too volatile to be a reliable store of value today. And I expect it to remain ultra-volatile in the foreseeable future,” the analyst noted. Though the Deutsche Bank analyst expressed concern about the lack of regulation over cryptocurrencies and their potential impact on the environment, she hinted that Bitcoin would likely remain the dominant cryptocurrency in the crypto space. 

“If Bitcoin is sometimes called ‘digital gold,’ Ethereum would then be the ‘digital silver.”

Ethereum may have more use cases in decentralized finance and with the rise in non-fungible tokens, but Bitcoin still enjoys its “first-mover advantage.” “If Bitcoin is sometimes called ‘digital gold,’ Ethereum would then be the ‘digital silver,” the analyst opined. Earlier, Deutsche Bank analysts described Bitcoin as a cryptocurrency “too important to ignore, ” suggesting that the crypto asset price would likely rise with additional asset managers and companies entering the market. In 2019, the financial institution predicted that digital currencies would replace fiat by 2030.

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Source: https://coinnounce.com/deutsche-banks-analyst-says-bitcoin-will-be-ultra-violate-but-it-is-here-to-stay/

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