🏛Sweeping Bipartisan Bill Aims For Across-the-Board Regulation of Crypto
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Legislation Would Define Key Role for CFTC in Crypto Oversight
NEWS U.S. lawmakers unveiled bipartisan legislation on Tuesday that could dramatically alter the regulatory landscape for crypto – or in the words of its primary author, Sen. Cynthia Lummis (R-Wy.), “fully integrate digital assets into our financial system.”
SNAFU The 67-page-bill is a beast that covers everything from regulatory oversight of crypto to defining what digital assets are, once and for all, to fixing the tax snafu passed last year that created major headaches for various DeFi players.
SPOT MARKET Most significantly, the bill would make the U.S. Commodity Futures Trading Commission the sole regulator of the crypto spot market, according to summary of the bill released this morning. That’s important because for the last year the U.S. Securities and Exchange Commission and its outspoken chair, Gary Gensler, have been rattling the crypto markets with tough talk about a crackdown.
QT Ends Loose Money Era and Augurs More Pressure For Token Values
By Owen Fernau
DAMAGE With crypto’s market cap already down $1T for the year, digital asset holders are hoping the bear market’s worst damage is done. They may be out of luck, however, as the U.S. Federal Reserve began quantitative tightening (QT) on June 1, according to a press release by the central bank.
LIQUIDITY QT is a monetary policy tool with which the Fed decreases the amount of liquidity in the economy by allowing securities on its balance sheet to reach their maturity date. These securities are primarily Treasury bonds, whose debt is serviced by the U.S. government, and mortgage-backed securities.
BALANCE SHEET The first tranche of debt won’t mature until June 15, according to Alfonso Peccatiello, the former head of fixed income portfolio management at ING Deutschland, so the actual effects of QT have yet to hit the U.S. economy. Further, the rate of balance sheet reduction will double from $47.5B for the next three months, to $95B in September.
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Feds Challenge Freewheeling NFT Space with Inside Trading Prosecution
By Jason Levin
FREAK OUT No surprise, many in the crypto world are freaking out after a federal grand jury indicted Nat Chastain for allegedly committing insider trading in NFTs sold on the OpenSea marketplace.
INSANE “They will come for other people next. It’s starting,” wrote Loopify, a web3 builder with 190,000 Twitter followers. Roberto Nickson, founder of The M3taverse, an NFT media company, was also shocked by the news. “Insane,” he tweeted. “First of its kind. Won’t be the last. US Govt not playing games anymore. A lot more to come.”
RUG PULLS Suddenly, the freewheeling vibe of the NFT market has turned considerably darker. “I would hate to be those influencers who were openly promoting rug pulls for pennies now,” Web3 developer Bender tweeted .
MATURITY Ever since Chastain was charged with one count of wire fraud and one count of money laundering last week, crypto Twitter and Discords have been girding for what might come next. Yet while there’s a lot of fear in the air, the aftermath of this novel case might not be bad for crypto. In fact, it could mark a leap forward in the NFT industry’s maturity.
By Samuel Haig
RESERVES The implosion of Terra Classic’s algorithmic stablecoin UST has prompted Tron to reinforce the reserves backing its algorithmic stablecoin, USDD.
FUTURE “We want to have USDD to be overcollateralized, which I think will make market participants more comfortable about using us in the future,” tweeted Justin Sun, the founder of Tron, a blockchain network supporting smart contracts.
BURNING USDD launched on May 5 as an undercollateralized algorithmic stablecoin. But according to the Tron DAO Reserve website, it is now backed by more than $1.41B worth of assets, including 14,040.6 BTC (worth roughly $416M at current prices), 140M USDT, 1.9B TRX ($154M), and a further 8.29B TRX that resides in a burning contract ($703M).
By Samuel Haig
VOLUME The crypto markets are punishing over-eager leverage traders. Margin calls for ETH shorts surged to unprecedented volume on June 6, with $686M worth of positions liquidated in a single day, according to CryptoQuant.
LIQUIDATIONS The liquidations came amid relatively modest upward price action, with ETH trading within a roughly 6.5% price range from $1,805 to $1,920. The price of Ether also rebounded by 10% over three days, bouncing from a local low of $1,745 on June 4.
LONGS The move coincided with the volume of BTC longs on Bitfinex continuing to push into new record highs. But $608M worth of longs have been liquidated over the past 24-hours amid today’s sudden 7% retracement.
By Samuel Haig
LAND SALE Illuvium, a web3 play-to-earn monster collector and auto-battler game currently in beta, has closed a virtual land sale worth more than $72M, defying the bearish market sentiment hanging over crypto.
AUCTIONS The digital land was sold via dutch auctions from June 2 through June 5. The sale distributed 19,969 land plots, with roughly 282 plots going on sale every hour. The game will feature 100,000 land plots in total, with Illuvium planning to conduct more lanrate fuel and elements that power its gameplay. The auctioned plots are tiered between levels 1 and 4 according to their rarity and the volume of in-game resources they can produce. Landowners will receive 5% of in-game revenues generated by the plots.
Katie Biber Brings Real World Experience to VC Goliath
By Samuel Haig
LEGAL OFFICER Paradigm, the crypto venture capital firm that closed a $2.5B fund last year, has appointed Katie Biber as chief legal officer.
NOISE Biber is the former chief legal officer at Brex, a fintech firm, and a top lawyer for the presidential campaign of Mitt Romney, the Republican Party’s nominee in 2012. In a blog post announcing her new position, Biber describes the recent price volatility of BTC and ETH as “just noise.”
A HUNCH “The promise of web3 comes into sharper focus with every passing day,” she said. “It’s no longer just a hunch – I am now confident that today’s builders will democratize finance, create a more equitable internet, and bring us tools that help humans exchange goods, services, opinions, and information trustlessly.”
A Primer on DAO Legislation in Multiple States
Guest writer Jordan Teague provides an invaluable state-by-state primer on DAOs and regulation.
TROUBLE When decentralized autonomous organizations (DAOs) blew up last year, the web3 community quickly realized that forming legal entities around their operations could save them a lot of trouble. Legal entities could limit the liabilities of their participants, increase certainty about tax jurisdiction, and make it easier to transact with the real world.
OPTIONS Before lawmakers wrapped their heads around DAOs, a number of projects used existing U.S. legal structures, such as unincorporated nonprofit associations, cooperatives, and LLCs. However, none of these options were created with blockchain in mind.
CUSTOM-MADE Things changed when some U.S. states passed legislation to create new types of legal entities custom-made for DAOs and crypto-native companies, including Vermont’s BBLLC, Wyoming’s DAO LLC, and Tennessee’s DO LLC.1
By Arya Ghobadi
LIVES When we talk about the metaverse, we’re talking about a digital environment that encompasses everything. Users can communicate with one another through their avatars, go about their daily lives, and meaningful experiences. Metaverse projects have over $14B market cap at the time of writing this article. The crash in the crypto market has also swept up metaverse platforms, with leading projects down in market capitalization in the last six months. Here’s a rundown of the leading platforms in the metaverse:
IDEA Decentraland is a well-established metaverse project with a large number of users who purchase virtual land for millions of dollars. The idea with Decentraland is to be a virtual locale where you can shop for favorite brands, attend events, play games, meet new people, start new businesses, and even gamble.
SETTINGS Built on the Ethereum blockchain, Decentraland is completely user-owned, giving users room to customize their settings, avatars, marketplaces, digital infrastructures, and applications.
For five years, the world’s largest cryptocurrency exchange Binance served as a conduit for the laundering of at least $2.35 billion in illicit funds, a Reuters investigation has found.
Crypto financial services firm BlockFi is in the process of closing a down-round — in which funds will be raised at a lower valuation compared to previous raises — according to three sources with knowledge of the process.
New academic research on Bitcoin’s early years undermines its foundational myths of privacy through pseudonymity and decentralization, Jaron Lanier and Glen Weyl write.
Polygon - MATIC 💚 @0xPolygonWeb3 can be a bit difficult to understand. Before @0xPolygonAvail launches soon, we wanted to share an analogy to help you with an often misunderstood web3 primitive: rollups, and their evolved form, validiums. Start your engines. 🧵 [1/11] https://t.co/FDq7zWIQrf
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Struggling artist to $525,000 NFT mega sale; the story of pplpleasr The NFT artist in a one-on-one interview with Robin Schmidt.
Algorand Woos LUNAtics with New Fund and Migration Tool The Algorand Foundation on Thursday announced the creation of a fund and “automated platform” intended to lure Terra developers stranded by the blockchain’s recent collapse.
Liquid Staking Derivatives Pose ‘Significant Risks’ to Ethereum 2.0: Report Protocols that offer liquid staking derivatives, like Lido and Rocket Pool, could undermine the integrity of Ethereum after its transition to proof-of-stake, according to a researcher at the Ethereum Foundation.
🧑💻 ✍️ Stories in The Defiant are written by Owen Fernau, Samuel Haig, Jason Levin, DeFiDad, Aleksandar Gilbert, and yyctrader, and edited by Edward Robinson, yyctrader, and Camila Russo. Videos are produced by Robin Schmidt, Alp Gasimov and Daniel Flynn. Podcast is led by Camila, edited by Alp.
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