Blockchain
Binance CEO Envisions DeFi Surpassing CeFi in Upcoming Crypto Surge
September 6, 2023 – During a recent live event on X Spaces, Changpeng Zhao, the CEO of Binance, presented an intriguing outlook on the future of decentralized finance (DeFi) in contrast to centralized finance (CeFi) within the cryptocurrency sphere.
In the event held on September 1, Zhao shared his perspective that DeFi holds the potential to outperform CeFi as the anticipated bull run unfolds. His emphasis was on the advantages of a more decentralized crypto landscape. Presently, DeFi constitutes approximately 5% to 10% of the trading volumes of CeFi. However, Zhao foresees this ratio undergoing a significant transformation.
“I believe that as the industry increasingly embraces decentralization, it will be to our benefit,” Zhao articulated during the live event. “DeFi represents the future; its trading volume currently ranges between 5% and 10% of CeFi volumes, a noteworthy proportion, the forthcoming bull market might very well witness DeFi eclipsing CeFi.”
This forecast coincides with recent developments within the cryptocurrency market, particularly the legal actions taken by the United States Securities and Exchange Commission (SEC) against prominent centralized exchanges like Coinbase and Binance. These actions prompted a remarkable 444% surge in trading volumes within 48 hours on the top three decentralized exchanges (DEXs).
As of now, the 24-hour trading volume on DEXs stands at $722,776,226.
Additionally, Zhao commented on the recent dismissal of a class-action lawsuit targeting the decentralized protocol Uniswap, characterizing it as a favorable and reasonable ruling while highlighting the significance of regulatory clarity. This lawsuit, which commenced in April 2021, scrutinized the operational details of Uniswap and its adherence to financial regulations.
Another significant discussion during the X Spaces session revolved around the responsibilities of developers in the DeFi sector. Zhao concurred with a judge’s decision asserting that developers should not be held liable for the misapplication of DeFi platforms. He underscored the importance of safeguarding the act of coding as a form of free expression, a stance he views as an encouraging development for the industry.
Recent data also suggests a notable shift in investment patterns, with venture capitalists reallocating their investments from CeFi projects to participate in the rapidly expanding DeFi sector. A report from CoinGecko in March revealed that digital asset investment firms channeled $2.7 billion into DeFi projects in 2022, marking a significant 190% rise compared to 2021. In contrast, investments in CeFi projects witnessed a stark 73% decline to $4.3 billion during the same period.
This shift highlights the emergence of DeFi as the new high-growth sector within the cryptocurrency realm, while CeFi may have reached a saturation point.
Amid these evolving dynamics, Binance recently issued guidance to its users, advising them to convert their holdings of Binance USD (BUSD) tokens into other stablecoins by February 2024. The platform encouraged its users to trade or exchange their BUSD balances for First Digital USD (FDUSD), a stablecoin introduced in June by the Hong Kong-based trust company First Digital Group, which made its debut listing on Binance.
It is noteworthy that BUSD’s market capitalization has experienced a substantial decline in the wake of increased regulatory scrutiny. Since the outset of the year, BUSD’s market cap has witnessed an 80% decrease, plummeting from $16.13 billion on February 9 to its current valuation of $3.1 billion.
In a landmark development for the cryptocurrency sector, the United States Government Accountability Office (GAO) has put forth crucial recommendations to the Securities and Exchange Commission (SEC) preceding the latter’s unprecedented approval of spot Bitcoin exchange-traded funds (ETFs) on January 10th.
The Role of the GAO in Shaping Crypto Regulation
The GAO, an independent and nonpartisan audit institution within the legislative branch of the U.S. government, is known for providing auditing, evaluative, and investigative services to the U.S. Congress. Its recent involvement with the SEC highlights the growing significance of the digital asset market and the need for a robust regulatory framework.
GAO’s Findings and Recommendations
Upon assessing the SEC’s capabilities in handling the burgeoning crypto market, the GAO discovered that while the SEC has 116 employees focusing primarily on crypto assets, it lacks an updated workforce planning strategy. The current strategy, dated for the fiscal years 2019–2022, is deemed insufficient to meet the SEC’s future needs in overseeing and formulating policies for crypto assets.
To address these gaps, the GAO suggested three key strategies:
- New Workforce Planning Strategy: The SEC’s Chief Human Capital Officer should develop a new workforce planning strategy that aligns with the agency’s strategic and performance plans for 2022–2026.
- Documentation of Policies and Procedures: It is recommended that the SEC’s FinHub director document the policies and procedures that support the hub’s internal controls.
- Development of Performance Goals: The GAO advises that the FinHub director should establish performance goals and measures that are clear, quantifiable, and focused.
Additionally, the GAO has introduced a live status section to track the SEC’s response to these recommendations, ensuring accountability and transparency in the implementation process.
Historic Approval of Spot Bitcoin ETFs
In a historic judgment, the SEC approved 11 spot Bitcoin ETF applications on January 10th. This decision marked a significant shift in the regulatory landscape, as the SEC, led by Chief Gary Gensler, had previously rejected such applications for nearly a decade. The internal document from the SEC revealed a close vote, with three votes in favor and two against, highlighting the contentious nature of this issue.
Peter Schiff’s Critique and Warning
Notably, Peter Schiff, a well-known critic of Bitcoin, has expressed skepticism about the approval. He suggests that the SEC Chief was cornered into approving the spot Bitcoin ETFs and warns of potential stringent crypto regulations in the future. According to Schiff, these regulations might substantially increase the cost of Bitcoin transactions, potentially undermining its use case and leading to a significant price decline.
Conclusion
The GAO’s recommendations to the SEC represent a pivotal step in shaping the regulatory framework for the digital asset market in the United States. As the crypto industry continues to evolve, the SEC’s response to these recommendations and its approach to regulating the sector will be closely watched by investors and market participants alike.
In a significant development for the cryptocurrency industry, the U.S. Securities and Exchange Commission (SEC) recently approved 11 spot Bitcoin exchange-traded funds (ETFs). This approval comes after a decade-long struggle between regulators and the digital asset industry, marking a watershed moment for the acceptance of digital assets as mainstream investments. Among the approved ETFs are BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF.
Unprecedented Inflows:
On the first day of trading, these ETFs saw impressive activity, with $4.6 billion worth of shares changing hands across all the products, according to LSEG data. Bitwise, a crypto asset manager, reported that its spot Bitcoin ETF alone attracted $240 million, making it the most popular among the newly introduced products. Grayscale, BlackRock, and Fidelity dominated total trading activity, according to the LSEG data.
Also Read: Grayscale Court Decision Crucial in SEC’s Approval of Bitcoin ETFs, Says Chairman Gary Gensler
Bitwise’s Chief Investment Officer, Matt Hougan, expressed optimism about the future, stating, “We think that this will become a market measured in the tens of billions of dollars.” This surge in interest highlights a growing acceptance of Bitcoin and other cryptocurrencies among traditional investors.
Competition and Fee Wars:
The SEC’s approval has sparked intense competition among issuers to gain market share. Franklin Templeton, reacting swiftly, slashed the fee for its Bitcoin ETF to 0.19 percent, the lowest in the market. Additionally, the company waived fees entirely on the product’s first $10 billion in assets under management until August. Valkyrie, another player in the space, reduced its fees to 0.25 percent after its ETF started trading. This fee war is indicative of the fierce competition among ETF issuers to attract investor capital.
Grayscale’s Transition to ETF:
Grayscale, a prominent player in the cryptocurrency investment space, received approval to convert its existing Bitcoin trust into an ETF. This move instantly made it the world’s largest Bitcoin ETF, managing over $28.6 billion in assets. Despite this success, the ETF experienced outflows of $95 million on the first day of trading. The ability of Grayscale to navigate this transition will be closely watched, as it sets a precedent for other trusts considering a similar shift.
Regulatory Caution:
While the SEC’s approval is a significant step forward, it is important to note that SEC Chair Gary Gensler emphasized that the decision should not be interpreted as an endorsement of Bitcoin. Gensler referred to Bitcoin as a “speculative, volatile asset,” highlighting ongoing concerns about investor protection. The regulatory nod indicates a willingness to explore the potential of digital assets, but caution is warranted as the market continues to evolve.
Conclusion:
The approval of 11 spot Bitcoin ETFs by the SEC marks a turning point for the cryptocurrency industry. The influx of billions of dollars within the first day of trading demonstrates a growing acceptance of digital assets among traditional investors. The fee wars among ETF issuers and Grayscale’s transition into an ETF further highlight the competitive dynamics and challenges in the market. As the cryptocurrency market matures, ongoing regulatory scrutiny and investor sentiment will play crucial roles in shaping the future of these innovative financial products.
In a recent exclusive interview with Cointelegraph, Tether CEO Paolo Ardoino has voiced his belief that the future of the crypto industry lies in providing real-world use cases without necessarily relying on tokens or blockchain technology. Ardoino argues that the next breakthrough in the industry should focus on the fundamental value proposition offered by cryptography, emphasizing peer-to-peer transactions and privacy protections.
“Crypto doesn’t need a blockchain. It doesn’t need a token,” Ardoino stated, challenging the conventional reliance on these technologies. He proposes that the industry should shift its focus towards practical applications that offer tangible benefits to users.
Ardoino suggests that potential killer apps in the crypto space could take the form of everyday solutions, such as a booking system or a competitor to ride-sharing services like Uber. The key, according to him, is to leverage the core strengths of cryptography in facilitating secure and private peer-to-peer transactions.
One of the primary concerns raised by Ardoino is the centralization and regulatory scrutiny associated with token issuance. He argues that introducing a token creates a centralized point of failure, increasing the likelihood of regulatory challenges. Ardoino notes that many projects that issued tokens are currently under the scrutiny of regulatory bodies like the U.S. Securities and Exchange Commission (SEC).
“To be decentralized, this system wouldn’t need blockchain technology, which is slow and requires a global shared state,” Ardoino explained. He cited BitTorrent as an example of a decentralized system that achieved success without relying on blockchain technology.
The Tether CEO contends that departing from the conventional blockchain and token model could lead to more innovation and adoption in the crypto industry. By focusing on the core principles of cryptography, projects can potentially avoid regulatory challenges and offer solutions that resonate with a broader audience.
Also read:Bitcoin-Centric Firms Surge in Pre-market as BTC Soars Past $45K
As the crypto industry continues to evolve, Ardoino’s perspective challenges the status quo, encouraging a shift towards real-world applications that prioritize user experience and practicality over traditional blockchain and token-centric approaches.
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