The U.S. makes a push for investor protections

Plus: One of the biggest stablecoins might de-peg from the dollar

Author

Logan Cloak
August 26, 2022

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Get caught up from the past week in 10 minutes or less:

  • Government focuses on investor protection in crypto

  • DAI's de-peg 🪙

  • Other stories from the week 📰

FOCUSING IN ON INVESTOR PROTECTION

A few weeks after OFAC imposed sanctions on Tornado Cash, the House Committee on Oversight and Reform has sent letters to four federal agencies (Dept. of Treasury, SEC, CFTC, and FTC) and five crypto exchanges (Binance.US, Coinbase, FTX, Kraken, and KuCoin) asking for information about the steps they are taking to "combat cryptocurrency-related fraud and scams" in addition to asking for suggestions on how to further protect US crypto users.

Rep. Raja Krishnamoorthi, who sent the letters to the respective institutions, says he is "concerned by the rapid growth of fraud and consumer abuse" in crypto markets.

On the same day those letters were sent, the FBI sent a public service announcement out via their Twitter to warn investors about vulnerabilities in the DeFi ecosystem.

In addition to the warning, the FBI provided suggestions to DeFi platforms on what precautions should be taken. They included the following:

  • "Institute real time analytics, monitoring, and rigorous testing of code in order to more quickly identify vulnerabilities and respond to indicators of suspicious activity."

  • "Develop and implement an incident response plan that includes alerting investors when smart contract exploitation, vulnerabilities, or other suspicious activity is detected."

DAI's POTENTIAL DE-PEG

The co-founder of the fourth largest stablecoin by market cap (over $7B) has proposed that the DAO that runs it, MakerDAO, allow the stablecoin to free float away from it's USD peg.

Last Friday, Rune Christensen of MakerDAO wrote this long proposal to allow the stablecoin DAI to de-peg - or no longer have a 1:1 value match - with the US Dollar.

His reasoning stems from the "authoritarian threat" that the government poses on decentralized protocols that are tied to real-world assets, or "RWA" as they're referred to. He mentioned the Tornado Cash sanctions and the fact that physical crackdown on crypto can happen with no advanced notice.

In order to protect DAI holders from such crackdowns, Rune sees the only path forward as limiting DAI's exposure to RWA. What this means is that instead of holding USD or stablecoins as collateral for DAI, they would limit their collateral exposure to a mix of other decentralized tokens and staked Eth.

This proposal does not come without pushback, however, as many within the DAO have differing ideas of what the future of DAI should be. Greg Di Pisco breaks down the different political factions within MakerDAO and how this proposal came to be.

HOT OFF THE PRESS

Weeks after 'Cryptoqueen' Ruja Ignatova makes FBI's Ten Most Wanted list, her accomplice faces extradition from the UK. This is a truly crazy story you do not want to pass over.

Famous Bitcoin maximalist Michael Saylor is being sued by D.C. for tax fraud. He reportedly claimed that he was living in Florida to avoid income taxes and is being sued for $25M.

Argentine Province Allows Millions to Pay Taxes Using Stablecoins - Taxpayers can now use USDT or DAI to pay for any sort of tax payments in the Mendoza province.

GLOSSARY

  • DeFi - stands for Decentralized Finance - an umbrella term used for financial services on public blockchains, primarily Ethereum (Coinbase)

  • stablecoin - cryptocurrencies the value of which is pegged, or tied, to that of another currency, commodity or financial instrument (Investopedia)

  • DAO - an entity with no central leadership. Decisions get made from the bottom-up, governed by a community organized around a specific set of rules enforced on a blockchain (CoinTelegraph)

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