This Week In DeFi – December 16
This week, an Elizabeth Warren-proposed bill threatens crypto, MetaMask partners with PayPal, USDD falls off its peg, and Balancer settles its disputes with a veBAL whale.
To the DeFi community,
This week, senators Elizabeth Warren and Roger Marshall have introduced legislation to tighten U.S. anti-money laundering rules for crypto assets.
The bill would expand existing know-your-customer (KYC) rules to wallet providers, miners, validators and other network participants, and would also prohibit financial institutions from using or interacting with transaction mixers.
The bill is unlikely to become law during this Congress, but may be reintroduced after the next one starts in January. It also has the potential to speed up rule-making processes that are already underway within federal agencies.
Popular non-custodial wallet MetaMask has partnered with PayPal to enable users to purchase Ether directly within the MetaMask app.
The service is currently available to select users within the US, and will be rolled out to all eligible users in the coming weeks. It will be the first time that a web3 wallet has integrated directly with PayPal, and comes as the payment processor continues to cautiously expand its involvement in the cryptocurrency space.
Tron's algorithmic stablecoin, USDD, has fallen away from its $1 peg with the US dollar for the second time since its launch.
The stablecoin briefly dropped to around $0.97 earlier today before recovering to around $0.98. The decline in USDD's price comes as liquidity for the stablecoin has shrunk on Curve, an Ethereum-based decentralized trading platform.
Currently, more than 80% of the liquidity pool is held in USDD, indicating that traders are choosing other stablecoins over USDD.
Decentralized exchange Balancer has approved a proposal which settles a long-standing dispute between a yield-farming whale in its ecosystem.
The whale, known as “Humpy'', reportedly had a history of manipulating the vote-escrow Balancer (veBAL) system to leverage their own self-interests over the good of the protocol itself – leaving little revenue to be collected by the protocol.
Following continued battles between the whale and the broader Balancer community, a peace treaty has been negotiated, allowing both sides to compromise. The treaty will allow Humpy to continue farming BAL tokens with a cap on yields, in return for backing down on hostile governance proposals.
As outlined in the leading story this week, senators Elizbeth Warren and Roger Marshall have proposed a worrying crypto-focused bill, which seeks to regulate crypto ecosystem participants. The rules proposed make it difficult – if not impossible – for the affected parties to abide by, as it looks to enforce KYC regulations on miners and even wallet providers.
Although the bill is yet to pass congress, it may be the tip of the iceberg of what is yet to come for crypto regulation in the US. The move, or similar, may well and truly drive legitimate actors out of the space and send DeFi back underground, into a greyer area.
In the centralized crypto markets, we have seen a recent large exodus out of Binance, as the exchange sees a net outflow of almost one billion dollars in a single day. The move comes as Binance becomes the focus of money-laundering investigations, perhaps inflamed further by the recent FTX collapse.
As a result, DeFi and non-custodial wallets are likely to capture much of this outflow from centralized exchanges.
Other factors boosting DeFi this week are the MetaMask-PayPal partnership, enabling new users to more easily enter the space, while inflation remains high (although somewhat more “tamed”) and reiterates the declining purchasing power of the US dollar.
Interest Rates
DAI
Highest Yields: Nexo Lend at 10% APY, Aave at 1.1% APY
MakerDAO Updates
DAI Savings Rate: 0.01%
Base Fee: 0.00%
ETH Stability Fee: 0.50%
USDC Stability Fee: 0.00%
WBTC Stability Fee: 0.75%
USDC
Highest Yields: Nexo Lend at 10% APY, Aave at 1.1% APY
Top Stories
Sam Bankman-Fried charged with fraud over FTX collapse
Inflation cooled further in November, with prices rising 7.1%
Binance Withdrawals Surge as Concerns About Its Reserve Report Spook Traders
Microsoft bans cryptocurrency mining on cloud services
Stat Box
Total Value Locked: $41.1B (down 2.6% since last week)
DeFi Market Cap: $37.6B (down 3.4%)
DEX Weekly Volume: $7.61B (down 21%)
Bonus Reads
[Zhiyuan Sun – Cointelegraph] – SushiSwap CEO reveals DEX lost $30M on LP incentives this year
[Vishal Chawla – The Block] – Maple Finance releases version 2.0 after $36 million default on platform
[Owen Fernau – The Defiant] – CowSwap Launches ‘Surplus-Capturing’ Limit Orders
[Prashant Jha – Cointelegraph] – Opera launches security tools to protect users against malicious Web3 actors