Does the Crypto Boom in the US Mean DeFi Needs New Regulations?

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Several former US government officials have been joining crypto companies lately, raising concerns of crypto institutionalisation undermining the idea of decentralised finance (DeFi). Compliance aspect of the wider crypto adoption could either change the course towards industry growth and adoption or split it into two different directions.

The recent Coinbase IPO listing has become a watershed moment for cryptocurrencies and their move towards the mainstream. The broader acceptance has been further affirmed as crypto companies continue hiring a number of former US government officials, most recently—a former top US banking regulator joined Binance, at the beginning of May. While it could help crypto companies handle emerging US regulatory frameworks, it also raises questions if cryptocurrency institutionalisation undermines the ideology of decentralised finance (DeFi).

Bitcoin especially has seen massive endorsements from well-known financial leaders this year, driving the huge institutional interest. Major companies like Tesla and Square have been heavily investing in Bitcoin, financial giants Visa, Mastercard and PayPal began implementing crypto within their services—all helping to boost Bitcoin’s credibility.

While around 60% of crypto owners in the US would use their bank to invest in cryptocurrencies, according to a recent survey, the crypto institutionalisation would come with a number of regulatory frameworks for digital assets and their trading. The regulations and the wider use of Bitcoin, in turn, bring uneasiness of losing the core idea of blockchain technology—decentralised and peer-to-peer based.

However, Vytautas Zabulis, CEO of H-Finance —a regulatory-compliant digital asset trading solutions company—notes that while for some ‘true believers’ in blockchain technology and DeFi movement the regulatory compliance might seem uncalled for, the regulation would remove speculative use of blockchain-based currency, legitimising the technology for broader use, which would continue to have room for DeFi innovation, with more credibility to support its growth. That said, current regulatory frameworks would not work for digital asset classes and would require a unique approach for broad application.

“It’s impossible for digital assets to go mainstream without clear regulation and sufficient safeguard,” explains Zabulis. “As Bitcoin becomes an institutional asset, market participants expect regulation to be in place to protect capital and have clearly set rules. As cryptocurrencies start being treated as a new asset class at least some clear rules will need to be put in place to solidify international adoption.”

Die-hard crypto fans?

Zabulis notes that it is an extremely complex situation, since most people begin using crypto because they see it as a financial speculative asset, not because they are die-hard fans of the technology itself. In turn, because the main use of digital assets at the moment is frequently speculative, regulation is key to, at least, set minimum standards to market participants.

This does not mean that regulation should be overwhelming to stifle the organic growth of the crypto industry. As an example of subtle regulatory adoption, the Markets in Crypto Assets (MiCA) directive in the European Union, would set clear rules of the crypto assets throughout the EEA without the need for further national legislation, establishing a common framework and avoiding anomalies resulting from personal interpretations. In contrast, in the US crypto companies are seen as money service businesses and fall under Financial Crimes Enforcement Network (FinCEN), in addition to other regulatory requirements, which is still in debate of being a right approach to digital assets regulation.

“It is a big step forward to make the assets more usable and stable,” adds Zabulis. “First of all, banks will be able to work with a compliant crypto sector—something that currently is more of an exception than a rule. But we need to be honest and acknowledge that a fully regulated crypto sector will lose its charm and I would not be surprised that a new type of ‘Bitcoin’ or technology will emerge; some are already looking into in-game asset regulation.”

Cases of NFT and DeFi illustrate that parts of the industry might not need regulation as they can function independently. These two use cases show that crypto assets could be used not only as speculation but mainly for the purpose of the technology—to make finance more decentralised and increase financial inclusion, such as NFTs changing how we interact with art and intellectual property.

While the opinions on complacent crypto are diverging, the broader acceptance of digital assets is in full swing with major endorsements from financial leaders and visible moves towards regulatory compliance. The regulations both in the EU and the US would help crypto companies to work within set frameworks if digital assets continue to seek going mainstream.

DBS Bank Singapore Launches Asia’s First Direct Crypto Offering To Clients

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Benzinga

Authors Rob Chang and Brittany Kaiser Recently, Elon Musk announced that Tesla’s purchases and transactions with Bitcoin would be paused until the network “transitions to more sustainable energy.” Though Musk is one of the blockchain industry’s biggest advocates, his criticisms of the Bitcoin network’s energy usage are joining a growing choir of voices pressuring industry leaders to take action. Accompanying every large crypto boom, and the renewed financial industry and public attention it inspires, comes the hand-wringing about what this future of finance is ultimately reaping and wreaking. The litany of naysayers reflexively return to their list of talking points against blockchain technology: it is mostly used by criminals (false), it is too volatile to be trusted (also false, especially when comparing it to other more finicky and “trusted” legacy assets that can crash or boom at a moment’s notice), and most of all, bitcoin energy consumption is what will drive the inevitable climate change that will toast the planet and all of humanity with it (also false, and usually accompanied by hyperbole). No less an authority than U.S. Treasury Secretary and former Federal Reserve Chairwoman Janet Yellen has once again joined the chorus, recently saying, “[Bitcoin is] an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.” Unsurprisingly, the Federal Reserve does not seem to have published any figures on the energy costs of managing the U.S. dollar, nor have they opined on how they seek to manage energy consumption of the blockchain-based digital dollar they are reported to be introducing this coming summer. Of course, while the headlines about Bitcoin’s energy usage isn’t a story nearly as old as time, it is an unsustainable argument that has been reductive, reused, and recycled since the earliest days of the Bitcoin hype cycle. In 2013, noted Bitcoin skeptic Mark Gimein provided some of the first foundations in this convenient argument that has been repeatedly deployed by Yellen and others: “The trade-off here is that as virtual value is created, real-world value is used up. About 982 megawatt hours a day, to be exact. That’s enough to power roughly 31,000 U.S. homes, or about half a Large Hadron Collider. If the dreams of Bitcoin proponents are realized, and the currency is adopted for widespread commerce, the power demands of bitcoin mines would rise dramatically.” Yes, Bitcoin and other cryptocurrencies that rely on mining computer hardware can use large amounts of energy, just as the 5 billion views of viral music video “Despacito” burned as much energy as 40,000 U.S. homes in a year. Bitcoin has probably financially liberated more people than “Despacito'' though, to be fair. Still, energy consumption comparisons to the dollar or consumption of other digital content are no excuse for virtual currency’s usage of dirty energy. We have to do better and we know we will. Just as we are in the infancy of the digital finance future, we are also in the infancy of finding effective ways to offset and even circumvent the wastefulness of first-generation mining practices. To continue with that effort, leaders inside and outside of government and finance need to realize and address the problem effectively, not use it as an easy straw man to dismiss a booming industry that is quickly gaining global mass adoption. Quick read: BTC vs ETH Price Predictions Cleaning up legacy mining issues To help solve the problem, we need to first recognize the true scope of the problem beyond the vaguely framed “staggering” amount of energy. According to a recent Cambridge University study cited by Decrypt, Bitcoin’s non-renewable electricity consumption is about 78.7 TWh, which is equal to 61 billion pounds of burned coal, electricity consumption for 9 million homes, or 138 billion miles driven by an average passenger vehicle. For scale, it might be more helpful to think of Bitcoin as its own country, as long as we are comparing apples to oranges. Decrypt’s math also shows that Bitcoin consumes more energy in a year than the country of Argentina, making it a top 30 “country” for consuming energy. However, that’s not so bad if you consider how another Bitcoin metric compares to other countries: if you ranked Bitcoin’s $1 trillion market cap against world GDPs, it would rank an even higher 17th, between Mexico and the Netherlands. Recently, Deutsche Bank even noted that it could “no longer ignore Bitcoin, as it has become the third largest currency in the world by total value of circulation.” Even so, we shouldn’t excuse these environmental downsides with the same vigor naysayers do to promote them. The industry has already started on the solution of creating significant offsets and surely there will be more to come. Crypto has two things going for it: its underlying efficiency-first math and a sort of innovation-based “law of attraction.” As Bitcoin and other cryptocurrencies become a more feasible way of creating both value and access to finance, it attracts more talent to not only innovate on the fundamental technology, but to also reduce its environmental impact and carbon footprint. One such area that the industry is focusing on is increasing renewable energy sources, which also provides its own cost benefits to miners. There is also no telling what effect next-generation blockchains or whole technologies like quantum will have on reducing the industry’s carbon footprint. And full disclosure: at Gryphon Digital Mining, we are also working on this problem, finding partners to help create the world’s largest fully integrated pure-play Bitcoin miner with a zero-carbon footprint. We are using 100% renewable energy, not greenwashing with offsets for dirty energy usage, but of course open to options like carbon credits to make sure our overall operational carbon footprint is always neutral, if not negative. Read also: What is Bitcoin Mining? We can’t do it alone It is natural for politicians to critically engage with these issues, especially when they don’t come from a background in blockchain technology, or may not be well-briefed about the industry. If you have watched a congressional hearing with any Big Tech CEOs, you’ve seen the varying levels of digital literacy enjoyed by our leaders, some of whom struggle to keep up with the quickly moving innovation in emerging technologies like the blockchain industry. It is much easier for politicians and bankers to reflexively look for the problems with blockchain technologies as a means of easily dismissing it, rather than realizing the public demand for digital assets, and finding solutions to make it more sustainable and less environmentally wasteful. While it might go against the natural instinct of some legislators and regulators to be open-minded to such innovations, it will best help the public interests they serve if they start the process of engaging with the industry and its real problems in earnest, such as the forward-thinking officials in the State of Wyoming who have engaged since 2017, and who have now brought tens of billions of dollars worth of digital asset businesses into the state’s economy. Bitcoin, cryptocurrencies and other digital assets are in the midst of another global boom, so it is in everyone’s interest both inside and outside of the industry to make it more friendly to the environment. Blockchain is one of the most innovative spaces in all of technology, so we cannot wait for Elon Musk’s new solution, Kevin O’Leary’s investments, or a quantum breakthrough to solve the problem for us. Rather than the crypto industry ignoring its carbon footprint problem, or legacy government and finance thinking it can dismiss, or regulate blockchain technology out of the economy, it will take real cooperation from both industry and public sector leadership to continue reducing our carbon footprint through demonstrably effective measures like increased investment and innovation in renewable energy sources. We still have time, but we need to focus on adding sustainable infrastructure to digital asset networks so that the industry’s continued carbon footprint is small, and not a reason for excess regulatory scrutiny. Only then can we rid the industry of the legacy baggage that currently holds us back, and continue to rapidly scale the building blocks of this technological and financial revolution. About the authors: Rob Chang is the CEO of Gryphon Digital Mining, former CFO of Riot Blockchain, and former Managing Director of Cantor Fitzgerald, widely regarded as a top commodities and mining expert. Brittany Kaiser is the Chair of Gryphon Digital Mining, as well as a Director at the Blockchain Center Foundation, and is considered a global expert in blockchain technology and digital assets. See more from BenzingaClick here for options trades from Benzinga5 Ways Real Estate May Provide Income And Diversification In A COVID-19 RecoveryBenzinga Unusual Options Data to be Leveraged by Bulltrades.net in their Mission to Simplify Wall Street Trading© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

DOGE sends Robinhood Crashing, but Musk Will Send Crypto (Literally) to the Moon — Does That Mean You Should Invest?

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HANNIBAL HANSCHKE/POOL/EPA-EFE/Shutterstock / HANNIBAL HANSCHKE/POOL/EPA-EFE/Shutterstock

As was expected, Elon Musk pumped up Dogecoin during his “Saturday Night Live” appearance, but the crypto tumbled. Investors rushed to trade, once again triggering Robinhood to crash temporarily.

See: Dogecoin’s Major Price Increase — Is It Still Worth an Investment?

Find: 10 Best Cryptocurrencies To Invest in for 2021

“Crypto trading is back up and running. Due to high trading volume and volatility, some customers might see some intermittent issues. We’re working hard to provide a smooth experience, and will monitor the situation closely,” Robinhood tweeted at 12:52 a.m. Sunday, adding shortly later, “Our team is looking into who may have been impacted by our downtime tonight, and will be reaching out to affected customers.”

The crash brought the ire of many traders on Twitter, who threatened to “leave the app.”

Doge was trading at a record $0.70 Saturday, plummeting to $0.42, according to CoinMarketCap data. It also reached $65 billion in market cap, according to Coinbase. This morning, Doge was at $0.49.

See: Dogecoin Exceeds $11 Billion Market Cap as Coinbase Launches IPO

Find: Hedge Fund Manager Warns: Beware the Meme Stock

Dogecoin was created as a joke — its name is a reference to a popular internet meme, according to Coinbase. “It shares many features with Litecoin. However, unlike Litecoin, there is no no limit on the number of Dogecoins that can be produced.”

While it has gained incredible traction lately as well as celebrity endorsements, including Mark Cuban and Snoop Dog, just like any other crypto, it’s extremely volatile. If you’re planning on investing in it, you should be ready to stomach wild swings. In addition, it doesn’t have the important supply and demand factor embedded in Bitcoin, the supply of which is capped 21 million. Dogecoin has 129.5 billion tokens in circulation and has no hard cap on the number of coins that can be produced. That said, investors who invested $100 in January, for example, made a lot of money as Doge shot up 13,000% this year, .

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People are already looking for the next crypto that could produce similar results, and many are turning their eyes toward Safemoon, for example, whose price today is at $0.000007, and hence has plenty of room to grow.

See: 10 Cheap Cryptocurrencies to Check Out

Find: What Are Altcoins — and Are the Potential Rewards Worth the Risks?

As for Tesla and SpaceX CEO Musk, aka Technoking, yesterday he announced the launch of the “DOGE-1 Mission to the Moon” in the first quarter of 2022, with the company accepting the meme-inspired cryptocurrency as payment, according to a tweet.

“Mission paid for in Doge – 1st crypto in space – 1st meme in space. To the mooooonnn!!” Musk tweeted.

Geometric Energy Corporation, an intellectual property, manufacturing and logistics firm, said in a statement that “having officially transacted with DOGE for a deal of this magnitude, Geometric Energy Corporation and SpaceX have solidified DOGE as a unit of account for lunar business in the space sector.”

See: Coinbase, the Largest US Cryptocurrency Exchange, Goes Public – ‘It Will Infect the Financial Universe with a Bad Case of FOMO’

Find: Numbers Behind the Modern-Day Space Race — Why Billionaires Are Obsessed With Going to Space and How Much They’re Spending

“This mission will demonstrate the application of cryptocurrency beyond Earth orbit and set the foundation for interplanetary commerce,” SpaceX Vice President of Commercial Sales Tom Ochinero said in the statement. “We’re excited to launch DOGE-1 to the Moon!”

The company further explained that through this transaction, “DOGE has proven to be a fast, reliable, and cryptographically secure digital currency that operates when traditional banks cannot and is sophisticated enough to finance a commercial Moon mission in full. It has been chosen as the unit of account for all lunar business between SpaceX and Geometric Energy Corporation and sets precedent for future missions to the Moon and Mars.”

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