The Next Wave of DeFi Innovation Will Affect the Crypto Market

Alexander Salazar
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The Next Wave of DeFi Innovation Will Affect the Crypto Market

DeFi innovation has helped replace inefficient counterparty matching mechanisms on decentralized exchanges, but it relies heavily on large amounts of liquidity. New applications have focused on creating new high-performance tokenomic systems, bringing wealth to the participants, which has worked well for a while.

Unsound fundamentals have caused a rinsing out in the bearish crypto trading market, where several protocols will struggle to survive.

Bearish markets may be disastrous, but they often lead to significant innovations regardless of the sector. DeFi platforms are no exception to that situation, as a wave of innovation has historically occurred.

The projects that fueled the hype cycle preceding the current bear market did not bring major DeFi innovations. Since they focused on creating cash flows with super-loaded tokenomics, the most affected projects led to a dire state.

The current bearish market aims to separate the wheat from the chaff, where weakly-founded projects like Terra will go first.

Looking at those DeFi projects that focus less on the new tokenomics and return to technological innovation is crucial. A better DeFi infrastructure and creators to build it will help determine which platforms will last.

DeFi Innovation Introduced the Rise of Liquidity in 2020

The peer-to-pool model introduced a mechanism to accumulate liquidity on the Ethereum network. That has replaced inefficient counterparty matching mechanisms on decentralized exchanges, leading to the creation of the Uniswap automated market maker (AMM).

However, the operation of this model relies heavily on large amounts of liquidity. Therefore, models that took advantage of the token economy to serve the product inspired DeFi creators. For example, the FCoin Exchange mining trading mechanism introduced the centralized exchange in 2019 to reward users with tokens for their transactions.

Compound has gained popularity, making decentralized lending crucial to the DeFi landscape in 2020 by leveraging liquidity mining. After that, SushiSwap launched Pool 2 Mining, combining tokenomics with liquidity structures by adding leverage.

Although these innovations have been significant to DeFi development, this expansion has had increasing difficulties. The operation of all these protocols on Ethereum congested the blockchain. That slowed the innovation pace and led to a sluggish condition in the market.

DeFi Innovation Focused on Creating Tokenomic Systems since 2021

The recovery of the bearish market by late 2020 gave way to a wave of new protocols in 2021. These new applications have focused on creating new types of high-performance tokenomic systems, bringing wealth to the participants.

These protocols integrated existing technology stacks with new smart contracts, using algorithms to create positive feedback loops. That led to ever-increasing returns for liquidity providers and yield farmers, which worked well for a while. People earned significant annual percentage yields for lending and growing their assets.

However, people started selling their tokens as chaos broke out due to worse market conditions. The algorithm-driven virtuous cycles providing those high returns have ceased to work, as stablecoins have lost their pegs and cascading liquidations exploded across the market.

A combination of accumulated leverage, greed, and human arrogance has caused the recent DeFi market cycle. The entire market undergoes significant sell-offs at the end of each phase, while the bearish market shows no signs of ending soon.

Undoubtedly, the public will become more aware of the protocols that will last. Everyone will see the enduring performance of truly trusted technology in this industry.

By Alexander Salazar

More than Twenty Cryptocurrency Companies Have Registered with the Bank of Spain

Audy Castañeda
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More than Twenty Cryptocurrency Companies Have Registered with the Bank of Spain

The Bank of Spain assures that the registration does not imply approval of the activity carried out by the providers of exchange services of virtual currency for fiat. Most of the registered companies are of Spanish origin.

According to a document published by Europa Press, twenty-one crypto companies began to be part of the Bank of Spain’s registry of wallet custody service providers.

In October 2021, the Bank of Spain enabled a new registry for cryptocurrency service providers. This registry seeks that crypto companies comply with the demands and requirements set forth in the regulations for the prevention of money laundering and financing of terrorism.

Since then, the financial institution has been receiving registrations from up to 21 cryptocurrency companies. In mid-June 2022, the registry already had 15 registered providers, but in the last month, that number grew significantly.

Companies such as Rapiven99, Binance (registered under the name of Moon Tech Spain), Shitcoins.club (commercial name of Young Guns), GBTC Finance, and Nebeus (registered as Rintral Trading), are the ones that have registered in recent weeks in the register of the Bank of Spain.

According to the economic newspaper Cinco Días, most of the registered companies are of Spanish origin, five of them are located in Madrid, another five in Barcelona, ​​three in Valencia, one in Alicante, and another in León. Two others are based in the Netherlands, two in Austria, and two in Germany.

Details of the Registration with the Bank of Spain

According to an official document published by the Bank of Spain, registration for cryptocurrency service providers is only conditional on the existence of adequate procedures and bodies for the prevention of money laundering and financing of terrorism. Similarly, it is limited to compliance with the requirements of commercial and professional honorability.

According to said document, “Law 10/2010 includes these providers as obligated subjects for its purposes and introduces an obligation to register with the Bank of Spain. However, it does not establish rules for financial supervision, prudential, corporate governance, technological security or market conduct or information transparency.”

The Bank of Spain Warns against the Risks

The financial entity of Spanish origin ensures that it does not supervise, for example, the financial or operational and security risks of these businesses nor does it have any competence in matters of conduct over these providers.

Similarly, the Bank of Spain clarifies that being in the registry “does not imply any approval or verification of the activity carried out by providers of virtual currency exchange services for fiduciary currency and custody of electronic purses by the Bank of Spain.”

About the risks, it is worth considering that, aside from major assets, cryptocurrencies often have small market capitalizations, and often the developers themselves are anonymous or pseudonymous. This can lead to price volatility, in addition to the general volatility of the cryptocurrency market.

Therefore, in order for cryptocurrency traders not to lose their minds or their investment, they must be aware that their monetary interest is often equal to their emotional interest. They don’t see their assets as funds, but as what they could be: a car, a house, or a debt-free future. This is a fundamentally wrong mindset with which to approach cryptocurrency trading.

By Audy Castaneda

FTX CEO Sam Bankman-Fried Believes Crypto Will Flourish in Latam

Jenson Nunez
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FTX CEO Sam Bankman-Fried Believes Crypto Will Flourish in Latam

Sam Bankman-Fried, CEO of FTX, thinks crypto will prosper in Latam. In a recent interview, Bankman-Fried acknowledged the increasing adoption and demand that digital assets are experiencing in Latam, stating that the use of remittances and these type of payments would increase in the future.

Latam is one of the regions in the world that has become a digital asset adoption spot due to its particular traits and situations, so the crypto space is starting to notice this particularity.

Sam Bankman-Fried, CEO of FTX and one of the wealthiest personalities in the crypto world, has recognized the influence of crypto in the area, so he believes this influence will keep expanding its tentacles in the future.

Bankman-Fried highlighted that the region would experience a rise in adoption rates for different purposes. Bankman-Fried declared that the volume would reach a good position over time, and more and more adoption is coming for remittances in Latam. Bitcoin will end up serving as a payment method in the entire region.

Remittances have vast digitization in the region. Mexico, El Salvador, and other areas in Latam show a $128 billion remittances market that is still not digitized and possibly presents an opportunity for digital assets.

A Native Asset in the Region

FTX’s CEO recently got involved in helping some of the entities dealing with liquidity issues. He believes this new payment and remittances flow might bring many advantages because it would happen through a native digital asset connected to the value of fiat currencies in the area.

There have been various attempts at achieving this goal, with nations like Mexico already having a coin attached to its fiat asset issued by Tether, the stablecoin entity.

The entity got interested in Latam and is negotiating a possible business opportunity in the region. Bankman-Fried explained that he does not think there is anything solid at the moment, but he would love to do it and has been talking to possible partners in Latin America to carry out the project.

FTX intends to Provide Early Liquidity to Customers of Voyager

On June 28, Sam Bankman-Fried told Forbes author Steven Ehrlich that various crypto entities were secretly insolvent and warned more insolvencies were on their way.

The FTX CEO’s words turned out to be a reality, as several entities with financial issues followed the struggles with Celsius and its obstruction of withdrawals. Celsius eventually opted for bankruptcy protection alongside Three Arrows Capital and Voyager Digital.

On July 22, Bankman-Fried went to Twitter and out a statement explaining how FTX is willing to assist Voyager’s users. He said he is happy to do what he can to get liquidity to Voyager’s customers.

On the other hand, a press release revealed by Bankman-Fried notes that FTX launched a joint offer with West Realm Shires Inc., the owner, and operator of FTX US, and Alameda Ventures. The entity intends to bring early liquidity to customers of Voyager. Bankman-Fried explained that he desired to offer a better method to assist customers in their quest to get their liquidity.

By: Jenson Nuñez

Inflation Drives Demand for Stablecoins in Latin America, According to Binance

Audy Castañeda
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Inflation Drives Demand for Stablecoins in Latin America, According to Binance

Binance CEO for Latin America, Maximiliano Hinz, said that stablecoins have great growth in the region. Latinos have a preference for stablecoins because they are “more familiar” with them, according to the exchange.

Binance CEO for Latin America, Maximiliano Hinz, revealed that the current economic landscape in the high-inflation region has boosted the demand for stablecoins, as they are used as an alternative against currency devaluation in Latin America.

Maximiliano Hinz expressed the following to Bloomberg Line:

“Much of the volume of cryptocurrencies traded in Latin America translates into stablecoins. As users learn about Binance and alternatives, we see them migrating to cryptocurrencies whose value is more volatile, such as Bitcoin, Ethereum, and Binance Coin.”

Hinz Further Explains

At the beginning of July, Maximiliano Hinz calculated that cryptocurrencies have a global penetration of up to 4%, which, although it has grown, is lower than the global use of credit cards, which is between 12 and 15%, so that there is “a lot to do”.

“We see how there are a lot of crypto projects that are emerging within Latam, both technological and artistic, and the right decisions are being made so that the region can establish itself as an international hub, without a doubt.”

BeInCrypto previously stated that one of the countries that most recently adopted stablecoins was Argentina, where savers in the face of changes in the Treasury resorted to stablecoins. They bought between two and three times more stablecoins than on a typical weekend. Following Guzmán’s resignation, the peso depreciated around 15% against stablecoins DAI and Tether on several major local exchange platforms.

For the CEO, Latinos have a preference for stablecoins because they are “more familiar” to them, as they have a 1:1 parity with fiat money, such as the Mexican peso (Tether), the dollar, or the euro.

At the end of 2021, Hinz declared in a television interview that El Salvador set “a precedent” with the adoption of Bitcoin as legal tender and acknowledged that the country is working “very hard” on financial education.

Boom for Cryptocurrencies

On that occasion, the local director of Binance claimed that there was a boom in the world for cryptocurrencies, including Latin America, and stated that when the company arrived in El Salvador they realized that many businesses accepted Bitcoin, which seemed to him to be a “very positive option.”

“There are many people in Latin America who are investing in cryptocurrencies and learning about their use. El Salvador has guaranteed employment generation, with the help of Bitcoin mining. The country will be the ecosystem in which companies will sell their shares in a global market, since, in a few years, Bitcoin will be the currency of the world.”

Despite the enthusiasm for Bitcoin, there are those like Professor Paul De Grauwe, who think differently. According to him, it indicates the existence of an aspect regarding the future of Bitcoin, which makes it a dangerous currency, since it confronts a supposed idealized world – where Bitcoin would be central – with the real world.

Bitcoin would not be backed by a lender of last resort, the central banks, and when crises came, and they always do, everyone would go for liquidity, but it would be non-existent. If there are no central banks to provide liquidity, you are headed for deflation and insolvency. A Bitcoin economy is not flexible enough.

By Audy Castaneda

Binance CEO Changpeng Zhao Issued a Lawsuit against Bloomberg Subsidiary

Jenson Nunez
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Changpeng Zhao issued a legal complaint against Bloomberg Businessweek’s Hong Kong publisher, Modern Media CL. It claims that a released article made many unsubstantiated remarks that brought a bad reputation to Binance and Zhao. Zhao has also issued a Memorandum of Law in New York regarding the case.

Binance CEO Changpeng Zhao has issued a lawsuit against a Bloomberg subsidiary for defamation. The legal complaint highlights a recently released article that presented various defamatory remarks that affect Zhao and its company.

Binance CEO Changpeng Zhao has issued a lawsuit against a Bloomberg subsidiary for defamation, as presented in a court filing on July 25. The legal complaint came from the High Court of Hong Kong, while a Memorandum of Law got filed in the District Court of the Southern District of New York regarding the case. The subsidiary is Bloomberg Businessweek’s Hong Kong publisher Modern Media CL.

The filing states that the related text that got released contained serious and defamatory accusations against Binance and Zhao that were false. It claims that the article got designed to deceive readers and drive them into thinking that the CEO and exchange were participating in illegal activities.

The article got titled Can Crypto’s Richest Man Stand the Cold.? But the translation into Chinese presented a different headline that led to the issuing of the legal complaint. The translation alleged that Zhao was leading a Ponzi scheme. The English version also highlighted sentences that seemed very offensive.

The lawsuit points to many specific statements made in the article, alleging that it was implying that Binance was playing a role in a money laundering procedure, fraud, and hacking. The text also features a quote from a Binance user that described Binance as a massive shitcoin casino without giving further identification or verification of the trader.

Changpeng Zhao has issued legal complaints against media publications before. He filed a lawsuit against venture capital firm Sequoia for defamation in 2019 and Forbes in 2020, though he abandoned the latter.

Binance is Facing Regulatory Hurdles but Intends to Contribute to Authorities

Binance thinks that legality is a serious matter, and even though it previously went through regulatory issues, it has been working hard with regulators. The exchange stopped its support for Litecoin privacy enabling MimbleWimble-based transactions, as privacy coins are a matter of concern for regulators.

Many regulatory improvements regarding Binance and its operations took effect, with the Dutch Central Bank fining the exchange $3.3 million for carrying out financial activities without a license.

On the other hand, Binance received a license to carry out its activities in Spain, which adds to the increasing list of regions it serves. It also reached agreements with Cambodia to bring help in regulatory matters.

A Non-Stop Growth

Binance has made public its desire to become a global crypto exchange. For the most part, it has already achieved that goal, even as it has rival exchanges like Coinbase.

The entity is now the one with the most crypto in the world, overtaking Coinbase. Zhao expressed that Binance has a very healthy structure and that it was expanding its hiring process at this time, even if the crypto market is facing a downturn.

By: Jenson Nuñez

The SEC Might Consider Ether (ETH) a Security after the Merger

Alexander Salazar
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The SEC Might Consider Ether (ETH) a Security after the Merger

As a security, Ether might qualify as an investment contract due to its expected rewards or profits. The SEC seeks to control all cryptocurrencies the same way as securities, except for BTC.

Over the last week, the long-awaited Ethereum Merger has driven the asset and the overall crypto market. However, there might still be some negative implications about the regulatory framework.

Several bullish factors have led to the Ethereum transition to Proof of Stake (PoS) in September. Two of the main are a massive reduction in grid power consumption and deflationary issuance.

However, there might be a negative outcome if anti-crypto US financial regulators decide that Ethereum qualifies as a security.

Professor Adam Levitin, from Georgetown University Law Center, Washington DC, recently suggested a scenario where ETH might qualify as a security.

The Expected Profits on ETH Make It an Investment Contract

Gary Gensler, the Securities and Exchange Commission (SEC) Chairman, seeks to secure the control of his agency over cryptocurrencies. If they succeed, they could treat most tokens as securities and regulate them like stocks.

Levitin thinks it is possible to consider any token on a PoS network a security. According to the Howey Test used in a Supreme Court in 1946, a security is an investment contract due to its expected profits.

The test aims to determine whether people have invested money in a business with an expectation of profit derived from the efforts of others.

Concerning Ethereum, the investment would consist of staking with the expectation of a reward or gain of about 4.2% annual percentage yield (APY).

That meets the common business requirement, but only because of the efforts of a third party. It is a gray area as stakers are network participants who provide work in return by validating blocks.

According to Levitin, the contributions from individual stakers might be small compared to the sum that could satisfy the criteria of the efforts of others.

The law professor added that this does not answer the question regarding the issuer when dealing with a decentralized system.

Gary Gensler told financial news television channel CNBC that the only cryptocurrency he does not consider a security is Bitcoin.

The Prices of Ether Cool Down despite the Recent Momentum

After a two-week 30% rally, the prices of Ether reached resistance over the weekend and pulled back on Monday.

ETH is trading at around USD 1,546 and has accumulated a 2.4% loss over the last 24 hours. Its daily trading volume is above USD 18.12 billion, while its market capitalization is about USD 185.30 billion, according to CoinGecko.

The price of the crypto asset remains 69% below its all-time high despite recent momentum.

Turbulent macroeconomic news in the US might cause further volatility for Ether and the crypto market in the coming days.

The relevance of cryptocurrencies is increasingly evident, which regulators like the SEC do not overlook. By considering it a security, they exert further control on how people use it, going against its decentralization principles.

By Alexander Salazar

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