DeFi threatens the banks and the USD. OF COURSE the SEC is going to come after "it".. But what are most DeFi protocols? Just math, code and extremely efficient execution and settlement. The best, safest, most valuable networks that provide consensus on these transactions are the "decentralized" part and have no jurisdictional exposure - they are the Internet! And until the global elites decide they have to turn THAT off, DeFi will continue to grow, naturally..
The US regulators are trying to put the genie back in the bottle. An intelligent, modern, advanced approach would be to embrace this new technology, allow the disruption and encourage the capital to flow into the USA. And be made a stronger and more robust economy because of this freedom and ability to adapt.
But NO! Must protect the entrenched money and power at all costs! Dinosaurs..
Crypto? A better world? That is so hilarious. Maybe "a better world" if you are a human trafficker or something, but for normal people who need a loan to start a business, say, a pyramid scheme is the last place you'd want to look. Pure and simple.
To my mind, a lot of the start-ups (including but not limited to FinTech/DeFi) are market disrupters, but in a pejorative sense of the term. They are doing regulation arbitrage, taking advantage of the (shrinking) space where the regulators have not yet stepped into. You might argue that the hotel and cab industries are corrupted, are full of monopolies, lack competition and progress etc. But what Uber and Airbnb were doing was nothing more than circumventing regulations and exporting all the negative externalities (security, landlords' rights, etc.) to the community.
DeFi is little different. It wants to play the game but doesn't want to pay the ante. Considering DeFi companies are dishonest about their dealings, I'd say they are worst than the gig-economies . If you hail a car using Uber, at least you get to have a clean and decent ride in a Tesla; but when all the dust has settled on DeFi, we'll find that all the promises are untruths. Think about how centralized the crypto mining operations and crypto custodian have become, and all the KYC they are about to (or already have) engaged in. So much for 'decentralization', 'privacy' and other tin foil hat conspiracy.
This is a brilliant and helpful piece. The big problem here is that the SEC wants to regulate by who they know and trust rather than by a clearly defined rule. This is why some will be prosecuted and others won’t for identical behaviours. The big established names like JP Morgan have a budget to engage in a continuous dialogue with the SEC. But the innovators here are little startups with no budget for an ongoing and potentially never-ending regulatory conversation. This is why clarity around the rules is so important. But clarity means loss of control regarding who is allowed to proceed and who will be punished for proceeding. In the end, governments won’t be able to control the who or the what without greater clarity. The solution is to announce the rules and accept that some of the new purveyors of digital finance won’t (shock horror) be the big banks who are old friends of the regulators. They will be new organisations with ever newer governance structures like Dao’s and Tokens. DeFi may not just be about creating new forms of money. DeFi may also be the death knell of the East India Company model. That would mean profits could be generated without issuing shares. That means no more need for a stock market. That means maybe no need for the SEC. This fight between the SEC and DeFi is existential for both sides.
One token has gone through the SEC's registration processes, the Stacks token (STX). They went the full IPO route with an S-1 et al. Once they received their funds, they moved to deregister it. They needed to do that so the tokens could be traded without going through a broker. Now it trades like any other token.
It doesn't necessarily end DeFi *everywhere* though does it? I mean, it could be a bloodbath in the USA and a total mess, but DeFi could still function in Europe and parts of Asia.
Although the "De" part of DeFi is questionable in many cases, to some extent some of these protocols are fairly robust.
“DeFi stands for decentralized finance, and it is the crypto world’s attempt to radically transform the entire financial system. It is truly innovative, dynamic, and filled with promise for a better world.”
DeFi threatens the banks and the USD. OF COURSE the SEC is going to come after "it".. But what are most DeFi protocols? Just math, code and extremely efficient execution and settlement. The best, safest, most valuable networks that provide consensus on these transactions are the "decentralized" part and have no jurisdictional exposure - they are the Internet! And until the global elites decide they have to turn THAT off, DeFi will continue to grow, naturally..
The US regulators are trying to put the genie back in the bottle. An intelligent, modern, advanced approach would be to embrace this new technology, allow the disruption and encourage the capital to flow into the USA. And be made a stronger and more robust economy because of this freedom and ability to adapt.
But NO! Must protect the entrenched money and power at all costs! Dinosaurs..
Crypto? A better world? That is so hilarious. Maybe "a better world" if you are a human trafficker or something, but for normal people who need a loan to start a business, say, a pyramid scheme is the last place you'd want to look. Pure and simple.
It used to be called cryptocurrency, but since it isn't currency, because it takes too long to execute. (The root of currency is current)
So now it's a financial instrument that is the Jerry Seinfeld of financial instruments. (About nothing)
It is literally less moored to any underlying value than a synthetic CDO, which is saying a lot.
To my mind, a lot of the start-ups (including but not limited to FinTech/DeFi) are market disrupters, but in a pejorative sense of the term. They are doing regulation arbitrage, taking advantage of the (shrinking) space where the regulators have not yet stepped into. You might argue that the hotel and cab industries are corrupted, are full of monopolies, lack competition and progress etc. But what Uber and Airbnb were doing was nothing more than circumventing regulations and exporting all the negative externalities (security, landlords' rights, etc.) to the community.
DeFi is little different. It wants to play the game but doesn't want to pay the ante. Considering DeFi companies are dishonest about their dealings, I'd say they are worst than the gig-economies . If you hail a car using Uber, at least you get to have a clean and decent ride in a Tesla; but when all the dust has settled on DeFi, we'll find that all the promises are untruths. Think about how centralized the crypto mining operations and crypto custodian have become, and all the KYC they are about to (or already have) engaged in. So much for 'decentralization', 'privacy' and other tin foil hat conspiracy.
"The land of the free."
I have all these questions, like
Where will the SEC go to get Satoshi's address to serve process?
By mining crypto does one create a security?
Free rein
Would tether be considered defi? Because it’s obviously not kosher nor are many of the crypto currencies
Woah. It'll be crazy to see who they pull the trigger on first, and how many they go after how quickly.
What kind of popcorn futures does a chicken invest in?
This is a brilliant and helpful piece. The big problem here is that the SEC wants to regulate by who they know and trust rather than by a clearly defined rule. This is why some will be prosecuted and others won’t for identical behaviours. The big established names like JP Morgan have a budget to engage in a continuous dialogue with the SEC. But the innovators here are little startups with no budget for an ongoing and potentially never-ending regulatory conversation. This is why clarity around the rules is so important. But clarity means loss of control regarding who is allowed to proceed and who will be punished for proceeding. In the end, governments won’t be able to control the who or the what without greater clarity. The solution is to announce the rules and accept that some of the new purveyors of digital finance won’t (shock horror) be the big banks who are old friends of the regulators. They will be new organisations with ever newer governance structures like Dao’s and Tokens. DeFi may not just be about creating new forms of money. DeFi may also be the death knell of the East India Company model. That would mean profits could be generated without issuing shares. That means no more need for a stock market. That means maybe no need for the SEC. This fight between the SEC and DeFi is existential for both sides.
One token has gone through the SEC's registration processes, the Stacks token (STX). They went the full IPO route with an S-1 et al. Once they received their funds, they moved to deregister it. They needed to do that so the tokens could be traded without going through a broker. Now it trades like any other token.
It doesn't necessarily end DeFi *everywhere* though does it? I mean, it could be a bloodbath in the USA and a total mess, but DeFi could still function in Europe and parts of Asia.
Although the "De" part of DeFi is questionable in many cases, to some extent some of these protocols are fairly robust.
“DeFi stands for decentralized finance, and it is the crypto world’s attempt to radically transform the entire financial system. It is truly innovative, dynamic, and filled with promise for a better world.”
That’s adorable.
How can these DeFi platforms offer yield of 10% on stablecoin such as USDT ?!
"But…doesn’t that effectively end DeFi as we know it?"
It absolutely ends a good part of it. And when the FOMO, "I buy at $X and sell at $10X ends", the rest of it is over.
And yes, I get all of the technology and "cool stuff" about it...that has nothing with Joe Retail looking to get sell to the next sucker.
I also want to point out that the selective enforcement is a very real weapon, and will certainly be used here.