Around Block 11: Snapshots on both sides of the DeFi and encryption supervision scope

Coin Bank Around the block Clarified the key issues in the encryption field.In this version Justin Mart with Ryan Yi Take a look at the current state of DeFi and two aspects of the scope of encryption supervision.

Snapshot of DeFi

In the broad crypto bull market, DeFi continues to grow strongly. Starting from the summer of 2020, the total value lock (TVL) of DeFi projects has increased significantly.Blocks previously explored DeFi and Yield Farming Phenomenon In June 2020, but what happened since then?

In short, the rapid development of DeFi continues.As we pointed out Last time, Yield agriculture phenomenon still spurs growth. This includes a virtuous circle: the mechanism of fine-grain farming induces participants to increase capital → increase TVL → promote governance token valuation → expand subsidies for fine-grain farming → continue this cycle.

Nevertheless, DeFi’s true zero-to-one innovation cannot be discounted as part of the growth story. These things include synthetic assets (such as Synthetix, UMA, and Mirror), financial products (such as Aave, Compound), improved capital efficiency, open financial access (including fast loans and emerging remittance use cases), and layered combinable DeFi projects The agreement is together like Year.

The total value locked in the DeFi protocol (TVL) is now over $25B, Incredible year-on-year growth of 2500%. Similarly, the number of DeFi users has exceeded 1.2 million, which is defined by the number of unique addresses that access DeFi services. Mainstream protocols such as Uniswap and Compound require 200-500K users, while most other DeFi applications are between 25-50K users.

Similarly, since July 2020, DEX trading volume has continued to maintain strong growth. The cumulative trading volume of DEX has now surpassed most centralized trading, By January 2021, the maximum is $10B per day.

Transaction volume is driven by the growth of DeFi, but also by the broader crypto bull market and continued attraction in categories where DEX enjoys a competitive advantage. These include long tails using novel DeFi tokens; effective swaps between highly correlated assets (such as stablecoins).

However, today’s DEX conducts transaction settlement on the main Ethereum blockchain, so natural gas prices are suppressed during periods of high demand.This has aroused continued interest in scaling solutions, which is a significant milestone Synthetix launched optimism (A kind Based on summary Scaling solution).

Although looking at the main indicators is encouraging, the truth is that DeFi moves so fast that no one can track it. Here are some advanced topics that we found interesting:

DeFi projects are embracing composability: New DeFi projects either introduce new primitives or bundle existing primitives to create new network products. Think of these primitives as Lego bricks. Six months ago, we were designing and building individual bricks. Today, we combine these bricks into cars, airplanes and castles.

Composability extends to the DeFi version of the partnership: The DeFi project is wrestling around key issues such as the moat, defense capabilities, and revenue growth. Most projects seem to involve open community collaboration, thinking that the community will create a moat (you cannot send the community).This precise vision originally led to the phenomenon of governance tokens and farming, and has now evolved into creative partnerships and collaborations, the most notable of which is Sushiswap’s 2021 roadmap.

Scalability is becoming a bottleneck, but the solution is coming: As the scale of the underlying Ethereum chain continues to expand, some protocols are openly exploring integration with layer 2 networks or other blockchains. Look for major developments in 2021, especially in the Ethereum summary.

Regulatory uncertainty affects development: At the same time, the U.S. Securities and Exchange Commission (SEC) targeted ripple File a lawsuit with the CFTC Bitcoin Prove that regulators are paying close attention to cryptocurrencies and are not afraid to charge the largest players in the field. It can be expected that more attention will be paid to DeFi-based projects, which is reasonable, and this uncertainty continues to affect the development of functions in regulated jurisdictions.

Speaking of regulations….

Two aspects of the scope of supervision

In the past quarter, both FinCEN and OCC have issued cryptocurrency regulatory guidelines. Even if both are within the purview of the U.S. Treasury Department, the guidelines seem to be moving in a crypto-friendly direction.

Financial Center

Financial Center Responsible for compliance with KYC/AML laws, which is especially important for crypto exchanges (“VASP-Virtual Asset Service Providers”) like Coinbase. Require cryptocurrency exchanges to verify their customer identity (KYC) and use blockchain forensics tools to study cryptocurrency transactions to ensure that deposits do not come from potentially illegal sources.

FinCEN recently proposed Amendment Comply with the FBAR regulations of the Bank Secrecy Act, which are specifically for encrypted assets and VASP. In short, under the new amendments, regardless of where they hold crypto assets, U.S. citizens must report holdings of cryptocurrency and transactions with a transaction value of more than $10,000. All in all, the amendment will essentially require U.S. individuals to report holdings of cryptocurrency in excess of $10,000 in foreign accounts. with A cryptocurrency exchange or wallet is required to store customer information related to any transaction above $3K and report this information to FINCEN for any transaction above $10,000.

In addition, during the US holidays, there is only a 15-day comment period for announcements, which may make it difficult for encryption service providers to respond.

Many encryption service providers (Coin Bank, Fidelity, square, Coin Center, ErisX(Among them) there was a strong response to the proposed rule, highlighting (among other things) the hasty nature of the proposal and the lack of time to resolve the issue.

Since then, the Ministry of Finance has extended the comment period, and given the existence of the new government, the future is still uncertain.


Office of the Inspector General of Currency (OCC)It is an independent agency of the Ministry of Finance whose mission is to help “charter, supervise and supervise banks”, and has gone to the other end under recent guidance:

  • Commonwealth Bank may run public blockchain infrastructure [Jan 2021]
  • Commonwealth Bank may be engaged in stablecoins [Sept 2020]
  • Commonwealth Bank may custody crypto assets [July 2020]

With this series of positive guidance, it is clear that National Bank can now participate in the crypto economy through custody and settlement.It’s worth noting that the January 2021 guidelines legalize public blockchains as settlement infrastructure, and combine blockchains with ACH or rapid.

In other words, the Commonwealth Bank can act as a large validator on the blockchain (such as miners), or more practically speaking, the bank can eventually settle transactions through Bitcoin, Ethereum, or through stablecoins.

Ultimately, this is the first step in the regulatory actions required to transition the crypto economy to a traditional financial infrastructure. Please also note that although the OCC is a federal regulatory agency, it is not the only regulatory agency. There will be interactions between state and federal interpretations of this guide. In addition, adoption will take time-blockchain is still relatively new and lacks some core features (e.g., privacy, scalability), but this is a promising development.

It’s commendable that the Ministry of Finance has expanded During the consultation period, the proposal may be deadlocked with the incoming Biden administration.

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