Blockchain Bites: CZ’s Exclusive Interview, California’s Souped-Up Regulator, Alt Season’s End?
California beefed up its financial regulator, Bitpanda closed a notable raise and some investors say “alt-season” is over.
European crypto brokerage Bitpanda has raised a $52 million Series A led by Peter Thiel’s Valar Ventures, to be put to use expanding the company’s payroll and adding a variety of products. Next year the Vienna-based firm intends to expand to “all kinds of asset classes” including stocks. In an interview, the firm’s co-founders told CoinDesk’s Leigh Cuen France, Spain and Turkey were among the fastest-growing crypto markets out of the roughly 34 countries the platform serves.
California Gov. Gavin Newsom signed a bill on Friday that increases the scope of the state’s financial regulator. Renamed the Department of Financial Protection and Innovation, the agency is now equipped with “new tools to shape the regulation of virtual currency” and enhanced abilities to crack down on unlicensed or deceptive financial services and products. The new law will also create an Office of Financial Technology Innovation to engage with emerging financial products such as cryptocurrencies and a division to oversee markets.
Artificial intelligence and data service Ocean Protocol has suspended its old contract on the Ethereum blockchain and hard-forked its project, following the $150 million KuCoin hack. On Sunday at 22:00 UTC, Ocean Protocol announced it had migrated from its old token address to a new one to thwart the KuCoin hacker’s attempts to offload 21 million OCEAN tokens worth some $8.6 million. “Moving contract addresses has effectively blacklisted the hacker’s stash of OCEAN tokens. But it also raises questions of the project’s true immutability if the protocol can be effectively hard-forked in one weekend,” CoinDesk’s Will Foxley reports.
Coinbase CEO Brian Armstrong published a blog Sunday calling the company “mission focused,” with the underlying message that it won’t engage on political or social topics outside its domain of open finance. That said, employees are expected to pursue social activism in their own time. CoinDesk’s Paddy Baker reports the blog has “split the crypto industry straight down the middle,” with many commending the public stance while others deem it regressive. For instance, Boost VC’s Adam Draper said focusing on a “unified mission” was the only way to achieve its goals. Others in the Twitterverse have called the message out-of-touch, and a way to downplay issues that directly affect employees’ lives.
A class-action lawsuit alleging the Maker Foundation and others knowingly misrepresented the risks of investment has been sent to arbitration. The case centers around plaintiffs who claim to have incurred six-figure losses during the “Black Thursday” crash in mid-March and allegations that Maker’s stewards misrepresented the security and collateralization of the platform. The DAI stablecoin is over-collateralized, they argue. In an order last Friday, Judge Maxine Chesney granted a motion by the Maker Foundation to refer the case to the American Arbitration Association as specified in a clause in the foundation’s terms of service.
DeFi v. CeFi
In an exclusive CoinDesk interview, Binance CEO Changpeng “CZ” Zhao said he fully expects decentralized finance (DeFi) to cannibalize his own crypto exchange.
“Our mission is not to build a CeFi exchange,” Zhao said in an interview with CoinDesk’s Muyao Shen, using a shorthand term for centralized finance. “Right now it is one of our larger businesses that support our growth. But over the long term, we want to push decentralization.”
Zhao’s comments reflect the growing competition between centralized exchanges and their more community-driven alternatives. Faced with quick-moving projects that can iterate week to week, Zhao is tasked with evolving the world’s largest crypto exchange (by volume) to something that can meet the moment.
At a micro-scale this battle played out between Uniswap, a venture-backed automated market maker (AMM), and its upstart clone Sushiswap, which features a governance token. As reported, Uniswap responded to the challenger by integrating its own governance token – a means to spreading the wealth among its community members.
Uniswap is part of the DeFi ecosystem currently threatening exchanges like Binance, Huobi and Coinbase. In recent months, Binance has been targeting the DeFi ecosystem as a growth sector.
“The company’s new foray into DeFi, Binance Smart Chain, attempts to replicate some of the features of the Ethereum blockchain that have proven fertile for developers building decentralized, blockchain-based trading and lending applications that theoretically could one day challenge traditional lenders and Wall Street trading firms,” Shen reported.
But building decentralized systems is difficult. The Binance Smart Chain is run by only 21 nodes and the majority stakeholder of its native BNB tokens remains Binance.
Zhao said this comparatively centralized structure was to better compete with Ethereum.
“So in my mind, I’m never worried about the business model,” Zhao said. “I’m always much more worried about if we have users using the product. There’s always multiple options for business models, so the key is to build something that’s useful.”
Some digital asset traders say they’ve been rotating funds out of alternate cryptocurrencies (altcoins) into bitcoin (BTC) in anticipation of the leading cryptocurrency significantly outperforming the entire crypto market for at least the next several months. CoinDesk’s Zack Voell reports bitcoin is down so far in September, dropping more than 10%. Still, bitcoin became “under owned” during the DeFi craze, according to Kyle Davies, a prominent DeFi investor and co-founder of Three Arrows Capital, and likely correction is due to follow. Kevin Zhou, co-founder of San Francisco-based Galois Capital, outlined a similar theory.
Ethereum 2.0 developers have launched yet another testnet, this time to give on-boarding stakers a dry run before the launch of Eth 2.0 sometime this fall. The testnet, called Spadina, follows the official Ethereum Foundation’s Medalla testnet which launched in early August and will only be in use for the next three days while Eth 2.0 stakers practice joining the network with the testnet. “The main objective is to give us all another chance to go through one of the more difficult and risky parts of the process – deposits and genesis – before we reach mainnet,” Ethereum Foundation researcher Danny Ryan blogged.
CoinDesk Executive Editor, Operations & Strategy Pete Pachal penned a response to Coinbase CEO Brian Armstrong’s recent public statement and the division his “mission-focused” stance has stirred. “Armstrong’s position isn’t a message to Silicon Valley heavyweights to turn back the clock on employee “wokeness” – it’s an open letter to every other corporate leader, urging them to connect the dots between the political positions they might be taking and the central mission of their companies. And if the result is a picture they don’t like, rethink,” Pachal writes.
Shiv Malik, author and head of growth at Streamr, thinks crypto needs a euro-pegged stablecoin. The U.S.’ recent social and political upheavals are placing serious strain on the dollar’s future hegemony. “And if America is so precariously balanced between further prosperity and potential disaster, so, too, rests the fate of the U.S. dollar for the rest of the world. Just the issue of U.S. Treasury debt issuance alone has had professional money managers warning this month that the U.S.’s reserve currency status is under threat,” he writes.