decentralized finance

French central bank looks at certification, incorporation as part of DeFi regulation

The Banque de France presented a well-written consideration of issues related to DeFi and the forthcoming MiCA regulation, with suggestions.

The Banque de France has contributed to the discussion of European crypto asset regulation with a close examination of decentralized finance (DeFi) and potential approaches to its regulation. The discussion is timely, given the growing use of tokenization in finance and the introduction of blockchain technology in many economic sectors, the authors said.  

The paper, written by members of the Fintech-Innovation Hub at the French central bank’s Prudential Supervision and Resolution Authority, notes that the term “DeFi” represents a range of crypto asset services, technologies and associated risks, which cannot be adequately addressed with current regulations:

“The main idea developed in this paper is that the regulation of disintermediated finance cannot simply replicate the systems that currently govern traditional finance.”

The paper suggests that regulation through certification could strengthen blockchain infrastructure security, decentralized autonomous organizations (DAOs) could be supervised by making them incorporate, and control over the intermediaries that allow access to DeFi services could enhance customer protection. As currently written, the European Union’s Markets in Crypto-Assets (MiCA) regulation excludes fully decentralized services from its scope and would have to redefine “crypto asset service providers” to make it possible to extend regulation to DeFi intermediaries.

Blockchain code could be subject to minimum standards, the paper argues. However, controlling the concentration of validation capacities in a DAO would be fraught with complexities and knock-on effects on a public blockchain, so the authors prefer a “resolution mechanism” that can be triggered after a cap has been reached. A private blockchain has the advantage of selecting trusted players but would require a more specific regulatory framework.

Related: French central bank pilots blockchain-based CBDC for debt market

Furthermore, the code in smart contracts could be subject to certification through a variety of mechanisms to assure it functions as intended, the paper says. Decentralized oracles could be regulated to avoid collusion.

Stablecoin regulation would be a necessary complement to DeFi regulation, as stablecoins “are now essential to the functioning of DeFi.” This is complicated under the MiCA framework, due for its final vote this month, as “the MiCA Regulation does not apply to services provided in a fully decentralized manner without any intermediary.” An additional rule would have to be introduced here, too, for the regulation of stablecoin use in DAOs.

At 45 pages, not including a consultation questionnaire, the paper’s argumentation is dense. Nonetheless, the English translation distinguishes itself with its clear language and thorough descriptions of DeFi technology and the issues it perceives with it.

Magazine: ZK-rollups are ‘the endgame’ for scaling blockchains: Polygon Miden founder

MetaMask launches new fiat purchase function for cryptocurrency

The new feature will allow users to purchase cryptocurrencies using various payment methods, such as debit or credit cards, PayPal, bank transfers and instant ACH.

Cryptocurrency wallet and decentralized application (DApp) provider MetaMask has announced the launch of a new feature that will allow users to purchase crypto with fiat currency directly from its Portfolio Dapp. The move is intended to provide users with an easier way to purchase crypto with fiat currency.

The new “Buy Crypto” feature enables MetaMask users to purchase a wide range of cryptocurrencies using various payment methods, including debit or credit cards, PayPal, bank transfers, and instant ACH (Automated Clearing House). The service will be rolled out to users in over 189 countries and will offer more than 90 tokens across eight different networks, including Ethereum, Polygon, Arbitrum, BNB Smart Chain, Avalanche Contract Chain, Fantom, Optimis and Celo.

To access the feature, MetaMask users can connect their wallets to the Portfolio Dapp or click on the “Buy” button in the MetaMask extension wallet. From there, users can select their region, payment method, and the token and network they want to purchase on.

The feature also takes into account a variety of factors, such as the user’s location and local regulations, to provide a customized quote for each purchase. Once the user has selected a quote, they will be redirected to a third-party provider’s website to complete the transaction. The funds will then be deposited directly into the user’s MetaMask wallet.

Related: Scam alert: MetaMask warns users of deceptive March 31 airdrop rumors

Over the years, MetaMask has partnered with several organizations to help onboard new users to its platform.

In 2022, Metamask partnered with PayPal to allow MetaMask users to purchase and transfer Ether (ETH) via PayPal’s platform. The service, announced on Dec 14, enables users to purchase and transfer ETH from PayPal to MetaMask by logging onto their Mobile MetaMask app, which would then redirect them to their PayPal account to complete transactions.

Additionally, on March 21 MetaMask announced a new integration with crypto fintech provider MoonPay that allows Nigerian users to purchase crypto through instant bank transfers. The new feature, available in the MetaMask mobile and Portfolio DApp, offers a simpler and cheaper way to buy crypto without using credit or debit cards. 

What will be the outcome of the Ethereum Shanghai upgrade?

Join us as we discuss the potential outcomes of the upcoming Ethereum Shanghai upgrade and other important developments in DeFi.

In this week’s episode of Market Talks, Cointelegraph welcomes Justin Bram, co-founder and CEO of Astaria — which allows users to put up their nonfungible tokens (NFTs) as collateral to earn instant liquidity. Bram also has his own YouTube channel with over 30,000 subscribers.

We kick things off by getting Bram’s opinion on the most exciting thing happening in decentralized finance (DeFi) right now and follow it up by discussing the most important thing happening in DeFi.

We then get into Ethereum layer-2 protocols like Arbitrum and whether Bram is bullish on them or whether he has his eye set on something else.

With the next big Ethereum upgrade just around the corner, we ask Bram what his perspective is on the Shanghai upgrade and the potential of liquid staking derivatives. Is ut going to be as big as everyone hopes and thinks it will be? Does the unlocking of Ether (ETH) represent the offering of some new innovation in the crypto and DeFi space?

By the end of the chat with Bram, we hope the audience will have gotten a better understanding of the most exciting and important developments in DeFi, the potential outcomes of the Ethereum Shanghai unlocks, and the longer-term impact of this on the liquid staking derivatives space, and also the development within the Ethereum layer-2 platform.

We cover all this and more, so make sure to stay tuned until the end. Market Talks airs every Thursday. Each week, it features interviews with some of the most influential and inspiring people from the crypto and blockchain industry. So, head on over to Cointelegraph Markets and Research’s YouTube page, and smash those like and subscribe buttons for all our future videos and updates.

Uniswap v3 code free to fork as BSL expires

The license expiration marks a significant event within the DeFi ecosystem, enabling developers to deploy their own decentralized exchange.

Developers are now allowed to fork Uniswap v3 protocol as its Business Source License (BSL) expired on April 1, shows protocol documentation. The expiration was a much-anticipated event within the decentralized finance (DeFi) ecosystem, enabling developers to deploy their own decentralized exchange (DEX). 

The BSL license lasts for a limited period before becoming completely open source. The purpose is to protect the author’s right to profit from their creations. Uniswap v3’s license was released in 2021 for two years, preventing its code from commercial use. A new license called a “General Public License” now applies to the protocol.

To fork the code, developers will be required to use an “Additional Use Grant” — a production exemption meant to accommodate both the needs of open-source and commercial developers.

Screenshot: Uniswap V3 core smart contracts repository on GitHub. Source: GitHub

Uniswap is a widely utilized decentralized exchange — considered the biggest automated market maker in DeFi space — providing a platform where token creators, traders and liquidity providers swap tokens. Its native Uniswap (UNI) token is a popular way for investors to gain exposure to the DeFi market.

In May 2021, shortly after being launched, Uniswap v3 surpassed Bitcoin in terms of daily fee generation, Cointelegraph reported. Data from Cryptofees showed that Uniswap v3 was generating $4.5 million in daily fees at that time, while Bitcoin generated $3.7 million.

Uniswap v3 Total Value Locked. Source DefiLlama.

Earlier this month, Unisawp officially went live on the BNB Chain — Binance’s smart contract blockchain — after more than 55 million UNI tokenholders voted in favor of a governance proposal by 0x Plasma Labs to deploy the protocol on the BNB Chain. Through the move, Uniswap users can access BNB Chain’s ecosystem for trading and swapping tokens. The integration also allowed Uniswap to tap into a liquidity pool with BNB Chain’s DeFi developer community.

Magazine: DeFi abandons Ponzi farms for ‘real yield’

Blockchain and regulated stablecoins to be widely used by 2030, industry execs say

Digital regulatory professionals have predicted the wide use of stablecoins worldwide by 2030, despite the current competition between TradFi and DeFi.

Regulated stablecoins are in the spotlight of policymakers as a panel of professionals in the digital regulatory space discusses the future use of the assets at the World of Web3 (WOW) Summit in Hong Kong. 

In the panel titled “Digital Assets: Policies & the Road Ahead,” the group discussed how regulated stablecoins would most likely remain in use by 2030, and how the current growth rate of the stablecoin market helps to ensure this.

While recognizing the crypto industry’s growth, Alexandra Sasha, the first deputy to the Danish Parliament, and an advocate for blockchain technology and innovation, said regulated stablecoins would grow stronger.

In her statement, Sasha said, “So I think there’s still two forms of need because you will have people who will want to centralize the digital era, and you will always have the people who do want this decentralized way of using payments, of course, unless it gets banned, but I do not think that’s the goal of anyone.”

Related: Stablecoins are solution to crypto’s banking problem, exec says

Concerning the wide acceptance of regulated stablecoins by 2030, Kelvin Lester Lee, commissioner of the Securities Exchange Commission of the Philippines, said he isn’t sure whether regulated digital assets would be thriving by then. However, they would still be present and might also look different.

Rounding up, Douglas Arner, a professor working in the areas of interconnection between finance and technology regulation at the University of Hong Kong, added that this entire decade would be a competition between centralized approaches and decentralized approaches. According to Arner, the competition applies just as much in the context of the metaverse as it does in the context of the crypto ecosystem, and by the end of the decade, there would be a spectrum of different structures where there’s a high likelihood that regulated stablecoins will emerge as the most widely used monetary instrument embedded in blockchain applications.

Magazine: Are CBDCs kryptonite for crypto?

Tim Draper sings a Bitcoin song dedicated to SVB and world governments: PBW 2023

The American venture capital investor Tim Draper took the stage at Paris Blockchain Week 2023 to talk about decentralization and the future of money.

American venture capital investor and entrepreneur Tim Draper took the master stage at Paris Blockchain Week 2023 to give his keynote speech on “The Decentralization of Everything,” which he ended with a self-composed Bitcoin song.

The speech opened by touching on the general distrust of cryptocurrencies — primarily Bitcoin (BTC) — from centralized governments. “I think they are absolutely panicking right now,” he said.

Tim Draper giving his keynote speech, “The Decentralization of Everything,” at Paris Blockchain Week 2023. Source: Cointelegraph

Draper particularly angled his thoughts through the lens of the recent Silicon Valley Bank (SVB) crisis, which he called a “crisis of trust.”

“They have shaken our confidence in the banking system… What a really strong leader would do is build that trust back. Trust the banks that now remain and set them free.”

However, according to the investor, a smooth transition out of these latest bank failures will not be likely under the current leadership in the United States. He signaled the recent remarks against cryptocurrencies stemming from the White House. 

His whole speech boiled down to his belief that an inevitable change is coming stemming from decentralized financial tools like Bitcoin, calling it a “drumbeat that keeps coming and coming.” 

“Everything got wealthier as more liquidity was created for the world — every time there was a leap in currency. We’re going through an anthropological change, which is hard for people. A lot of people resist it.”

He continued by saying that weak leaders will be revealed by those who resist it. Whereas strong leaders embrace it and are looking for this change. He concluded his speech with a three-minute song, which he wrote and performed.

According to Draper, the song was written four years ago but is more relevant than ever today. It touched on Satoshi, Bitcoin, banks, governments and the want for a new world order. 

Related: Paris Blockchain Week 2023: First day of the Summit kicks off

Before he began, he dedicated the song to SVB and “all the banks that have failed and will fail.”

“And I dedicated to all those governments that if they don’t trust their people and set them free, they will also fail, and their currencies will also fail.

The song got a round of applause from the audience, as well as the panelists who followed Draper on the master stage. 

He concluded his time by saying blockchain, Bitcoin and smart contracts are making up one of the “greatest transitions in the history of the world,” and it should be embraced.

SEC’s crypto staking crackdown has uncertain consequences for DeFi: Lido Finance

A Lido DAO member raised concerns over what impact the SEC’s crackdowns on staking could mean for the future of DeFi in the U.S.

A crackdown by the United States securities regulator on crypto staking could have unintended consequences for decentralized finance, according to the head of business development at Lido DAO.   

 Jacob Blish — who leads business development at Lido’s decentralized autonomous organization — told Bloomberg in a Feb. 13 report that the most significant risk would be if the SEC eventually concluded that no U.S. citizen can interact with crypto staking services, including protocols.

“The biggest risk I personally see as a U.S.-based person is if they come down and say you can no longer even interact with or contribute to these types of protocols.”

“Then me, as a contributor to the DAO, does that mean I can’t work on Lido anymore? Do I have to go leave and do something else?” Blish added.

The governance of Lido is managed by the Lido DAO with members from all over the world voting on critical decisions that steer the protocol.

In the wake of the SEC launching lawsuits and other enforcement actions against crypto firms, Blish joined a growing number of people in the crypto industry calling for more transparency around regulations and rules going forward, saying:

“The most disappointing thing is we as an industry keep getting asked for transparency, but then me as a U.S. citizen, I get no transparency and how [regulator’s] decision-making process is going.”

On Feb. 9 the SEC charged crypto exchange Kraken with “failing to register the offer and sale of their crypto-asset staking-as-a-service program,” prompting the exchange to halt offering staking to its U.S. customers.

The SEC’s latest action saw Coinbase co-founder and CEO Brian Armstrong defend staking in a Feb. 9 tweet, saying it would be “a terrible path for the U.S.” if a staking ban was to happen.

Related: Paxos facing SEC lawsuit over Binance USD — Report

Coinbase chief legal officer Paul Grewal built on Armstrong’s tweets on Feb. 10, asking for clearer rules for the industry.

“The public shouldn’t have to parse complaints in federal court to understand what a regulator expects,” Grewal said.

Why DeFi should expect more hacks this year: Blockchain security execs

One reason is that “hackers have gotten smarter, gained more experience, and learned how to look for bugs,” according to the founder of a crypto auditing firm.

Decentralized finance (DeFi) investors should buckle themselves up for another big year of exploits and attacks as new projects enter the market and hackers become more sophisticated.

Executives from blockchain security and auditing firms HashEx, Beosin and Apostro were interviewed for Drofa’s “An Overview of DeFi Security In 2022” report, shared exclusively with Cointelegraph.

The executives were asked about the reason behind last year’s significant increase in DeFi hacks, and whether this will continue through 2023.

Tommy Deng, managing director of blockchain security firm Beosin, said while DeFi protocols will continue to strengthen and improve security, he also admitted that “there is no absolute security,” stating:

“As long as there is interest in the crypto market, the number of hackers will not decrease.”

Deng added that many new DeFi projects “don’t go through complete security testing before going live.”

Additionally, a significant amount of projects are now exploring the use of cross-chain bridges, which were a prime target for attackers last year, with $1.4 billion stolen in six exploits.

Deng’s comments mirror those of blockchain security firm CertiK, whictold Cointelegraph on Jan. 3 that it doesn’t “anticipate a respite in exploits, flash loans or exit scams” in the coming year.

In particular, CertiK noted the likelihood of “further attempts from hackers targeting bridges in 2023,” citing the historically high returns from attacks in 2022.

The founder and CEO of crypto auditing firm HashEx, Dmitry Mishunin, said th “hackers have gotten smarter, gained more experience, and learned how to look for bugs.”

“The crypto industry is still relatively new, and everyone is growing with each other, so it’s difficult to get too far ahead of bad actors.”

He added the amount of value in some DeFi projects made the industry “very attractive” to malicious actors and that the number of hacks “is only going to grow going forward.”

Mishuin said these attacks may even spread outside of DeFi, with attackers setting their sights on “crypto exchanges and banks” that enter the market offering “more secure solutions for storing digital assets.”

Related: Crypto’s recovery requires more aggressive solutions to fraud

Smart contract security and auditing firm Apostro co-founder Tim Ismiliaev gave a more hopeful take, however, as he expects the space to “mature over the next five years, and new best practices for securing decentralized finance protocols will emerge.”

Too long; didn’t read

Interestingly, both Mishunin and Deng noted that many of the post-incident reports provided by blockchain security firms often fail to reach their target audience — blockchain developers.

“The people that read such analyses are average investors that are concerned about their money. Actual blockchain developers are too busy coding; they don’t have time to read stuff like that,” said Mishunin.

Meanwhile, Deng said the reports are usually about “event-based vulnerabilities and related recommendations,” so they often don’t help other developers that might be vulnerable to other exploits.

He admitted, however, that reports on “general vulnerabilities” in DeFi “tend to do a good job of ramping up protection.”

“The reentrancy vulnerabilities are now not as common as they used to be.”

Vitalik Buterin reveals 3 ‘huge’ opportunities for crypto in 2023

There’s still plenty of room for innovation, according to Ethereum co-founder Vitalik Buterin.

Ethereum co-founder Vitalik Buterin has shared three “huge” opportunities yet to be realized in crypto: mass wallet adoption, inflation-resistant stablecoins and Ethereum-powered website logins.

During an interview with Bankless co-owner David Hoffman, Buterin shared his outlook for the crypto industry in 2023, responding to Hoffman’s raised concern that the “adoption wave” for decentralized applications is now over and that there’s “less opportunity” for developers to come in and build new decentralized applications.

Buterin instead shrugged off the “limbo period” that Hoffman eluded to, firstly suggesting that more developments need to be made on wallet infrastructure to make crypto easier for everyday people to use and ensure that it is capable of onboarding billions of users.

“If you can make a wallet that a billion people will use — that’s a huge opportunity,” the Ethereum co-founder said.

Secondly, Buterin said that the creation of a hyperinflation-resistant and globally accessible stablecoin that can withstand all types of conditions — both on-chain and in the broader macroeconomy — would be revolutionary for the industry:

“If you can make a stablecoin that can actually survive anything up to, and including, a U.S. dollar hyperinflation […] that’s a huge opportunity as well if you can create something that will feel like a lifeline for everyone going through that situation.”

Buterin, thougdidn’t offer any technical suggestions as to how this could be achieved.

Lastly, Buterin said any technical developments that contribute toward Ethereum taking login powers away from Facebook, Google, Twitter and other centralized monopolies would ultimately enable Ethereum to capture more market dominance on internet-based applications:

“If you can get signed in with Ethereum to work and if you can unseat Facebook and Google and Twitter as the login overlords of the internet, that itself is a huge opportunity, right?”

Buterin did however state that the opportunity to fill market gaps was becoming less obvious due to increasing competition and the maturation of the market.

Related: What are DApps? Everything there is to know about decentralized applications

Ethereum’s co-founder appears to have spent the last few weeks sharing his learnings and advice for the crypto space, including his optimism about the years ahead for the industry. 

Buterin stated on Dec. 5 that blockchain-based identity, decentralized autonomous organizations (DAOs) and hybrid applications also excite him about the future of Ethereum and decentralized technologies.

A few days earlier, on Dec. 3, the Ethereum co-founder iterated the importance for traders to take a long-term view by focusing more on technical developments rather than onprice.

Following the collapse of FTX, Buterin advised traders and investors on Nov. 21 to consider the level of human influence that can be exerted over a protocol and to put more trust in open and transparent code than humans.

US regulator to seek feedback on DeFi’s impact on financial crime

A “close look” is being taken at money laundering and terror financing laws by FinCEN as it asked banking sector players for feedback on DeFi’s crime risks.

A United States financial regulator is looking to gain feedback from the banking industry about how decentralized finance (DeFi) may affect the bureau’s efforts to stop financial crime.

The Financial Crimes Enforcement Network (FinCEN) said it is “looking carefully” at DeFi, while the agency’s acting director, Himamauli Das, said the digital asset ecosystem and digital currencies are a “key priority area” for the agency.

Das gave prepared remarks on Dec. 6 at the American Bankers Association’s Financial Crimes Enforcement Conference.

The acting director added the agency is “taking a close look” at its Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) framework for cryptocurrencies and digital assets to decide if “additional regulations or guidance are necessary.”

“We are engaging with relevant U.S. government stakeholders in this effort,” said Das. “We welcome engagement with industry — including the banking community — to better understand your assessment of the vulnerabilities and risks.”

In particular, the regulator was concerned at DeFi’s “potential to reduce or eliminate the role of financial intermediaries” that are critical to its AML and CFT efforts.

Das said it recognizes DeFi “will continue to impact the financial services industry” and the agency will need to mitigate the “illicit finance and national security risks posed by the misuse of digital assets.”

Related: Terrorists still predominantly use cash over crypto: UN officials

FinCEN’s evaluation of its AML and CFT frameworks is part of the Executive Order on Ensuring Responsible Development of Digital Assets issued by United States President Joe Biden on Mar. 9.

A result of the Executive Order was the U.S. Treasury Department’s “Action Plan to Address Illicit Financing Risks of Digital Assets.”

Among other priority actions, the plan recommended increased private sector engagement through “the publication of official documents, discussions, and Treasury programs that enable public‐private and private‐private information sharing.”