This Week In DeFi – June 9

This week, the SEC takes action against Coinbase's staking service, Curve adds stETH as collateral for crvUSD, ENS announces .box domains, and Atomic Wallet is hacked for $35M+.

Jun 09, 2023

To the DeFi Community,

This week, the US Securities and Exchange Commission (SEC) has filed a lawsuit against crypto exchange Coinbase, claiming that its staking service qualifies as an investment contract under US law.

SEC chair Gary Gensler stated that Coinbase did not register its staking-as-a-service program, depriving investors of necessary disclosure and protections. Additionally, the SEC argues that the tokens offered through the service are securities.

Since the SEC’s action, there has been a notable increase in users unstaking their staked ether on the exchange. On-chain data reveals that approximately $75 million worth of Coinbase Staked Ether (cbETH) has been burned for redemption since the lawsuit was announced.

https://twitter.com/brian_armstrong/status/1666129111025324035

Curve Finance has voted in favor of onboarding Lido's liquid staking token, stETH, as collateral for its crvUSD stablecoin.

The proposal received unanimous support with a significant quorum of over 84% of the circulating supply participating in the vote. The inclusion of stETH increases the crvUSD debt ceiling by 15 times to $150 million.

If crvUSD reaches this new limit, it would become the 13th-largest stablecoin globally. Currently, crvUSD users can only mint the stablecoin against deposits of Frax's staked liquid staking token (LST), sfrxETH, which has a $10 million debt limit.

https://twitter.com/CurveFinance/status/1665362759918256131

Ethereum Name Service (ENS) is preparing to support a new web domain called .box, which will function like conventional internet domains and can be routed on web browsers.

The .box domain is part of the My.Box project and will enable blockchain-based internet name services for Ethereum users, allowing domains to be used for both crypto and internet services such as email.

Registrations and transfers of .box domains will take place on the Ethereum blockchain, and ownership will be represented by associated NFTs. The My.Box project is scheduled to go live in September and aims to simplify decentralized naming and promote the adoption of blockchain-native domains.

https://twitter.com/nicksdjohnson/status/1666368619876327424

Atomic Wallet, a crypto wallet with 5 million users, has suffered a breach resulting in the loss of over $35 million in assets, with the potential for the damage to exceed $50 million as more reports of stolen assets emerge.

On-chain investigator ZachXBT discovered the exploit and managed to recover over $1 million of the stolen funds for one victim. However, the details of the recovery process have not been disclosed due to ongoing risks.

The company's response to the incident has faced criticism, with users contesting their claim that the last exploit transaction occurred over 40 hours ago.

User compensation remains uncertain, as Atomic Wallet's terms and conditions state that the company is not obligated to compensate users for more than $50 in damages, leaving many users with significant losses and limited recourse for recovery.

https://twitter.com/AtomicWallet/status/1664946301815910400

It’s been another bumpy week for centralized platforms, as the SEC files major lawsuits against exchange leaders Binance and Coinbase.

The enforcement actions have sent DeFi activity soaring, as trading volumes increase and a surplus of users rush to remove their Ether from Coinbase’s staking service. Although it was somewhat expected (given the SEC’s previous comments and similar actions against platforms such as Kraken), the lawsuit is a huge blow to staking as a service.

It may be a net positive for DeFi, as would-be Ethereum stakers will have to migrate to alternative services such as Lido or Rocket Pool – perhaps a first step into the DeFi world for many of them.

Some other interesting developments involve decentralized websites and social media, as ENS expands to web domains with the My.box project and Lens raises $15 million for social media on the blockchain.

These will both be fascinating to watch, given the increased censorship of traditional Web 2.0 platforms in recent times.