DeFi projects like Synthetix and Chainlink are addressed in the Cryptocurrency Act of 2020

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.

 

 

 

Takeaways from Zuckerberg’s upcoming Libra testimony

Tomorrow, CEO of Facebook, Mark Zuckerberg, will appear before the House of Representatives to further explain Libra’s goals and argue against its criticism. Zuckerberg released his written testimony to the public today which answers many questions and speculations. 

Libra won’t release until U.S. regulators approve it

This week, David Marcus, head of the Libra project admitted that the Libra Association was playing with the idea of using multiple stablecoins instead of one backed by many. 

One of the obvious reasons to do this is so the Libra platform could be released in other countries while regulators in the U.S. hash out details. 

Even though Zuckerberg is afraid that China’s digital currency will beat Libra to its primary use cases, the Facebook CEO still values regulator approval. 

“Facebook will not be a part of launching the Libra payments system anywhere in the world unless all US regulators approve it. And we support Libra delaying its launch until it has fully addressed US regulatory concerns.”

Zuckerberg plays to the U.S. fear of losing financial leadership

An official from the Federal Reserve Bank of Dallas recently spoke about the possibility of a digital dollar. His statement came shortly after a former CTFC Chairman wrote about how creating virtual USD could help the U.S. maintain its status as the world’s reserve currency. 

Zuckerberg plans on following suit by warning congress about China’s innovation and what the U.S. risks by waiting it out. 

“Libra will be backed mostly by dollars and I believe it will extend America’s financial leadership as well as our democratic values and oversight around the world. If America doesn’t innovate, our financial leadership is not guaranteed.”

Libra “is not an attempt to create a sovereign currency”

Zuckerberg wrote that Libra is just a way to transfer money. They have no intention to compete with central banks even though one of the first lines from the testimony mentions that more than 1 billion people don’t have access to a bank account.

His only argument against banks is that they make it hard for people to send money across the globe at low costs. 

“We expect the regulatory framework for the Libra Association will ensure that the Association cannot interfere with monetary policy.”

They will be cooperative with identifying money laundering and terrorist funding

Since Libra will comply with KYC (Know Your Customer) regulations before letting people exchange fiat for Libra, they will have all information needed to track transactions.

“A digital payments system with regulated on- and off-ramps and proper know your customer practices is easier to secure, and law enforcement and regulators can conduct their own analysis of on-chain activity.”

Being KYC compliant means that Facebook will require things such as social security numbers, drivers licenses and possible inquire about employment status and reasons for purchasing Libra before allowing users to join the ecosystem.

 

Ripple expands into D.C. to educate regulators

Ripple said in a press release today that industry leaders have to come together to realize the full potential of blockchain tech. With this, Ripple announced a dedicated government relations office in Washington D.C. Along with the expansion, they also announced becoming a member of the Blockchain Association.

The Blockchain Association is a non-profit located in Washington D.C focused on advocating for blockchain networks. Their official website has little information on who exactly is involved in the project or what they have done, other than quotes from companies like Coinbase, Circle, Cumberland and Blockstack scrolling across the screen. 

On the Blockchain Association’s Medium page, they occasionally post opinion pieces and news that has to do with them. The one post they have with direct commentary between a member and the U.S. Government was when Circle’s Jeremy Allaire testified to the Senate Banking Committee on behalf of the Blockchain Association. It was an important moment for the group when the Committee asked them to represent the blockchain industry.

We are grateful that the Committee asked the Blockchain Association to represent the industry in this important hearing and look forward to continuing our dialogue with policymakers in order to ensure that the United States remains a leader in this growing field.

October has been a month filled with the U.S. Government telling blockchain projects no. Education in D.C. seems necessary to those advocating for blockchain projects, but it is unclear what type of activism is actually going on. 

Ripple is one of the few blockchain companies who is working in harmony with banks. Some of the Ripple community believes that because of this, they can have a strong influence on D.C. regulators.