Headlines
▌Fed Research Paper Warns of Future Risks of Crypto CeFi and DeFi
The Federal Reserve’s research arm published two papers last week exploring the impact of DeFi and digital assets on financial stability. The Federal Reserve and its leadership have pushed for more oversight of the crypto industry, especially in the context of its ties to the wider financial sector. Its paper on financial stability deals with regulation, and the authors recommend tighter oversight of firms handling client money. "Oversight, comprehensive disclosures, and capital and liquidity requirements, where appropriate, could improve the resilience of entities within the digital asset ecosystem," the paper said. The stability paper concluded that the crypto ecosystem is "prone to the accumulation of financial vulnerabilities," but later added that “financial stability risks are not widespread, as the digital asset ecosystem does not provide significant financial services and its interconnection with the traditional financial system are limited.” Still, such risks could grow in the future, the authors noted. "Should the digital financial system become more interconnected with the traditional system or expand its provision of financial services, financial stability risks could quickly become material," they wrote.
Policies
▌UK Forces Crypto Exchanges to Report Suspected Sanctions Violations
Cryptocurrency exchanges must report alleged sanctions violations to U.K. authorities under new rules amid concerns that bitcoin and other crypto assets are being used to circumvent restrictions imposed in response to Russia’s invasion of Ukraine. The official guidance, updated on Aug. 30, explicitly includes “crypto assets” among the assets that must be frozen when sanctions are imposed on individuals or companies. In addition to digital currencies such as Bitcoin, Ethereum, and USDT, crypto assets can also include other digital assets of nominal value, such as NFTs. Rules set by the Treasury Department’s Office of Financial Sanctions Enforcement will mean that it will be a criminal offense if cryptocurrency exchanges fail to report customers designated for sanctions. Under the rules, cryptocurrency exchanges must take immediate action if they suspect that one of their clients has been sanctioned, or if they suspect a sanction violation, giving them similar obligations to professionals such as real estate agents, accountants, lawyers, and jewelers.
Cryptocurrency
▌Head of the SEC Office of Internet Enforcement: The Idea of Decentralization Is a Complete Fraud
John Reed Stark, the founding director of the SEC’s Office of Internet Enforcement, said in an interview that there are many reasons to be skeptical about cryptocurrencies, and that blockchain technology is used for cryptocurrencies, NFTs, decentralized finance, etc. Consequences, all of which wreak havoc, not just in ransomware, human trafficking, drug dealing. A wave of crypto crime is sweeping the world. Then there are the environmental concerns associated with cryptocurrency mining. The idea of decentralization is a complete fraud. There are miners, digital wallets, platforms, exchanges, etc. There are too many middlemen, and every time you read it, there is more and more. Gary Gensler is considered a leading critic of cryptocurrencies. But I've never heard him condemn blockchain as a scam. In fact, in a 2018 MIT lecture, he was open to potential innovations in crypto and blockchain technology.
▌The United States, China, and India Become the Three Major Talent Hubs for Web3 Talents
As per the Global Blockchain Industry Talent Insights, Web3.0 talent increased 76% year-on-year globally, with the U.S, India, and China as the top three blockchain talent hubs. In India, according to NASSCOM’s 2021 report, Crypto Tech India, the Web3.0 industry witnessed a 39% increase over the last five years, employing almost 50,000 individuals
▌BIS: Cryptocurrencies Outperform Fiat Ecosystems in Achieving High-Level Goals of Future Monetary Systems
Governments around the world see central bank digital currencies (CBDC) as a means to improve the existing fiat ecosystem. A publication from the International Monetary Fund (IMF) suggests that the Cryptocurrency’s technical prowess supported by the central bank’s underlying trust is key to enabling a rich monetary ecosystem. A BIS study from June revealed that cryptocurrencies outdo fiat ecosystems when it comes to achieving the high-level goals of a future monetary system. “By embracing the core of trust provided by central bank money, the private sector can adopt the best new technologies to foster a rich and diverse monetary ecosystem,” the post highlighted. It further recommended central banks utilize innovations such as tokenization to allow purchases using multiple fiat currencies and further benefiting merchants and customers.
▌Solana Co-Founder: The Average Daily Transaction Volume of Ethereum Is Only 1/30 of Solana
In a new interview with Real Vision’s Raoul Pal, Solana co-founder and CEO Anatoly Yakovenko says that Solana’s goal of processing transactions at an ultra-high rate presented various challenges. “This is our biggest challenge, which is maybe one that I like to have because all these challenges are coming because we have users. And the chain is, on a daily basis, when you look at normal transactions from applications from users – just from people using the network – when you look at those, there’s about 30 million transactions per day. Our peak day was 65 million. That’s more than all the other chains combined,” he explained. “Binance Smartchain is one-tenth of that. I think Ethereum is one-thirtieth. And because of this load, we’ve seen things that we didn’t expect, and we were a bit short-sighted in the kinds of attacks people would throw at the network.”