A recently surfaced bill called the “Cryptocurrency Act of 2020” aims to delegate regulators power over blockchain based currency, and doesn’t fail to mention recent DeFi innovations in the literature. Specifically, the bill classifies synthetic derivatives, like those used on Synthetix exchange, as cryptocurrencies.
“synthetic derivatives that are determined by decentralized oracles or smart contracts; and collateralized by crypto-commodities, other crypto-currencies, or crypto-securities.”
Along with the clarification of synthetic derivative products, the Cryptocurrency Act defined what decentralized oracles are, probably because of their increased usage in DeFi projects.
“A ‘decentralized oracle’ means a service that sends and verifies real world data from external sources outside of a blockchain and submits such information to smart contracts that rest on the blockchain, thus triggering the execution of predefined functions of the smart contract.”
There are two protocols that come to mind when thinking of decentralized oracles and synthetic derivatives – Synthetix and Augur. Surely, there are many others that operate similarly, but these two might be the most well known.
Synthetix and Augur are both built on the Ethereum network and are classified fall under a decentralized finance category. Not only are they DeFi, Synthetix is a relatively new DeFi exchange that not many mainstream crypto traders are aware of or have participated in.
The feds have been notoriously behind the times when it comes to regulating in the crypto space, so it’s a bit surprising (and flattering) to see that they are keeping a close eye on the DeFi space. At the same time, it makes you wonder how closely they plan on monitoring decentralized products that have no fiat on ramping. Both Synthetix and Augur operate much differently than regulated exchanges do, with no KYC policies, no day trading limits, potential for leverage and the list goes on.
Sentiments of excitement and fear are being thrown around Twitter as people celebrate theF recognition and wonder what it will entail.
Please don't retweet this like it's a good thing. This is not good whatsoever for crypto https://t.co/vVpWHRqP0e
— Chico Crypto (Giving Away Eth-Jeez Greedy F***s) (@ChicoCrypto) December 20, 2019