Plexus DeFi Weekly Update #1 — Week of 7/25/21
Welcome to our first DeFi Weekly Update! Our goal at Plexus is to make DeFi simple and accessible to everyone, and we’ll be using these weekly posts to keep you in the loop about what’s going on both within Plexus and in the greater DeFi space as a whole.
In future Weekly Updates, we’ll be sharing news in a few separate sections, which should look like this:
- Weekly News Summary: A breakdown of the most important and interesting news from the DeFi sector from the past week
- Key Takeaways: Some thoughts on the implications of the week’s news on the market as a whole, and how they relate to Plexus
- Dev Updates from Plexus: News from our dev team about updates, changes, and improvements we’ve made to the Plexus protocol in the past week
- Upcoming Development Goals: A forward-looking explanation of the targets, goals, and milestones the Plexus devs are working towards
This week’s update will be a bit shorter than future ones, though — we’ve got so much exciting news to share about the Plexus development process this week that we’ll be making a separate post to dive into all of the details! With that being said, let’s dive into the biggest DeFi news from the last week.
DeFi News from 7/25 to 8/1
The prevailing theme of this week’s crypto news has been regulation, and the uncertainty that surrounds subjects like Binance, stablecoins, and other long-time regulatory targets. Today we’ll look at three of last week’s most important events in crypto, and talk a little about their implications on DeFi.
Binance’s future in question; CEO CZ looking for a replacement
The world’s largest centralized crypto exchange is no stranger to controversy, and the past few weeks have been particularly noteworthy. Regulators from Malaysia, the United Kingdom, Japan, and many other important crypto markets have issued regulatory warnings and statements about what offerings Binance can (and cannot) offer in their territories. Being the largest exchange, the future of Binance is tied more intimately than any other with the future of crypto worldwide.
It seems that Binance CEO CZ has acknowledged the growing existential threats to the exchange, as he announced that he is looking for a replacement with strong regulatory experience in a press conference on the 27th. Other moves to bring Binance more in line with global regulatory compliance include internal restructuring and setting up a more traditional headquarters (something the exchange doesn’t currently have).
The potential downfall of Binance is one of the more serious threats currently facing the cryptocurrency community, and it serves to highlight some of the greatest strengths of the DeFi sector: being completely decentralized, DeFi is not controlled by any one entity, business, or person, and is strongly resistant to interference by outside actors like governments and regulators.
United States Senate Banking Committee holds hearing about cryptocurrency
The USA is one of crypto’s largest and most important global markets, but it has traditionally also been one of the most restrictive. On Tuesday the 27th, the US Senate Banking Committee heard arguments for (and against) a number of topics relevant to cryptocurrencies from a panel of experts including Executive Director Jerry Brito from Coin Center, Professor Angela Walch from St. Mary’s School of Law, and Marta Belcher from the Filecoin Foundation.
Topics involved central bank digital currencies (CBDCs), crypto’s role in ransomware attacks, crypto mining, stablecoins, and a number of other important and timely concerns. Sentiment was largely split down party lines, as Democrats like Sen. Jon Tester accused crypto of being wasteful, opaque, and even a tool for the subversion of the American monetary system, while Republicans like Sen. Pat Toomey and others acknowledged legitimate uses and benefits of crypto.
Democratic Sen. Tina Smith accused many DeFi products of violating a number of American commodity laws, potentially signalling growing American government scrutiny of the DeFi space.
Elizabeth Warren demands SEC to draft regulatory framework for stablecoins
In this excellent opinion piece from Coindesk, writer Michael J. Casey lays out a number of steps that U.S. regulators and government officials have taken to begin discussions about regulating stablecoins in the last few months. Stablecoin regulatory and existential risk is no new topic for the cryptocurrency community (most often targeting Tether/USDT in the past), but the current push by American lawmakers is one of the largest and most coordinated, including entities such as Treasury Secretary Yellen, the SEC, the Federal Reserve, and a number of others.
Sen. Elizabeth Warren has been one of the most outspoken critics of stablecoins, and had previously laid out a demand that the SEC draft up a framework for regulating them by July 28th — while they did not release one by that date, the calls for action by Warren and others in the American government are ongoing.
Key Takeaways
Ultimately, there are both risks and benefits that come with increased regulatory oversight. Regulation isn’t always a bad thing — when used properly and fairly, regulation helps hold bad actors accountable for their actions and prevent regular people from being exploited by them. We’ve all found ourselves wanting to be able to call customer service sometimes in DeFi; with increased regulation, we end up with more protections to fall back on, which increases the addressable market for what is being built today.
Of course, the risks of regulation can also be heavy. Regulation can stifle innovation in emerging spaces like DeFi, adding red tape and legal hurdles could slow down the growth and experimentative nature that currently exists. More regulated industries are also generally less volatile — in a world of heavy crypto regulations, the halcyon days of 100x plays may be behind us. At the end of the day, it’s usually less fun to play by the rules.
One of the great strengths of DeFi is that participants have full control of their assets through their own personal crypto wallets, and don’t have to worry about big exchanges like Binance shutting down and taking their tokens with them. Even though threats like extreme stablecoin regulation or the potential downfall of a huge exchange like Binance would undoubtedly cause great damage to the health of the markets, DeFi users would still have capital sovereignty .
DeFi might seem confusing or opaque to new users, but it does solve a number of problems that centralized finance poses to people around the world. At Plexus, we’re building a protocol that will serve as the de facto hub for DeFi users, allowing them to handle complex tasks (finding the best yield opportunities, wrapping and unwrapping LP positions, etc.) in simple and easy to understand ways.
