Category Archives: Blockchain, Crypto, Digital Assets, Tokens

Visa Grants Coinbase Power To Issue Bitcoin Debit Cards

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Forbes | Michael del Castillo | Feb 19, 2020

Coinbase crypto visa payments - Visa Grants Coinbase Power To Issue Bitcoin Debit CardsCredit card giant Visa has granted its principal membership to a cryptocurrency company for the first time. Officially awarded to cryptocurrency exchange Coinbase in December, but not revealed to the public until today, the membership cuts out a crucial, and expensive middleman from the process of issuing a debit card that lets users spend their own bitcoin, ether and XRP anywhere Visa is accepted.

Perhaps even more importantly though, the principal membership makes Coinbase the first cryptocurrency company with the power to issue debit cards for others, including other cryptocurrency companies and more traditional firms alike. Visa confirmed it granted Coinbase the principal membership, clarifying that the company itself won’t actually accept cryptocurrency when the project goes live later this year.

See:  Visa R&D Arm Develops a Blockchain System That Could Replace Financial Data Aggregators

While Coinbase says it’s not planning on issuing cards to others anytime soon, the principal membership status marks a potentially important new revenue stream for the company, which Forbes estimates saw a 40% decline in earnings last year.

By simplifying the process of spending cryptocurrency anywhere Visa is accepted, the membership also lays the foundation for a potential explosion of cryptocurrency being used to buy everyday items, regardless of whether the merchant itself accepts cryptocurrency.

“Your Bitcoin holdings have never been liquid because you have to sell them, you have to go through a process, withdraw the money, and then spend it. It's never been an instant, "Oh, I'll buy this cup of coffee with bitcoin," says Zeeshan Feroz, CEO of Coinbase UK, which received the membership. “What the card is trying to change is the mindset that crypto is tucked away, takes two days to access, and can actually now be spent in real time.”

Managed by Coinbase’s fully-owned U.K subsidiary, based in London with offices in Dublin, the card that automates the conversion of cryptocurrency into whatever currency the merchant accepts will be available in 29 countries when it is first issued later this year, including Denmark, Estonia, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and the U.K.

The Coinbase Visa debit card will not be available to U.S. residents. Further simplifying the process of actually spending cryptocurrency, the nine assets available on the card, also including litecoin, bitcoin cash, Brave’s BAT, Augur’s REP, 0x’s ZRX, and Stellar’s lumen, won’t likely be subject to unwieldy capital gains taxes at the point of sale. Unlike the U.S., the E.U. doesn’t require spenders pay additional tax on the difference in price based on when a cryptocurrency was purchased, and when it was spent.

See:  With Plaid Acquisition, Visa Makes a Big Play for the ‘Plumbing’ That Connects the Fintech World

Feroz says direct access to the Visa network gives the cryptocurrency exchange more flexibility in the business models it pursues. A previous Coinbase Visa card was issued in April 2019 by financial services firm Paysafe Group Holdings Limited, which vets its customers, including corporate spending firm Soldo and mobile banking app Lunar, and charges a fee for the service.

“You have a dependency on their risk appetite and the models they'd like to work with,” says Feroz. “Direct membership allows us to take control of our issuing program.”

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NCFA Jan 2018 resize - Visa Grants Coinbase Power To Issue Bitcoin Debit Cards The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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How blockchain regulations will change in 2020

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TechTalks | Andrey Sergeenkov | Feb 12, 2020

blockchains - Visa Grants Coinbase Power To Issue Bitcoin Debit CardsAs 2018 drew to a close, crypto skeptics were ready to write obituaries after the devastating bear market that year. Talk of blockchain and cryptocurrency demise was rife among seasoned analysts. Just over twelve months later, the industry has shown remarkable resilience to rebound back.

Regulators are a segment of stakeholders who seem to be appreciating that crypto is here to stay, with Federal agencies in the US and Chinese authorities praising the potential of this technology in their respective countries’ digital future.

Blockchain technology has gained independent credibility over and above its application in cryptocurrency. The opportunities are endless as the emerging enterprise sector continues to draw plaudits. So far, this technology has grown in spite of regulatory infrastructure rather than because of it. A suitable regulatory climate is essential for widespread adoption.

See:  The Decade in Blockchain — 2010 to 2020 in Review

This is how Jason Lee, Vice President of NEM Foundation, describes the industry’s evolution:

“2017 was the year of the blockchain craze. In 2018, we hit the brakes towards the end of the year. For 2019 and the start of 2020, Don Tapscott at the World Economic Forum Annual Meeting reports says that the ‘blockchain revolution ground to a halt.’ This is because not all initiatives are going past the proof of concept stage just as blockchain regulation shapes progressively as it moves forward in the right direction. In 2020, real use case projects are starting to shape up and will play a crucial role.”

Therefore, industry leaders and enthusiasts at large are eagerly following regulator sentiment. Themes like consumer data protection and harnessing tech will be constant in these discussions. What is going to be the major themes around blockchain regulation in 2020?

Privacy and anonymity on enterprise blockchain

Anonymity and privacy were defining aspects of the decentralized blockchain projects. This sector went mostly unchecked until blockchain platforms became increasingly popular.

Last year, the release of the Libra project whitepaper by Facebook brought these issues to the fore.  Specifically, concerns about blockchain enterprises, including cloud services and handling customer data gave regulators an opening to legislate on such platforms. Blockchain enterprise will continue to draw unprecedented legislative scrutiny in 2020.

In late 2018, the US Department of Homeland Security started scrutinizing privacy tokens that shield user information. Similarly, G20 countries issued regulations in June 2019 for exchanges to comply with “anti-money laundering” (AML) and “know your customer” (KYC) requirements. In February 2019, the Cyberspace Administration of China (CAC) implemented additional guidelines specifically for blockchain companies.

See:  Blockchain Fundraising Can Benefit African Tech Startups

Chinese regulators claimed that these measures are aimed at settings the standard for blockchain development in the country. In the US, the Blockchain Promotion Act of 2019 focuses on finding potential applications for the distributed ledger and opportunities through which government agencies can explore and incorporate the technology. 2020 is sure to bring more scrutiny and legislation on this premise.

Crypto regulation over perceived threats to national currencies

Many countries initially took a position of ignorance about cryptocurrencies. However, as bitcoin took a larger-than-life profile after the monster rally in 2017, this position was no longer tenable. The only reason that blockchain experienced the crypto winter was due to being unregulated rather than the breakdown by governments.

The unchecked printing of money before and after the financial crisis of 2008 by the Central Bank led to some people becoming disillusioned about centralized financial systems. Bitcoin and other cryptocurrencies offered an alternative to these people. As with any power structure, the entities in charge will not relinquish power with ease.

China took drastic measures against trading cryptocurrencies in 2017. Last year, India went even further and completely banned non-sovereign cryptocurrencies. The fundamental aspect of decentralization is an existential threat to the ability of major central banks to control monetary policy.

See:  Visa R&D Arm Develops a Blockchain System That Could Replace Financial Data Aggregators

Even without expressly stating this position, the Securities and Exchange Commission in the U.S. decided to classify coins like Telegram Open Network (TON) as securities to regulate their rise. Regulators in the U.S. see blockchain currencies and commerce as an issue that needs to be addressed.

As 2020 begins, some countries are looking at digital currencies as an opportunity rather than a threat. China astonished the world last year when the People’s Bank of China announced that it was researching on a national digital currency. Such a development could trigger an arms race of sorts between nations that want to be the first to innovate in this space.

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NCFA Jan 2018 resize - Visa Grants Coinbase Power To Issue Bitcoin Debit Cards The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Samsung Is Quietly Becoming A Major Bitcoin, Crypto And Blockchain Player

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Forbes | Billy Bambrough | Feb 18, 2020

Samsung - Visa Grants Coinbase Power To Issue Bitcoin Debit CardsSamsung, the South Korean technology giant and creator of the Galaxy smartphone range, could soon become one of the biggest drivers of bitcoin, crypto and blockchain adoption.

While bitcoin traders and investors are focused on the upcoming bitcoin halving, a looming U.S. bitcoin crackdown, and rocky crypto trading volume, Samsung is putting the power of bitcoin, crypto and blockchain in people's hands.

Last week, Samsung, which makes up 19% of global smartphone sales and last year sold almost 300 million phones according to data site Statista, unveiled it latest Galaxy smartphone range with its new flagships the S20, S20+ and S20 Ultra models.

These new 5G enabled smartphones build on the Galaxy S10 ranges' bitcoin, cryptocurrency and blockchain support, which last year was revealed to boast a built-in bitcoin and cryptocurrency wallet.

"We created a secure processor dedicated to protecting your PIN, password, pattern, and Blockchain Private Key," Samsung wrote on its website, announcing the new S20 Galaxy phones. "Combined with the Knox platform, security is infused into every part of your phone, from hardware to software. So private data stays private."

Samsung's so-called Blockchain Keystore was introduced last year, initially with support for ethereum and other ERC-20 tokens, but adding bitcoin in August.

Those using Samsung devices with the Blockchain Keystore are able to store the private keys to their bitcoin and crypto wallets on the device.

See:  New Samsung Galaxy S10 Includes Cryptocurrency Key Storage

Control over a wallet's private keys is often cited as one of the most overlooked and important aspects of bitcoin and cryptocurrencies, with many of the biggest crypto exchange hacks and thefts happening because people fail to store their tokens in wallets they have the private keys for.

If bitcoin or cryptocurrencies are stored on a smartphone-based wallet that gives users control over their private keys it removes reliance on external exchanges.

Bitcoin and cryptocurrency adoption has fallen short of expectations in recent years, with some predicting that bitcoin and other cryptocurrencies would be widely used by 2020 following bitcoin's epic 2017 bull run.

However, technology and user experience developments from the likes of Samsung and micro-blogging platform Twitter could help the bitcoin and crypto industry drive adoption.

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NCFA Jan 2018 resize - Visa Grants Coinbase Power To Issue Bitcoin Debit Cards The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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An IOSCO report highlights crypto trading issues, but stops short of setting standards

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Investment Executive | James Langton | Feb 12, 2020

 

contemplating regulation - Visa Grants Coinbase Power To Issue Bitcoin Debit CardsRegulators grapple with crypto trading

Global securities regulators are monitoring the emerging crypto asset sector, but aren’t yet seeking to establish global standards for crypto trading platforms.

The International Organization of Securities Commissions (IOSCO) has issued a report detailing the risks associated with crypto trading, including concerns about platform access, asset safekeeping, price discovery, transparency and conflicts of interest.

See:  SEC Commissioner Speech: A Proposal to Fill the Gap Between Regulation and Decentralization

Many of these same issues arise in the regulation of traditional securities trading too, the report noted. So, to the extent that particular crypto assets are considered to be securities, “the basic principles…of securities regulation should apply,” the report said.

However, crypto trading platforms may also raise novel regulatory concerns due to their particular business models, IOSCO warned.

The report said that some regulators have determined that their existing frameworks for overseeing traditional trading venues will also apply to crypto trading, but that some are also considering new requirements “to account for the novel and unique characteristics” of crypto trading.

The group’s report — which was prepared by an IOSCO committee led by the Ontario Securities Commission (OSC) — aims to help individual regulators identify the issues raised by crypto trading and look at ways regulators around the world have started to deal with these issues.

View more:  Curated Fintech and Financing Research Reports here

“These key considerations and toolkits are intended to assist regulatory authorities who may be evaluating [crypto trading platforms] within the context of their regulatory frameworks,” the report said.

At the same time, the group isn’t proposing to set global standards for regulating crypto trading.

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Report:  Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms

IOSCO | Feb 12, 2020

The emergence of crypto-assets is an important area of interest for regulatory authorities, including those with authority over secondary markets and the trading platforms that facilitate the secondary trading of crypto-assets (Crypto-asset Trading Platforms or CTPs). The aim of this Final Report is to assist IOSCO members in evaluating the issues and risks relating to CTPs.

Published in February 2017, the IOSCO Research Report on Financial Technologies (Fintech), the Fintech Report discussed distributed ledger technologies (DLT) and the role of tokenization of assets and fiat money. In the Fintech Report,

IOSCO noted that “Tokenization is the process of digitally representing an asset, or ownership of an asset. A token represents an asset or ownership of an asset. Such assets can be currencies, commodities or securities or properties.”

For this Final Report, crypto-assets are a type of private asset that depends primarily on cryptography and DLT or similar technology as part of its perceived or inherent value, and can represent an asset such as a currency, commodity or security, or be a derivative on a commodity or security.

See:  Canadian Securities Regulators Publish Additional Guidance for Facilitating Crypto Asset Trading

Where a regulatory authority has determined that a crypto-asset or an activity involving a crypto-asset falls within its jurisdiction, IOSCO’s Objectives and Principles of Securities Regulation2 (IOSCO Principles) and the Assessment Methodology3 (the Methodology) provide useful guidance in considering the novel and unique issues and risks that arise in this new market. The IOSCO Principles and Methodology also facilitate the promotion of IOSCO’s core objectives of securities regulation,4 which include protecting investors and ensuring that the markets are fair, efficient and transparent.

The Final Report describes issues and risks identified to date that are associated with the trading of crypto-assets on CTPs. In relation to the issues and risks identified, it describes key considerations and provides related toolkits that are useful for each key consideration. These key considerations and toolkits are intended to assist regulatory authorities who may be evaluating CTPs within the context of their regulatory frameworks.

The key considerations relate to:

  • Access to CTPs;
  • Safeguarding participant assets;
  • Conflicts of interest;
  • Operations of CTPs;
  • Market integrity;
  • Price discovery; and
  • Technology.

 

The operational model adopted by a CTP and the existing regulatory framework may determine the extent to which issues or risks exist, are relevant or have already been mitigated. IOSCO recognizes that this market is new and rapidly evolving. As a result, the key considerations and toolkits put forward in the Final Report are not intended to suggest or mandate any particular regulatory action or requirement. They represent specific areas that IOSCO believes jurisdictions could consider in the context of the regulation of CTPs.

See:  The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement

The toolkits are examples of measures that can be used by regulatory authorities to address the key considerations and the associated risks and issues. For any particular IOSCO member there may be other considerations not highlighted in this report that it views as relevant to its legal and regulatory framework. IOSCO will continue to monitor the evolution of the markets for crypto-assets, with a view to ensuring that the issues, risks and key considerations identified in this report remain relevant and appropriate.

Finally, this Final Report does not include an analysis of the criteria that are used by regulatory authorities to determine whether a crypto-asset falls within its remit. Rather, it focuses on the trading of crypto-assets on CTPs when the regulatory authority has determined that it has the legal authority to regulate those assets or the specific activity involving those assets.

IOSCO Report:  Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms (55pg PDF) -> Download Now

 


NCFA Jan 2018 resize - Visa Grants Coinbase Power To Issue Bitcoin Debit Cards The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Blockchain Fundraising Can Benefit African Tech Startups

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Forbes | Oluwaseun Adeyanju | Feb 10, 2020

African startups - Visa Grants Coinbase Power To Issue Bitcoin Debit CardsAfrican startups raised a record $1.34 billion in venture capital in 2019, up from just under $200 million in 2015, according to WeeTracker, a media firm focused on the African entrepreneurship space. That’s about a 46.3% increase on a compound annual growth rate (CAGR) basis. WeeTracker estimates show that the total African venture funding had reached $725.6 million in 2018.

Despite the impressive growth rate, there are still huge funding gaps that the continent needs to fill and here’s why.

The larger portion of funds being raised by African startups comes from venture capital firms outside the continent. Given how the technology ecosystem in Africa is still in its nascent stage, coupled with how venture capital funds are typically directed toward growth, many early-stage startups on the continent still struggle to raise early-stage funding. And that’s because there aren’t sufficient local angel investors to fill this gap.

See:  EU rules to boost European crowdfunding, platforms agreed

For instance, in Nigeria, only about $1.5 million of the $133.5 million that the country attracted in 2018 came from the Lagos Angel Network, Africa’s largest angel network, according to online business news publication Quartz. Nigeria attracts the majority of African venture capital — nearly 50% in 2019.

The consensus within the African angel investing community during the 2018 Africa Early Stage Investor Summit is that the lack of clear exit opportunities is a major contributory factor.

“It is easy to invest money in Africa right now, but it is hard to make money in investing here. The key is to be exit centric — we only invest in entrepreneurs who are focusing on building sustainable businesses that can exit,” Ben White, the CEO of Venture Capital for Africa (VC4A) said. “This conversation succinctly captures the challenges venture capital faces in Africa and why we need to keep working to strengthen and support the entire African venture ecosystem.”

How blockchain can solve the early-stage liquidity problem

Traditionally, investors in startups are able to exit and make money from their investments through three major avenues including IPOs, acquisitions and mergers. Each of these typically requires that a company achieves a reasonable level of growth. For a technology ecosystem that’s still at its nascent stage like Africa, reaching this level of growth can take a longer time frame than in matured markets.

The implication of the longer time frame here is that convincing investors and high net worth individuals (HNIs) to inject funds into the African startup landscape can be tough. They already have access to more stable investment opportunities elsewhere. For instance, the Central Bank of Nigeria’s Open Markets Operations Bills returns about 15% per annum.

See:  Getting In Early: SEC Sees Growth In Equity Crowdfunding

One of the ways to encourage investors to inject money into startups in the early stages is to develop a liquid market.

“One of my key thesis is that if we have more secondary markets in Africa and that allows early-stage investors to get some kind of liquidity, we will be able to recycle funds within the ecosystem,” said Yele Bademosi, a Binance Labs director and founder of Nigeria-based angel investment firm Microtraction.

“However, the current infrastructure for capital markets across Africa doesn’t necessarily support this.”

Here’s where blockchain comes into play.

The distributed and trustless technology has powered a new method of fundraising that can be borderless. This is evident in the initial coin offering boom and subsequently the emergence of the security token market.

While ICO fundraising, for the most part, has sought to circumvent regulatory spotlight, the development of security tokens has been about redesigning the regulated capital markets to increase access and remove the inefficiencies that presently exists.

In Africa, blockchain can help increase market access for early-stage companies for a start.

See:  Architecting a New World: Investment Crowdfunding and Digital Assets

“There is an opportunity to create our own funding infrastructure using blockchain to issue security tokens or hybrid tokens,” Bademosi added. “We will need to define our own guidelines and regulations around that, but what gets me excited about blockchain is that it can allow us to rethink capital formation and capital markets from the ground up in a way that could be trustless.”

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NCFA Jan 2018 resize - Visa Grants Coinbase Power To Issue Bitcoin Debit Cards The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Why DeFi’s Billion-Dollar Milestone Matters

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Coindesk | Brady Dale | Feb 9, 2020

DeFi - Visa Grants Coinbase Power To Issue Bitcoin Debit CardsIt was only December when the entire decentralized finance (DeFi) market was worth less than $700 million. Early this morning, it hit $1 billion, a figure that even the most fervent blockchain skeptics would have a tough time dismissing as meaningless.

That figure is the measure of all the crypto held in projects that lend, hedge, abstract, swap or otherwise make structured bets using ethereum's smart-contract powers, as totaled by DeFi Pulse, which first showed the collective market at $1 billion at 8:00 UTC Friday.

To be clear, $1 billion is not how much money people are making on DeFi, but how much they have committed. Their “locked-in” collateral is used on various protocols to make a wide array of bets, from simple loans to complex derivatives.

At press time, the figure had dropped back to $993.3 million, but the billion-dollar milestone has been broken nevertheless, and most people in the space believe it's a sign of greater things to come.

"It proves that people around the world want access to more efficient, less biased, money," Rune Christensen, the creator of DeFi leader MakerDAO, told CoinDesk via a spokesperson.

MakerDAO has consistently held the top spot on DeFi Pulse, as the protocol with the most ETH as collateral – some 60 percent of the market.

See:  Interested in a High Interest Bitcoin Saving’s Account? Interview with Ledn CEO, Adam Reeds

“$1 Billion marks an important milestone for DeFi to be celebrated,” DeFi Pulse wrote on its blog. “Additionally, $1B feels like an early birthday present for DeFi Pulse which was launched in February 2019.” The website has become something of a standard in this nascent industry.

DeFi Pulse was not alone in its bullish tone. Investor Spencer Noon of DTC Capital struck a similar note in an email to CoinDesk:

"No other smart contract platform comes close in terms of its developer mindshare, tooling, and infrastructure, to the point where I don’t believe DeFi could exist anywhere else today. And perhaps most surprisingly, we’re finally seeing a credible case for ETH to accrue a long-term monetary premium as the only truly trustless collateral type in decentralized finance."

Unpacking $1B

Each hour, DeFi Pulse totals all the ETH and ERC-20 tokens locked inside public DeFi protocols and logs the "total value locked" (TVL) on a graph at the top of the page.

See:  Living on Defi: How I Survive Argentina’s 50% Inflation

Of course, that number is mostly ETH, which currently represents 70 percent of the value. As such, the number can be a little misleading because denominating it in dollars exposes the figure to crypto's volatility. In other words, a hard spike in ETH prices (the asset is up 21 percent over the last week) would drive TVL up even if no one else put any more coins in.

In fact, when weighed in terms of locked-up ETH, the chart line is going down, not up, over the last seven days. "Of course some of the DeFi milestone is due to ETH appreciation, but, regardless, we have crossed the inflection point between the bear markets of 2018 and 2019 and are poised for a bull market in 2020," CoinFund's Jake Brukhman said in an email.

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NCFA Jan 2018 resize - Visa Grants Coinbase Power To Issue Bitcoin Debit Cards The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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SEC Commissioner Speech: A Proposal to Fill the Gap Between Regulation and Decentralization

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SEC | Commissioner Hester M. Peirce | Feb 6, 2020

Commissioner Hester M. Peirce - Visa Grants Coinbase Power To Issue Bitcoin Debit CardsThank you George [Chikovani] for that kind introduction.  I appreciate the opportunity to be with all of you today.  Before beginning, I have to remind you that the views I express are my own and do not necessarily represent those of the Securities and Exchange Commission or my fellow Commissioners.[1]  Indeed, the views I will express today are not fully formed in my own mind and may not reflect my own opinions in the months to come.  To that end, I welcome the feedback of all of you and anyone else with an interest in the regulation of digital assets.

Before detailing my proposal for a safe harbor, I will first outline the problem. Many crypto entrepreneurs are seeking to build decentralized networks in which a token serves as a means of exchange on, or provides access to a function of the network. In the course of building out the network, they need to get the tokens into the hands of other people. But these efforts can be stymied by concerns that such efforts may fall within the ambit of federal securities laws. The fear of running afoul of the securities laws is real. Given the SEC’s enforcement activity in this area, these fears are not unfounded.

See:  Canadian Securities Regulators Publish Additional Guidance for Facilitating Crypto Asset Trading

There is, I think, a way to address the uncertainty of the application of the securities laws to tokens. The safe harbor I am laying out this morning recognizes the need to achieve the investor protection objectives of the securities laws, as well as the need to provide the regulatory flexibility that allows innovation to flourish. Accordingly, the safe harbor protects token purchasers by requiring disclosures tailored to their needs, preserving the application of the antifraud provisions of the securities laws, and giving them an ability to participate in networks of interest to them. The safe harbor also provides network entrepreneurs sufficient time to build their networks before having to measure themselves against a decentralization or functionality yardstick.

Getting into the specifics of the proposal, the safe harbor would provide network developers with a three-year grace period within which they could facilitate participation in and the development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws, so long as the conditions are met. This objective is accomplished by exempting (1) the offer and sale of tokens from the provisions of the Securities Act of 1933, other than the antifraud provisions, (2) the tokens from registration under the Securities Exchange Act of 1934, and (3) persons engaged in certain token transactions from the definitions of “exchange,” “broker,” and “dealer” under the 1934 Act.

The initial development team would have to meet certain conditions, which I will lay out briefly before addressing several in more depth. First, the team must intend for the network on which the token functions to reach network maturity—defined as either decentralization or token functionality—within three years of the date of the first token sale and undertake good faith and reasonable efforts to achieve that goal. Second, the team would have to disclose key information on a freely accessible public website. Third, the token must be offered and sold for the purpose of facilitating access to, participation on, or the development of the network. Fourth, the team would have to undertake good faith and reasonable efforts to create liquidity for users. Finally, the team would have to file a notice of reliance.

See:  The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement

Now that I have outlined the safe harbor,

I suspect some of you are asking, “Who cares?”  I get the point.  I am one of five Commissioners.  I cannot write rules unilaterally.  However, to quote another of the Boss’s songs: “you can’t start a fire without a spark.”[11]  It does not hurt to get the ball rolling.  People change their minds.

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