"Cryptocurrency traders call it the "sandwich" maneuver, and nobody wants to be the turkey caught in the middle. Here's how it works: You spot another trader on the network trying to buy a token, such as Ether or another so-called altcoin. Then you place an order, too. If you are able to get your purchase done before the other trader, you'll get a good deal on a coin you know there's demand for. Your purchase pushes up the price the other buyer has to pay. Completing the sandwich, you sell for an easy profit."
U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler called on Congress to give the agency more authority to better police crypto-asset trading, lending and platforms, a "Wild West" he said is riddled with fraud and investor risk. He said the crypto market involves many tokens which may be unregistered securities and leaves prices open to manipulation and millions of investors vulnerable to risks. He also focused on stablecoins and how they "may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system: anti-money laundering, tax compliance, sanctions, and... national security, too... Further, these stablecoins also may be securities and investment companies. To the extent they are, we will apply the full investor protections of the Investment Company Act and the other federal securities laws to these products." https://www.sec.gov/news/public-statement/gensler-aspen-security-forum-2021-08-03
An updated version of the U.S. Senate's infrastructure bill narrows the definition of "broker" for the purposes of crypto tax collection, but stops short of specifying that only companies that provide services for customers qualify. An earlier version of the bill sought to help pay for itself by boosting information reporting requirements and broadening the definition of a "broker" for tax purposes to include any parties that might interact with crypto. An updated version now does not explicitly include decentralized exchanges, but it also doesn't explicitly exclude miners, node operators, software developers or similar parties.
"Smart contracts are self-executing programmable contracts between two or more parties. Smart contracts do not require a vetting authority because their legitimacy relies on decentralised ledger technologies. However, the implementation of many potentially useful smart contract applications depends upon verifying that some real-world event has taken place. This is a problem. Given its fully decentralised nature, how does a smart contract select what the true state of the world is? We show that truthful reporting about the realization of a publicly observed event cannot be implemented as a unique equilibrium in a completely decentralized environment. Our work provides a theoretical underpinning of the need for oracles and the related oracle problem."
The president of Banco Central do Brasil (BCB), Roberto Campos Neto reportedly introduced some novel ideas that the central bank has for a possible CBDC, including the integration of the digital real with traditional and decentralized financial structures and institutions. He also showed off a "super app" that will allow customers to hold stablecoins and the CBDC, and showcased the connection the system will have with the already available PIX payments network.
The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Ooki DAO in the U.S. District Court for the Northern District of California. The complaint alleged that the Decentralized Autonomous Organization (DAO) was an unincorporated association involved in unlawful activity. This complaint has broad implications for the crypto industry. There are now 2,276 DAOs, which control about $10 billion of crypto in a wide array of blockchain-based financial tools.
It's not clear that the Tornado mixer sanctions actually outlaw reciting code, but they do include what appears to be the first-ever ban on interacting with blockchain addresses controlled by self-executing code (sanctions normally ban transactions with accounts controlled by specific people or entities). And as crypto advocates mull legal challenges to the sanctions, they're homing in on First Amendment objections. A showdown over the constitutionality of the sanctions would reopen decades-old questions about the legal status of code. In all likelihood, it would be just the first major skirmish in a broader fight over the First Amendment's application to blockchain systems, one that crypto advocates have been anticipating for years.
The Commodity Futures Trading Commission (CFTC) sued Ooki DAO, a decentralized autonomous organization, last week. The CFTC alleged Ooki DAO was offering leveraged and margin trading products without registering as a Futures Commission Merchant (FCM), a legal requirement in the U.S. The complaint is a dagger into the belief that decentralization is a defense against regulation. Admittedly, it's not the first time we've seen U.S. regulators indicate that decentralization really isn't a defense, but because of the way the CFTC has worded its complaint it seems especially concerning. The short version is that, in the CFTC's view, every single voting participant in a DAO can and should be held individually liable for any illicit activity conducted by the DAO.
Two recent papers by Christian Pfister examine the state of play and short- to long-term prospects for payments, money and finance in the digital era. The second paper, which focuses on longer-term issues, recommends that if a CBDC were to be issued, it should be aimed to stimulate innovation and not lead, even inadvertently, to the marginalization of the private sector. It concludes with a set of recommendations, including that the central bank should continue to issue banknotes, but in order to discourage their illicit use, gradually withdraw the high-denominations. Also, if retail CBDC is issued, it should allow offline transactions. Also there should be a threshold of anonymity for very small-value transactions to facilitate its substitution for cash without facilitating illicit transactions. Above this threshold, allow transactions under pseudonyms, with the possibility for the judicial authorities to request the lifting of pseudonymity, and limit the collection of personal information to what is necessary for reporting entities to fulfil their regulatory obligations. Christian recommends not limiting individual CBDC holdings, except for a transitional period, and remunerating at an interest rate linked by a fixed spread under the monetary policy rate. In addition, he recommends the issuance of wholesale CBDC on a distributed ledger technology (DLT) platform, and allow, but not force, payment service providers, including regulated issuers of retail stablecoins, to back their issuance with them.
Two recent papers by Christian Pfister examine the state of play and short- to long-term prospects for payments, money and finance in the digital era. The first paper focuses on short- to medium term developments, and two forms of public sector, intervention; regulatory and production-based. He argues that the regulatory approach should be considered against the potential costs, like the creation of barriers to entry and protection of established players, which makes it ambiguous from the point of view of competition. Production-based intervention, such as the introduction of central bank digital currency (CBDC), aiming to provide an alternative to private supply is much stronger than regulation, and has its own ambiguities. Hence, before intervening, the public authority should ensure that private initiatives are unable to meet a clearly expressed need (i.e., there must be a "market failure"), and the benefits outweigh any disadvantages.
"The motivation behind Swaap v2 is to address the current challenges in the crypto market-making sector, which is split between centralized and opaque actors and transparent Automated Market Makers (AMMs) that yield negative returns for their Liquidity Providers (LPs). Swaap v2 brings the best of both worlds, offering an open, transparent, non-custodial, composable, secure, and adaptive solution."
The Bank for International Settlements (BIS) published a paper that provides an overview of policy measures taken in 19 jurisdictions to address the risks associated with activities that incorporate crypto-assets and distributed ledger technology (DLT) programmability capabilities in financial services. The paper classifies policy measures into three categories and identifies different types of initiatives across jurisdictions, including bans, restrictions, clarifications, bespoke requirements, and initiatives to facilitate innovation. It finds that, for centrally managed issuance activities, current regulatory initiatives focus mainly on issuers of security tokens and stablecoins. Initiatives related to centrally managed infrastructure activities mainly explore the benefits and risks from traditional financial intermediaries' use of DLTs and their programmability capabilities. Initiatives related to centrally managed service provision activities often extend the regulatory perimeter to new non-bank centralized intermediaries.
"The Toronto-based Voyager filed for Chapter 11 bankruptcy protections Tuesday in the Southern District of New York, estimating that it had more than 100,000 creditors and somewhere between $1 and $10 billion in assets. It also recorded the same range for its liabilities."
Celsius Network, the crypto lender that is facing a liquidity crisis, has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. It suspended withdrawals starting June 12, cut jobs and hired restructuring experts to advise on its financial situation.
Celsius says it has $167 million in cash on hand, enough to "support certain operations during the restructuring process."
"Celsius is not an asset manager, it's a shadow bank. And deposits in banks aren't even "customer assets", let alone "assets under management". They are unsecured loans to the bank. They are thus liabilities of the bank and fully at risk in bankruptcy. "
"This post will discuss the two cases that the SEC relied on as the basis for issuing its Wells Notice to the Crypto Exchange, as well as the future for these types of programs."
Stop talking of Celsius as "managing assets". It is not an asset manager. Its terms and conditions specifically say deposits placed with it are lent to it. There is complete transfer of title. So there are no "assets under management"."
Yield farm and "savings platform" Finblox just cut off withdrawals and yield, after a few days of users reporting problems withdrawing funds. Finblox was tiny. It wasn't important or systemic in crypto, the way Celsius or Three Arrows were. But Finblox' failure is a symptom of trouble at the smaller end of the crypto market. There are a pile of little funds like Finblox that are going to get swept away in the storm - taking investors' money with them.
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