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SEC's proposed rule on exchanges could threaten DeFi, says Crypto Mom

“The proposal includes very expansive language, which, together with the chair’s apparent interest in regulating all things crypto, suggests that it could be used to regulate crypto platforms,” said Hester Peirce.

Hester Peirce, a commissioner for the U.S. Securities and Exchange Commission known by many in the space as Crypto Mom, is warning that a proposed rule from the agency could potentially affect the regulation of firms involved with decentralized finance.

According to a Tuesday Bloomberg report, Peirce said that the 654-page proposal recently released by the SEC to amend the definition of “exchange” as defined by the Securities Exchange Act of 1934 could impact the digital asset space. The SEC commissioner reportedly opposed opening the proposal to public comment and said the text could impose additional regulations on decentralized finance, or DeFi, firms.

“The proposal includes very expansive language, which, together with the chair’s apparent interest in regulating all things crypto, suggests that it could be used to regulate crypto platforms,” said Peirce. “The proposal could reach more types of trading mechanisms, including potentially DeFi protocols.”

The text of the proposal does not include terms like “digital asset”, “cryptocurrency”, or “decentralized finance”, and seems to focus instead on “systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities.” According to a Jan. 26 statement from SEC chair Gary Gensler, the rule change would, if implemented, “promote resiliency and greater access in the Treasury market” by expanding regulations to include Treasury markets platforms.

Cointelegraph reported on Jan. 20 that under Gensler, SEC enforcement was “notably high” between June and September 2021, shortly after his confirmation by the U.S. Senate. The SEC chair has previously referred to projects in the DeFi space as “highly centralized” in certain aspects, and thus subject to similar regulations as projects considered to be securities — purportedly to what Peirce was referring for Gensler’s “apparent interest in regulating all things crypto.”

If approved by the commissioners, the proposed rule change will be available to public comment for 30 days upon being listed in the Federal Register. The regulators would then likely vote on the measure, taking any submitted feedback into account.


Presenting CoinDesk’s Most Influential 2021

It was a massive year for crypto: Twelve months when long-held theses were validated and many once sci-fi concepts became relatively mainstream.

Celebrities embraced NFTs (non-fungible tokens), and DAOs (decentralized autonomous organizations) became a thing. The U.S. Congress taxed crypto (but accepted it more and more). And the markets … well, they were nuts.

Crypto today means more than it did a year ago and much more than it did a decade ago. It takes in the future of money, the future of culture, perhaps the future as we know.

Most Influential is CoinDesk’s recognition of this wide-ranging field of innovation. The following names were selected first by readers in a survey and then by staff over two rounds of (intense) meetings.

The top 10 are recognized for outstanding contributions across development, business building, regulation, gaming, art and investing. CoinDesk commissioned 10 artists to create portraits of these influencers, with NFTs of the works available at platforms like SuperRare and Foundation. Up to 20% of the sales will go to charities of the artists choice.

The honorable 40’s (listed below the top 10) are recognized for their ongoing work. We’ll roll out more profiles and interviews over the course of this week.

Most Influential 2021: The Top 10

Sam Bankman-Fried, CEO of FTX

Why: For naming stadia “FTX” and becoming crypto’s richest and cleverest twentysomething. Read the full profile.

Artist: Pindar Van Arman

NFT auction at: SuperRare

Charity: The Giving Block for art therapy at a local hospital.

Roham Gharegozlou, CEO of Dapper Labs

Why: For leading NBA Top Shot and bringing tokens to sports (including the NFL). Read the full profile.

Artist: Panter Xhita

NFT auction at: SuperRare

Charity: Ocean Clean Up

Bitcoin’s Taproot developers

Why: For contributions to the biggest Bitcoin upgrade in years. Read the full profile.

Artist: Stellabelle

NFT auction at: Foundation

Charity: Sloth Conservation Foundation

Jack Mallers, founder and CEO of Strike

Why: For his work in El Salvador with President Bukele and development of the Bitcoin Lightning Network. Read the full profile.

Artist: The Last Confirmation – a Norman X Robness collaboration

NFT auction at: SuperRare

Charity: The Giving Block Disasters and Conflict Cause Fund

Elon Musk, entrepreneur

Why: For his Dogecoin advocacy – and showing the dangers of influencers on crypto markets. Read the full profile.

Artist: Federico Solmi

NFT auction at: SuperRare

Charity: The Giving Block Children & Education Cause Fund

Trung Nguyen, CEO of Axie Infinity

Why: For making crypto fun and catalyzing a “play to earn” juggernaut. Read the full profile.

Artist: Matias Romano Aleman

NFT auction at: Foundation

Charity: The Giving Block Mental Health Cause Fund

Cynthia Lummis, U.S. Senator of Wyoming

Why: For leading pro-bitcoin discourse in the U.S. Senate. Read the full profile.

Artist: Gisel X Florez

NFT auction at: SuperRare

Charity: The Giving Block Children & Education Cause Fund

Gary Gensler, Chair of U.S. Securities and Exchanges Commission

Why: For grasping the nettle of crypto regulation. Read the full profile.

Artist: Skygolpe

NFT available for purchase at: Known Origin

Charity: The Giving Block Mental Health Cause Fund

Do Kwon, CEO of Terraform Labs

Why: For his contributions to Cosmos and the multi-chain future. Read the full profile.

Artist: Jake the Degen

NFT auction at: Private auction

Charity: Chicago Community Bond Fund

Katie Haun, General Partner of Andreessen Horowitz

Why: For leading policy discussions and notable investments. Read the full profile.

Artist: Sasha Katz

NFT auction at: SuperRare

Charity: Too Young to Wed

Katie Haun

The Honorable 40

The following are recognized for their ongoing contributions to the crypto industry.

All Seeing Seneca – The creative lead behind Bored Ape Yacht Club.

Naveen Jain – He created a global identity solution using emojis.

Polynetwork Hacker – For educating us on the difference between “hack” and “exploit.”

Roneil Rumburg – Audius’s CEO on growing a Web 3 Spotify to nearly 7 million monthly listeners.

Michael Shaulov – A DeFi powerhouse finds a balance between decentralization and compliance.

Francis X. Suarez – Miami’s Mayor: “I’ve learned how extensive the network of crypto stakeholders truly is.”

Camila Russo – The Defiant founder: “We are just learning how powerful cryptocurrencies and smart contracts can rally people globally.”

Tim Beiko – By 2030, Ethereum’s economy will be [at] “top 10 country” scale, says this Ethereum developer.

Mark Cuban – Crypto “will have the same impact on business and consumers as the internet did, if not more.”

Willy Woo – For building a 21st-century media empire.

Isaiah Jackson – The “Bitcoin & Black America” author continues to inspire.

Stani Kulechov – The founder of Aave has teased coming ideas, including a debit card and fashion line, for the decentralized money market.

Ryan Selkis – Messari’s CEO was a force behind crypto’s political awakening this year.

Charles Hoskinson – Cardano’s founder brought smart contracts to one of the largest “Ethereum killers” this year.

Andre Cronje – Will 2022 be the year Yearn becomes the “back office for yield?”

Gavin Wood – Following the first batch of parachain auctions, Polkadot will solidify its place as a key proof-of-stake blockchain.

Gavin Wood

Arianna Simpson – The a16z general partner is investing in the future of the internet, Web 3.

Paolo Ardoino – Tether’s unofficial hype man is willing to argue online with critics of the stablecoin.

Vitalik Buterin – The founder of Ethereum still holds sway over the most used blockchain network.

Antonio Juliano – Decentralized exchange dYdX was one the first to experiment with an innovative layer 2 solution.

Jeremy Allaire – The Circle CEO hopes to take his firm toward a $4.5 billion exit.

Danny Ryan – The Ethereum Foundation programmer took lead on the much anticipated London hard fork.

Michael Saylor – The MicroStrategy CEO will buy the dip and the top. He’s in the market for bitcoin.

Elizabeth Warren – The progressive Massachusetts senator has brought the fight against crypto to Washington.

Jerome Powell – The Federal Reserve chairman is likely the most influential man in crypto, as he is in all markets.

Barry Silbert – The founder of Digital Currency Group sees Standard Oil as an inspiration.

Serey Chea – Project Bakong stands apart from other nation digital currency experiments. Chea brought Cambodia’s moonshot into being.

Ray Youssef – Peer-to-peer bitcoin trading is a powerful force.

President Xi Jinping – When the Chinese Communist Party banned mining, it only proved the resilience of Bitcoin’s distributed network.

Bitfinex’ed – Some of the pseudonymous account’s suspicions about Tether’s backing were vindicated this year.

Changpeng Zhao – The Binance CEO took a more practical approach to regulation this year.

Robert Leshner – The Compound founder expects the bridge between DeFi and traditional finance to narrow next year.

Devin Finzer – OpenSea was most recently valued at $10 billion.

Matt Hall & John Watkinson – Larva Labs, the creator of CryptoPunk, is working with a Hollywood powerhouse to expand the NFT brand.

Brian Armstrong – Coinbase CEO took the U.S.-based exchange public this year, in a historic direct listing

Jack Dorsey – The former CEO of Twitter and Square, now CEO of Block, is building for a world where bitcoin is the native currency of the internet.

Kristen Smith – The Blockchain Association’s executive director is one of crypto’s staunchest advocates on the Hill.

Beeple – Digital artist Mike Winkelmann brought NFTs into the limelight.

Anatoly Yakovenko – Solana, a distributed network Yakovenko co-founded, saw massive growth this year.

Random Celebrities Who Discovered Crypto – From Paris Hilton to Jimmy Fallon, crypto was brought into the limelight

CoinDesk has partnered with SuperRare and Foundation to auction off the NFTs here and with The Giving Block to offer the artists the ability to donate to more than 1000 charities and causes.

Anonymous Crypto Donors Are Changing Philanthropy

In 2021, crypto users were crowned the most charitable investors on the planet. To those outside of crypto that might not mean much, but after years of reading hypocritical attack pieces from the traditional financial sector, it’s pretty heartwarming to see the world acknowledge that we’re more generous than our critics.

Open Twitter today and you’ll find thousands of people tweeting about their crypto donations to charities. Enter “#CryptoGivingTuesday” in the search bar and you’ll see hundreds of charities thanking crypto and NFT projects donating millions of dollars to make our world more beautiful.

Pat Duffy created The Giving Block with co-founder Alex Wilson in 2018, developing solutions that charities, universities and other nonprofits use to fundraise cryptocurrencies like Bitcoin. You can donate here as part of The Giving Block’s “Bag Season.”

The crypto community understands that these donors (let’s call them Loud Crypto Donors) – with their Twitter Spaces, live streams, NFT drops and partnership announcements – are one of the most powerful forces behind the mainstream adoption of crypto, having won over millions of normies through by plastering their crypto giving initiatives all over the internet.

But these Loud Crypto Donors are only part of the picture. Behind the scenes, Private Crypto Donors are winning the quiet war for donor privacy rights in the nonprofit sector. As someone with a crypto fundraising platform, I want to tell you why this matters…a lot.

Why does donor privacy matter?

Before getting into crypto, I worked in the nonprofit sector. I learned a lot about what makes donors tick. I also learned about a magical concept called “donor stewardship”, using donor data to get donors to give bigger and more often.

If you’ve never worked for a nonprofit you wouldn’t know this, but fundraising costs nonprofits a lot of time, energy and money (and then donors get mad at this expense, calling it “overhead”… but don’t get me started). Donor stewardship is important for nonprofits. Using data to target existing donors is easier than earning new ones, allowing them to spend less time and money fundraising.

Read more: Crypto-Philanthropy Is Here. What Will It Do? – Joe Huston

The more than 1,000 nonprofits I’ve worked with directly have appeared to use this data ethically. Most simply collect it for fear of accepting an ISIS donation unknowingly (though expecting nonprofits to catch ISIS with their donor forms is like expecting Starbucks baristas to catch stolen credit cards before Visa can).

As a result, the nonprofit industry has developed an appetite for your data, collecting it and using “wealth screening” companies (who have become some of the fastest growing companies in the sector) to compare it against growing databases and determine how much money you have.

For a nonprofit trying to fundraising efficiently, these types of services are heaven-sent, helping them grow their budgets and their impact. Today, the majority of great charities don’t accept anonymous gifts since that’s the norm. But if you’re like me, you probably don’t love the idea of the personal information you put in a donation form ending up on server farms designed to “steward” you into being more generous – even if it’s for a great cause. Furthermore, the ability to donate to charities anonymously empowers donors to support an important cause without fear of embarrassment or persecution.

Which brings us to Private Crypto Donors.

The real-world impact of donor privacy

Although interest in Crypto Philanthropy surged this year, it’s been around for years. Many of us remember the first major wave of Crypto Philanthropy during the 2017-18 bull market, with Ashton Kutcher donating crypto on the Ellen Degeneres Show (back when we still liked her) and a private donor created the Pineapple Fund, giving $55 million in Bitcoin to 60 charities (the Pineapple Fund was our inspiration to start The Giving Block). The Private Crypto Donor behind the Pineapple fund pushed dozens of nonprofits to accept anonymous donations for the first time, many of whom received multi–million dollar donors that transformed their organizations.

Shortly thereafter, I discovered the importance of Private Crypto Donors first hand when an LBGTQ charity we support received its first major crypto gift. It was a lot of money, and the nonprofit was confused about why one of their largest donors wouldn’t want credit for their gift. About a week later, we received a short note from the donor’s Protonmail. He was a closeted gay man and, because we was afraid of having it tied back to him, he had never donated to an LGBTQ charity before. I’m not ashamed to admit that when we first began championing accepting gifts from Private Crypto Donors, I never considered any experience like the one this man was having. I simply felt that donors deserved the opportunity to give without being pestered with mail or putting their personal information at risk. His story was the first of many.

Read more: Crypto: The Gift That Keeps On Giving (to Charity) – Dan Kuhn

Over the years, donor after donor has written to us thanking us for our anonymous option, with their stories opening our eyes to a range of human experiences that are often erased from the philanthropic experience. These Private Crypto Donors are the most passionate philanthropists I’ve had the honor of meeting, from human rights actors fighting against oppressive regimes, to women in Afghanistan who could never get a male guardian to authorize an AFN donation from their bank account (you read that correctly – most women in Afghanistan can’t have their own bank account).

Fast forward to 2021 – crypto prices have hit all-time highs, and millions of crypto investors are learning about the tax advantages of donating crypto for the first time. This has driven millions of dollars into the nonprofit sector from Private Crypto Donors, including perhaps the most famous donation in our platform’s history.

In October, a donor took our Crypto Giving Pledge anonymously before donating $3.5 million ETH to Médecins Sans Frontières/Doctors Without Borders (MSF). The reason this donor wanted anonymity wasn’t quite as emotionally charged as other cases, but it was yet again an interesting human experience. They had made money in crypto – a lot of money – for the first time in their life. To date, they had lived a quiet life and wanted to keep it that way. They weren’t willing to risk sharing their identity with a nonprofit whose marketing team could accidentally toss their gift into their social plan and, with a tweet, change the way their friends and family treated them forever. They came to us, donated anonymously, wrote a beautiful letter about MSF that left our team in tears, then vanished.

Since 2018, we’ve shared the (de-identified) stories of these Private Crypto Donors with the nonprofits we serve. As a result, over 90% of our nonprofits leave the anonymous option on in our widget, despite the fact that any of them can turn it off at any time. As a result, crypto is getting nonprofits into more than just blockchain – it’s getting them into privacy rights, as some of the biggest nonprofit brands are accepting anonymous donations for the first time to take advantage of the crypto trend.

Moral of the story

Though I understand the motivation of nonprofits who mandate donor information, I hope we continue to move toward the normalization of donor privacy. Though data collection is helpful in reducing a charity’s fundraising expenses, nonprofits are creating unnecessary friction by forcing everyone to do so, and boxing out a lot of good human beings who deserve the right to support a great cause without sacrificing their right to privacy.

If you’re a Loud Crypto Donor who’s building big, flashy charitable crypto initiatives – thank you for your service as a crypto adoption warrior. If you’re a Private Crypto Donor, thank you both for your generosity and for your role protecting privacy rights in the nonprofit sector. And if you’re a nonprofit who excludes anonymous giving if your gift acceptance policy, I hope this piece has at least convinced you to keep an open mind.

From NFTs to CBDCs, crypto must tackle compliance before regulators do

Crypto industry leaders need to self-regulate before inadequate public officials decide to take on the task themselves.

Each year that we get a little further away from Satoshi Nakomoto’s whitepaper, crypto becomes more popular than ever, breaking more barriers — not just in sheer enthusiasm, but in mainstream acceptance. From nonfungible tokens (NFTs) to the Metaverse, 2021 was the year of crypto, even following a decade where just about every other year could make the same claim.

Despite that peak enthusiasm and excitement though, we shouldn’t be blind to the fact that there are still fundamental issues that must be solved before crypto truly becomes the dominant “coin of the realm” across the globe, along with the backbone of the next industrial revolution. Prime among these issues are Anti-Money Laundering (AML), Know Your Customer (KYC) and Combating the Financing of Terrorism (CFT) protections that ensure crypto remains a responsible and stable payments option without overregulation.

We are already seeing these kinds of issues with the nations that are the most enthusiastic about adopting crypto, whether through CBDCs or other means. El Salvador has gotten headlines for making Bitcoin (BTC) legal tender and building a Bitcoin-funded, zero-tax city under a volcano, but the country has had its issues in the realm of AML/KYC/CFT, such as when identity thieves compromised the Chivo Bitcoin Wallet, the mechanism through which El Salvador gave its citizens a “Bitcoin stimulus.”

It is not just public entities, either. The NFT boom in 2021 has created a whole new need and emphasis for KYC/AML in a space dominated by gaudy figures. OpenSea has no KYC gathering or AML/CFT screening in place, meaning it opens itself up to being compromised.

To prevent crime and fraud from killing crypto in its crib, or at least in its primary school, the industry has to start taking proactive steps to self-police and self-regulate immediately. If they don’t, the task will be left to the same kind of clueless government officials who brought you the U.S. infrastructure bill’s cryptocurrency provisions.

Related: DeFi: Who, what and how to regulate in a borderless, code-governed world?

Emergent compliance-as-a-service

While NFT platforms are starting to integrate AML, KYC and CFT, the standard is by no means consistent. “Old guard” auctioneers like Christie’s and Sotheby’s refuse to either enumerate those standards or describe them in any detail. OpenSea, perhaps the prime driver of the NFT boom, has thus far resisted building any sort of AML/KYC into the platform itself.

As the popularity of NFTs continues to soar, just like popular computer operating systems, these platforms will attract more hackers and identity thieves. Mainstream news outlets loudly proclaim that “the NFT scammers are already here.” If 2021 was the year when NFTs ascended to the best use case we’ve had so far for crypto, then 2022 will be a year when hackers and scammers will try to fully exploit that popularity.

With the reticence of the NFT platforms, themselves, to address this problem, it is up to other technology platforms to pick up the slack. These platforms can help NFT platforms develop tighter protocols and more detailed AML and KYC requirements before governments come down with backward and draconian regulations. Developing “Compliance-as-a-Service” as an internal industry solution will not only prevent fraud but drive even greater enthusiasm and engagement by individuals, financial entities and governments that still see crypto as the irresponsible corner of the financial universe.

Companies should make up the growing sector of compliance-as-a-service, but coping with the growing threat of NFT and blockchain scammers won’t be enough, especially when whole countries are looking to blockchain as national solutions.

Clear AML/KYC standards equal true mainstream viability for crypto

Of course, some in the crypto community would rather not encourage or even acknowledge regulation of any kind, but that tack and philosophy is simply neither realistic nor reasonable. The problems with El Salvador’s Chivo wallet demonstrated how quickly identity and security problems can trip up even the best-intentioned crypto rollouts. Nations continue to seek out the best KYC practices as part of expanded crypto operations. Sri Lanka has done a KYC proof-of-concept. HSBC has worked with Dubai on its KYC.

Meanwhile, in the United States this year, the Financial Crimes Enforcement Network (FinCEN) issued its first AML/CFT priorities this summer. These priorities include corruption, cybercrime, terrorist support, fraud, transnational crime, drug and human trafficking, and financing weapons of mass destruction.

While different nations are at different steps in the AML/KYC/CFT process, some clear guidelines are emerging. With 195 different countries, yes, there may be 195 different standards for regulating crypto. However, after several years of guidelines, regulations and penalties, the industry has more than enough parameters to start tailoring AML/KYC/CFT solutions and oversight across different jurisdictions. This is just one more reason the industry, itself, needs to be proactive, developing a comprehensive, easily comprehensible and internationally recognized standard that is easy to adopt throughout as many jurisdictions as possible.

Related: The United States updates its crypto AML/CFT laws

What the industry cannot do is allow blockchain to become riddled by the same types of “Wild West” traps which characterizes the internet. Yes, the popularity of the internet is indisputable, but that has come with the sacrifice of not just privacy, but the primacy of truth and healthy communication among people. That means building a new model of identity, based on the blockchain’s trustless system, but also a model flexible enough to meet the reasonable standards of AML, KYC, and CFT.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Jonathan Camilleri Bowman is the CEO of Sekuritance, a multi-dimensional RegTech ecosystem delivering compliance, regulatory transaction monitoring and identity management to individuals and business corporations.

Institutional Investors Expect Major Correction in Crypto Market Next Year

Institutional Investors See Crypto Market as the Top Contender for Major Correction in 2022

Many institutional investors are predicting a major correction in the cryptocurrency market next year, a survey published by Natixis Investment Managers shows. Despite seeing crypto as the top contender for a major correction, institutional investors are increasingly warming up to the asset class.

Institutional Investors See Crypto as Top Contender for Major Correction

Natixis Investment Managers published the results of a global institutional investor survey Wednesday. The company polled 500 institutional investors who collectively manage $13.2 trillion in assets for public and private pensions, insurance, foundations, endowments, and sovereign wealth funds worldwide. Nearly 100 institutional investors in the U.S. who manage $1.3 trillion in assets were included.

Institutional investors were asked about which markets will see a major correction next year. While “institutions see the potential for corrections in a range of asset classes and sectors,” the survey findings state:

They think the top contender for a major correction next year will be cryptocurrencies.

Natixis detailed that cryptocurrency tops the list of correction concerns with more than half of institutions surveyed calling for a correction. Next on the list are interest-rate-sensitive bonds (45%), stocks (41%), and technology (39%).

Despite predicting a major correction for the crypto market, institutional investors are increasingly warming up to the asset class, Natixis noted, stating:

Even as crypto is the top contender for correction, institutions are beginning to warm to digital currency.

Natixis added: “Four in ten consider crypto to be a legitimate investment option, and of the 28% who invest in crypto, 90% say they will maintain (62%) or increase (28%) their allocation.” Meanwhile, 87% of institutional investors expect central banks to eventually regulate cryptocurrencies.

A growing number of institutional investors have shown interest in cryptocurrencies over the past months. In May, global investment bank Goldman Sachs said that fear of missing out (FOMO) is driving institutions to bitcoin. In July, a survey by Nickel Digital Asset Management shows that 82% of institutional investors and wealth managers are planning to increase their crypto exposure between now and 2023.

Do you agree with the institutional investors surveyed about a major correction in the crypto market? Let us know in the comments section below.