Month: October 2021

Is the Future of the NFT Metaverse Self-Built Worlds?

‘Metaverse’ is a term that has recently become ubiquitous in crypto, doubtless due to the success of immersive virtual projects like Decentraland and Iluvium. The metaverse describes a vast ecosystem of often interconnected virtual environments, where players can interact with one another, explore parallel digital worlds, and buy and trade tokenized collectibles with real-world value.

The metaverse concept is not native to crypto, incidentally – the term comes from Neal Stephenson’s sci-fi novel Snow Crash, published in 1992. Three decades and a raging pandemic later, the metaverse concept is gaining ground as a range of virtual experiences become available, many of them built on blockchain rails.

Even social media giant Facebook is positioning itself to capture a share of the market, with Mark Zuckerberg claiming ‘we will effectively transition from people seeing us as primarily being a social media company, to being a metaverse company.’

Build Your Own Metaverse

Into this fast-evolving milieu comes Planet Sandbox, a metaverse project developed by The Minders Studio and backed by over two dozen VC firms. Currently gearing up for an IDO on October 2, Planet Sandbox shares many of the hallmarks of existing metaverse games – the lurid vistas, varied terrain and coveted collectibles – but introduces new features, most notably the ability for players to build and customize their very own sandbox worlds.

What does this mean, in real terms? In essence, players can access a building toolkit to customize every aspect of their universe, tweaking the geographical characteristics such as weather, topography, even gravity. If this evokes the plot to Christopher Nolan’s Inception, you’re on the right lines. Only Dom and Mal never monetized the worlds they created…

Once constructed, domain owners can determine the rules for games conducted within their boundaries and invite players to participate. Both the land and the collectibles within it can be leased or sold in exchange for cryptocurrency, incentivizing creatives to design the best, most profitable sandboxes in the expanding metaverse.

Planet Sandbox is, at heart, a play-to-earn game – the sort that has given rise to the term ‘gamefi’, used to describe projects interweaving gaming and decentralized finance (DeFi). But unlike many of its contemporaries, Project Sandbox isn’t just geared towards players; it’s also pitched at would-be game designers, VR architects, artists, and NFT traders.

While some users will exclusively build and profit from their creations, others will compete to claim and earn NFT weapons and accessories through in-game quests and battles. These battles can be against rival players in diverse sandboxes or against NPC enemies that tirelessly stalk the landscape. Those interested purely in game-play can browse sandboxes, find their favorite, and participate in shooting games, car races or quests to earn prizes.

A World Unrestricted by Physics

As time goes on, and the Planet Sandbox community expands, worlds are likely to become more diverse, challenging and lucrative – particularly with the popularization of sophisticated VR/AR technologies currently being developed by Apple, Amazon, Microsoft and Google.

Like many of its contemporaries, Planet Sandbox has a governance token, PSB, which is used for rewards, platform governance and also to cover NFT transaction fees. In the near future, players will also be able to stake PSB tokens to earn a share of fees processed by the network. An additional token, PULV, is used to purchase consumables for use within the metaverse.

Planet Sandbox’s integrated 3D marketplace, meanwhile, facilitates all trades in the game, with NFTs variously representing mountains, lakes, helicopters, tanks, weapons, gasoline, armour – the list goes on.

The appeal of metaverses such as those created by Planet Sandbox is universal: in a world unrestricted by the limitations of physics, unforgettable experiences can be enjoyed. Metaverses allow users to play, work, socialize and, thanks to NFTs and blockchain, build virtual businesses to earn passive income.

Planet Sandbox is built on Binance Smart Chain and a beta version of the game is set to launch next month, giving players an opportunity to familiarize themselves with the ecosystem and, if they desire, get to grips with the building toolkit. After the web version is released, mobile and PC versions will follow while the PSB token will be listed on decentralized and centralized exchanges.

Whatever happens to the metaverse, only the most brilliant projects are likely to survive once the cacophonous hype has died down. Is Planet Sandbox one of them? Only time will tell.

 

Image by Arek Socha from Pixabay

The ARwards: The Official OVR Contest for Content Creators

Following the announcement of a few days ago, the decentralized multiverse platform OVR, which unites the physical and virtual worlds through Augmented Reality, has launched “The ARwards” contest open to all creators who are looking for an opportunity to gain wide visibility and possibly win interesting prizes.

First of all, The ARwards is completely free for any participant who will simply be asked to register. Creators will be required to provide: username, password, email and nationality, thus completing the registration in less than five minutes.

The platform offers content creators the opportunity not only to project their 3D experiences to the world, but also to encourage competition among creators to make augmented reality experiences even better.

In concrete terms, through an OVRLand NFT, the famous virtual hexagon developed by OVR to create three-dimensional objects on top of it, participants can upload a 3D model to the dedicated workspace, edit it, refine it and finally send it to the OVR team for approval.

Once the project has been approved, the content will be shown in the list of candidates for the competition and can receive its vote. Each registered user of the OVR platform will be able to vote until the end of the competition according to three specific criteria, namely creativity, design and relevance of the theme.

Users can vote regardless of whether they have OVR tokens in their wallet or not. However, the vote of users who have tokens in their wallet will carry more weight due to the fact that the contest uses a quadratic voting system powered by blockchain.

In addition to securing a space on the official website where the model created is seen by lots of users, participants will be able to win additional prizes in OVR tokens which, at the time of publication, are worth $0.69 and can be traded on Uniswap, ZT, Gate.io, BitMart and PancakeSwap.

It is already possible to admire the works via representative videos, to read the original captions written by the creators and to vote for the NFT OVRland with the 3D work you enjoy the most.

This is a sponsored post. Learn how to reach our audience here. Read disclaimer below.

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Dydx Trading Volumes Explode After Latest Chinese Crypto Ban

Dydx, a decentralized exchange, has seen its trading volumes explode in the last few days, surpassing other recognized decentralized exchanges like Uniswap and Pancakeswap. Some analysts have suggested this might be the result of the latest Chinese cryptocurrency ban causing China-based users to move their trading activities to these platforms.

Dydx Bursts With Activity

Dydx, a decentralized exchange that, unlike other similar platforms, offers an order book, has been bustling with activity during the last few days. The activity in the decentralized exchange has grown enormously, with volumes surpassing those of its decentralized rivals such as Uniswap and Pancakeswap. In fact, On September 26, dydx trading volumes surpassed those of Coinbase, achieving a big milestone for the platform.

According to Antonio Juliano, Dydx’s founder, the exchange managed to move $3.68 billion on September 26, while Coinbase moved $3.61 billion on the same day. Dydx was originally based on Ethereum, but it has since included an L2 layer called Starkware, which allows for much cheaper fees offering the same functionality to its users. This has also caused the exchange to become popular, now being more appealing to everyday traders.

Chinese Exodus to Decentralized Exchanges

Due to the incredible growth in Dydx’s trading volumes, some analysts have declared that this might be the result of Chinese traders moving to decentralized alternatives after being abandoned by their centralized counterparts. This abandonment was motivated by the recent cryptocurrency ban that forced Asian exchanges to stop offering services to mainland China-based users.

Decentralized exchanges are the best option for Chinese traders right now because they don’t enforce KYC policies for their customers. This means that traders can continue to keep holding and exchanging their assets without the risk of government intervention, and now, this trait is key for Chinese users.

The value of dydx, the governance token of the exchange, has also been on a constant rise since it was awarded to its traders earlier this month. The token has gained more than 100% in just a month, and its price now hovers around the $24 mark. This means that the airdrop offered to traders is now worth more than double when it was awarded, with some traders now having obtained $900K worth of dydx.

What do you think about the recent explosion in dydx trading volumes? Tell us in the comments section below.

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News, ban, Bitcoin, China, Cryptocurrency, decentralized exchanges, Dydx, Exchanges, starkware

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BabyCake – Bringing DeFi to the Masses

BabyCake has a mission. Bring DeFi to the masses.

The rate of crypto adoption in the world is growing, but the percentage of the world’s population who use it is still very small. Decentralized finance, which utilizes technologies to remove intermediaries, middlemen, and banks from financial markets, is a complicated system to enter into.

In a huge step toward fulfilling their mission, BabyCake has developed an App. This app aims to allow anyone with a credit card and a phone to buy cryptocurrency within 3 clicks.  The App is clean, clear and simple to use and will soon be available on both IOS and Android. It will revolutionize the DeFi space and foster the adoption of crypto in a safe, secure, easy and rewarding way.

BabyCake’s primary goal was to make it simple for our mothers to start earning passive income without having to understand this complicated DeFi world, and with this App, they have succeeded.

So who or what is BabyCake? The company was founded by two friends, Monk and Halo. Their passion is helping people take control of their lives and elevate their situations through the use of DeFi to earn passive income. The first step towards achieving that goal was to create the BabyCake token. It is an innovative Reflection Token, one that pays dividends in an already established token instead of its own. Seven percent of the daily volume is paid out to the holders in $Cake, the native token of PancakeSwap, the premier BSC Swap on the market and a company whose tokens are getting more valuable all the time. This means that not only do holders of BabyCake benefit from the increase in the price of the native token, they also receive an appreciating asset, which they can then also Stake on PCS to make even more money!

BabyCake’s early success enabled the creation of the App, their brand new Swap, and the creation of more products, all of which make owning BabyCake a very profitable investment.

Just this week, BabyCake launches its new and improved website. It includes the brand new Swap, an updated Dashboard, Rewards Calculator and information about their upcoming ‘3-click’ App.

The Dashboard includes their very popular Auto-Reinvestment Pool (ARP). Over 14% of all BabyCake tokens have been deposited into the ARP. The Pool accumulates the Cake rewards each holder earns and automatically converts them to BabyCake tokens for a low 3% tax. As the buy tax for BabyCake is 15% to purchase through PancakeSwap, it is a great way for their holders to increase their bags for a significant discount.

BabyCake is currently burning 200 million tokens a day for a 7 day period, reducing supply and increasing the value of already held tokens.

Coming up in the future is the very exciting launch of BabyCake NFT’s. The first NFT to combine Augmented Reality NFT’s with a Rewards System. The NFT’s will initially be available on a BabyCake NFT platform. There will also be a merch store opening in the near future in response to huge demand from the community.

All in all, the future of BabyCake looks bright and with the current price floor being very stable, it is a great time to invest before their many products are launched and their market cap explodes.

 

Visa Announces Layer 2 Payments Channel for CBDCs and Stablecoins

On Sept. 30, Visa’s Global CBDC Product Lead, Catherine Gu, wrote that the company’s research and product teams are working on a new blockchain initiative called Universal Payment Channel (UPC).

The cross-chain interoperability hub will connect different DLT networks to facilitate transfers of digital assets.

Gu used the example of splitting a bill between friends using different types of money, such as a central bank digital currency (CBDC) and a stablecoin like Tether. She described it as a kind of universal adaptor for money:

“Think of it as a “universal adapter” among blockchains, allowing central banks, businesses, and consumers to seamlessly exchange value, no matter the form factor of the currency.”

Visa to Settle Cryptocurrencies?

Visa is confident that digital currencies will be a part of daily financial life in the future. The payments giant is also confident that there will be more CBDCs launched, even if the United States is still dragging its feet on that front.

Visa’s UPC aims to connect all of these newly released CBDCs and stablecoins in one cross-chain platform to enable seamless transfers. The UPC hub would connect dedicated payment channels between blockchains such as CBDC networks for different countries or vetted private stablecoin networks.

Gu also pointed out that there were certain transaction speed advantages that Visa could offer over existing public blockchains that are much slower, though she didn’t name names. The new platform would act as a layer 2, processing transactions off the main chains.

“UPC’s specialized payment channels would be established off the blockchain and leverage smart contracts to communicate back with the various blockchain networks, delivering high transaction throughput securely and reliably and improving speeds overall.”

The UPC solution aims to serve as a network of blockchain networks, she added, “adding value to multiple forms of money movement, whether they originate on the Visa network, or beyond.”

There was no mention of the ability to transfer cryptocurrencies such as Bitcoin or Ethereum, but the infrastructure laid out would most likely permit it. Visa referred to BTC as digital gold earlier this year and is clearly eager to be a part of the space.

Cardano Partner COTI Launches Visa Debit Cards

In a related development on Sept. 30, digital fintech platform COTI announced new products that will provide Visa debit cards and bank accounts to users.

In July, Visa approved the first debit card that would allow Bitcoin payments for the Australian market.

Featured Image Courtesy of CBerry

Ardadex Protocol Kicks off Token IPO to Early Adopters

[PRESS RELEASE – Please Read Disclaimer]

Ardadex Protocol is an innovative platform on Cardano Blockchain that provides users with advanced AMM and NFT functionalities. Ardadex Protocol will power NFT marketplace for Digital Creators and online creators to Mint & trade digital commodities using our super sleek, easy-to-use user interface on Ardadex Protocol.

The key features of the Ardadex ecosystem include; the NFT and DeFi aggregators, NFTPad, AMM/DEX, yield Farming, etc. The cross-chain interoperability makes it easy for users to explore and select the best protocols.

Ardadex ecosystem

1. Ardadex Exchange: this will serve as the native decentralized exchange on Cardano Blockchain that allows users to swap tokens conveniently. The DEX has some of the lowest fees in the DeFi space and offers fast trades with low slippages.

2. Liquidity providers can deposit LP tokens, receive competitive returns on their capitals, and take part in yield farming activities.

3. Ardadex NFT: The platform combines decentralized finance and nonfungible tokens. This will enable Digital Creators and online creators to Mint & trade digital commodities using our super sleek, easy-to-use user interface on Ardadex Protocol.

4. ARDAN Token can serve as Payment Currency for Fees & Featured Listings

A community-driven token

Ardan Token acts as the governance token of Ardadex Protocol. ARDAN holders can vote on the development or amendment of the Ardadex projects and can also submit governance proposals. This makes ARDAN a completely community-driven token. Being the governance token on Ardadex Protocol.

Participation on Ardadex Protocol, investor profits are diversified with many sources:

1. Staking: Customers can use ARDAN Token to stake and receive rewards on the Ardadex platform. The more transactions processed, the higher the liquidity as well as the profit from staking.

2. Trading: Investors can unlock ARDAN tokens and transfer them to a trading wallet for trading cryptocurrency or NFT tokens.

3. ARDAN Token holders are granted Early Access To Exclusive NFT Drops

In conclusion, DEXs and NFT market are still in their early years and will need further development of infrastructure and refinement of user experience, with a growing Ardadex ecosystem and several features already planned for future release, Ardadex.finance isn’t just another DeFi protocol but rather, an innovative project to surely watch out for.

Ardadex Token Early Adopters Benefits

Interested participants can purchase ARDAN tokens at the best available price. Ardadex Protocol allocated a total of 250 million ARDAN tokens for pre-sale at a price of $0.001 ADA per token and 250 million ARDAN tokens for public sale at a price of $0.003 ADA per token. The total allocated tokens to the public will be unlocked at the end of the ARDAN Token IPO.

Interested participants can visit our website, click on the presale link https://ardadex.finance/presale/ and proceed with ARDAN token purchase procedure.

Dogecoin Co-Founder Suggests an Ethereum Bridge to Doge and Compatible NFT Markets

Billy Markus, the co-founder of Dogecoin, explained on Wednesday that an Ethereum bridge to the Doge network would bolster the dogecoin ecosystem. Markus also said that non-fungible token (NFT) markets “would help Dogecoin” as well.

Dogecoin Co-Creator Thinks 2 Ideas Could Help the Doge Network

The popular crypto asset dogecoin (DOGE) has gained a whopping 7,500% during the last 12 months and reached a high of $0.731 per unit on May 8, 2021. However, DOGE is down 72% since that all-time high and 25.4% during the last month.

While the Dogecoin co-founder Jackson Palmer criticized the crypto world and said it was managed by powerful cartels, Billy Markus speaks about crypto in a positive manner.

On Wednesday, Markus tweeted about the meme-based crypto network he helped create and discussed how the project could be helped by adding two things.

“Two things I believe would help Dogecoin: [The] completion of DOGEETH bridge, [and] NFT platforms (e.g. Opensea) allowing for the DOGE-ETH token to be used for purchases,” Markus added:

NFT purchasing is [in] high demand with crypto. Allowing for DOGE purchases of NFTs greatly increases its utility.

Some People Are Already Discussing a DogecoinEthereum Bridge

Markus’s idea follows the suggestions from the co-founder of Ethereum Vitalik Buterin during the first week of September.

“Personally, I hope that doge can switch to PoS soon, perhaps using Ethereum code,” Buterin said at the time. “I also hope they don’t cancel the 5b/year annual PoW issuance, instead they put it in some kind of DAO that funds global public goods. Would fit well with dogecoin’s non-greedy wholesome ethos.”

Meanwhile, a number of individuals liked Markus’s concept of an ETH DOGE bridge and NFT utility. “DOGE being implemented into the NFT ecosystem would be a huge benefit to the community,” one individual said in response to the DOGE co-creator’s tweet.

A Twitter account dubbed “DogeX” tweeted: “HEY Billy Markus our metaverse developer spoke with Steven Steele about this last week. We are actively trying to work with you on this concept while we build out the Doge X ecosystem.”

What do you think about the ideas the co-creator of DOGE shared on Twitter? Let us know what you think about this subject in the comments section below.

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TA: Ethereum Consolidates, Why Bulls Could Aim Fresh Rally

Ethereum is consolidating near the $3,000 zone against the US Dollar. ETH price could start a fresh rally if it clears $3,020 and $3,050.

Ethereum corrected lower, but it found support near the $2,950 zone.
The price is now trading above $2,950 and the 100 hourly simple moving average.
There is a key contracting triangle forming with resistance near $3,020 on the hourly chart of ETH/USD (data feed via Kraken).
The pair could start a steady increase if it clears the $3,020 and $3,050 resistance levels in the near term.

Ethereum Price Stuck Below Resistance

Ethereum extended its increase above the $3,000 level. ETH even tested the $3,050 zone before correcting lower, similar to bitcoin.

There was a downside correction below the $3,000 support level. There was a break below the 23.6% Fib retracement level of the upward move from the $2,782 swing low to $3,050 low. However, downsides were limited below the $2,950 level.

Ether price is now trading above $2,950 and the 100 hourly simple moving average. There is also a key contracting triangle forming with resistance near $3,020 on the hourly chart of ETH/USD.

Source: ETHUSD on TradingView.com

An immediate resistance on the upside is near the $3,020 level. The first major resistance is near the $3,050 level. A break above the $3,050 level could start a steady increase. The next main resistance is still near the $3,150 and $3,165 levels, above which the price might accelerate higher.

Fresh Decline in ETH?

If ethereum fails to continue higher above the $3,020 and $3,050 resistance levels, it could start a fresh downside correction. An initial support on the downside is near the $2,980 level.

The first key support is now forming near the $2,950 level and the 100 hourly simple moving average. If ether fails to stay above $2,950, there is a risk of a sharp drop. In the stated case, the price might decline towards the $2,800 level.

Technical Indicators

Hourly MACD – The MACD for ETH/USD is now losing pace in the bullish zone.

Hourly RSI – The RSI for ETH/USD is still above the 50 level.

Major Support Level – $2,950

Major Resistance Level – $3,050

Compound Finance Suffers Bug Leading To ~$50M Token Distribution

Compound Finance (COMP) has seemingly suffered a token distribution bug after introducing and passing a recent governance vote that addressed rewards distribution, Proposal 62. Shortly thereafter, Compound reported in a tweet that there was unusual behavior regarding COMP distribution following the vote, but that “no supplied/borrowed funds are at risk.”

The funds that are in jeopardy due to the bug sit only in the Comptroller contract, which means that there is a total cap of 280,000 COMP tokens that are at risk. However, that’s still a hefty number, worth over $80M USD at the time of publishing. One transaction was reportedly as high as nearly $30M alone.

Let’s Get Movin’

With governance often comes the lack of immediate action. As Compound Finance CEO and Founder Robert Leshner noted in a tweet discussing the events at hand, “there are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process.”

The Compound team quickly rolled out the initial governance process with Proposal 63 up for review, which temporarily disables COMP distribution rewards while the team and community address the fix for the protocol.

Leshner adds that while Proposal 63 is up for review, “a patch to restart the distribution is in development.” While this gives the team time to address the issue, Proposal 63 does note that all ~280,000 tokens will be at risk.

While the recent Compound bug showed immediate price impact, buyers quickly came back to market and the COMP token has still showed long-term resiliency. | Source: COMP-USD on TradingView.com

Related Reading | TA: Ethereum Consolidates, Why Bulls Could Aim Fresh Rally

Take 10%

Leshner has since gone on Twitter asking recipients of mistaken distributed COMP to return it, with the below tweet:

If you received a large, incorrect amount of COMP from the Compound protocol error:

Please return it to the Compound Timelock (0x6d903f6003cca6255D85CcA4D3B5E5146dC33925). Keep 10% as a white-hat.

Otherwise, it’s being reported as income to the IRS, and most of you are doxxed.

— Robert Leshner (@rleshner) October 1, 2021

He took a bit of heat for the tweet, and followed up by stating that it was a “bone-headed tweet / approach” and that his intentions lie in “trying to do anything I can do to help the community get some of its COMP back.”

Smart contract specialist Kurt Barry noted just how costly small errors in code can impact blockchain projects:

Smart contracts are unforgiving of the tiniest errors…COMP bug is a tragic case of “>” instead of “>=” (in two code locations). Two characters, tens of millions of value lost.

— Kurt Barry (@Kurt_M_Barry) September 30, 2021

Truly a tough set of circumstances for the Compound Finance community, however many have shown approval of Leshner’s response.

The move is not the first mishap in the rapidly growing world of DeFi. Last month, the Poly Network suffered a hack that cost over $600M USD. In a bit of a bizarre set of circumstances, the Poly hacker returned most of the stolen crypto back to the network. And in the last week, cross-chain DeFi protocol pNetwork lost over $12M USD in tokenized Bitcoin to attackers.

Related Reading | Visa Is Building A Payment Channel Network On Ethereum

Featured image from Pexels, Charts from TradingView.com

Why is SEC Chairman Gary Gensler playing hardball with crypto?

In between the doom and gloom, there are indicators pointing to this new regulatory reality as a potential setup for digital asset laws down the line.

Regulatory Clarity Incoming

On Sunday, September 26th, U.S. House of Representatives Speaker Nancy Pelosi stated with some degree of confidence that the $1 trillion infrastructure bill will finally pass this week, probably on September 30. As you may recall, when it was in the Senate, the bill was highly controversial for the digital asset space.

In a nutshell, Janet Yellen, the current Treasury Secretary and former Fed Chair, reportedly instructed a group of senators—Warner-Portman-Sinema—to include crypto regulation in the bill. It would maximize regulatory power over DeFi with a simple trick. The expanded, albeit ambiguous, definition of “broker” would include every cog in the blockchain space—wallet developers, miners, and decentralized exchanges.

In turn, the SEC would have the power to treat them as such, requiring their registration for oversight and tax purposes. Upon hearing the news, many developers had already announced that they were packing their bags. Although there was an attempt to introduce clearer language via the Wyden-Lummis-Toomey amendment, it failed to pass due to surprise intervention by Sen. Richard Shelby.

I supported @SenToomey cryptocurrency amdt. I know of its importance to innovation & job creation, but I believe it pales in comparison to the security of our nation–which is why I called for a vote on my defense infrastructure amdt. It’s unfortunate that Dems blocked both amdts.

— Richard Shelby (@SenShelby) August 10, 2021

Due to the enormity of the infrastructure bill and underwhelming crypto lobby, the most likely scenario is that the infrastructure bill will pass with the crypto amendment in its original form. While this would give the government maximum leeway to place pressure, there are different interpretations of what it could mean. Former Coinbase CTO thinks the amendment could eventually go straight after Bitcoin:

Make no mistake, this is a backdoor Bitcoin ban.

Compliance is impossible. Their intent is to criminalize full nodes, lightning nodes, and most Bitcoin wallets.

And they are not really in favor of proof-of-work; the very next bill will include some ESG thing to attack that too. https://t.co/rnBXNTRDPd

— Balaji Srinivasan (@balajis) August 6, 2021

However, there is a more balanced approach to viewing the implications of the surprise crypto amendment.

Gensler’s Stance on Securities

Since the infrastructure bill has been introduced, Gary Gensler, Chairman of the SEC, stated on multiple occasions that the blockchain space—from DeFi protocols to Bitcoin—needs to embrace regulation. Most recently, on September 27 at the Code Conference in Beverly Hills, Gensler addressed the crux of the matter:

“There’s trading venues and lending venues where they coalesce around these, and they have not just dozens but hundreds and sometimes thousands of tokens on them,” Gensler continued.

“This is not going to end well if it stays outside the regulatory space.”

In other words, there needs to be a differentiation between categories of tokens – are they securities or commodities? Under the Securities Exchange Act of 1934, a legal construct called the Howey Test was devised to determine if an asset could be classified as a security. Key considerations included:

Whether there is an investment of money
Whether there is an expectation of profit which depends on the efforts of the promoter or a third party
Whether it involves common enterprise

Based on these criteria, even stablecoins could pass the test as a security. When Sen. Pat Toomey challenged Gensler how stablecoins can pass the Howey Test if they don’t have an “inherent expectation of profit”, Gensler responded that “they may as well be securities”, even as second-order financial activity. To this vague response, Toomey urged for regulatory clarity before any enforcement takes place.

Interestingly, Gensler seemed to have agreed with Toomey but implied that his hands are tied by the broad securities law from 1933 and 1934, hailing from a period when computers didn’t even exist. Needless to say, it would be a huge deal if stablecoins were to be regulated as securities as they serve as the bridge from fiat to crypto.

As long as there is a tax obligation, people will have to convert from fiat to crypto and vice-versa, regardless if a person manages to achieve the crypto-nirvana of paying everything else with digital assets. Further, most online credit card payments are facilitated with a fee of under 3%—which is far cheaper than the standard gas fee for transacting ETH. Online payments have become a fundamental role in today’s economy, and stablecoins are well-positioned to play a big role here.

What is The Regulatory Setup Then?

If we examine the development of the internet—especially its early regulatory discussions—to that of digital assets, one cannot help but notice a number of similarities. During the first internet wave, Europe missed the tech investment boat. In a 2014 report, global consultancy firm A.T. Kearney had noted Europe’s decline in the tech sector, with only 9 out of 100 major tech companies headquartered in Europe. Instead, the US became a hotbed for tech firms in the early days of the internet, largely thanks to a light-touch regulatory approach.

Now, we are at the threshold of experiencing something similar with DeFi in America. Or, are we? By any interpretation, Bitcoin doesn’t pass the Howey Test as it is sufficiently decentralized, with the IRS having previously said Bitcoin is ‘property’ for tax purposes. Even the previously most dismissive of bankers are coming around:

#Bitcoin price could 10x in the next five years. – Jamie Dimon, CEO of JPMorgan Chase pic.twitter.com/LOXiu6HmaC

— Bitcoin Magazine (@BitcoinMagazine) September 27, 2021

 

As it stands now, if most tokens were to be classified as securities, only the biggest institutional investors would benefit due to so many burdens involved with such an asset class. At the same time however, existing securities regulations applied to digital assets would likely lead to a mass exodus of digital asset firms out of the United States.

Related Reading: Zooming Out: The Real Takeaway from the Senate’s Digital Asset Debate

Is it reasonable to think that bankers and regulators would allow for decentralized finance to move out of the US to greener pastures as if they’re unable to conceive of such a consequence?

When we take a look at traditional finance, even the most speculative forms of trading—such as binary options trading—is not outlawed but strictly regulated by the SEC and CFTC. In this light, a likely scenario is that regulators are playing hardball to set the terms for future digital asset regulation. Both the crypto legislation embedded in the infrastructure bill and outdated securities laws provide a space for setting the terms.

Then, once the digital asset ecosystem sees the writing on the wall, proper legislation is likely to take place as the proverbial lesser evil that elicits a sigh of relief.

Some might see this as wishful thinking. But as the United States is on the verge of raising its debt ceiling once again, numerous indicators suggest the U.S. government needs every financial opportunity it has available.

The post Why is SEC Chairman Gary Gensler playing hardball with crypto? appeared first on CryptoSlate.