February 28, 2022
Photo: Al Drago/Bloomberg via Getty Images
Good morning, and welcome to Protocol Fintech. This Monday: the SEC makes a move on DeFi, SWIFT action, and Hester Peirce on regulating code.
Bank runs in Moscow. Armies funded by DAOs. Avocado inflation. This year’s off to a chaotic start. The jitters over cutting Russian banks off from SWIFT, which Western powers seemed to overcome this weekend, were roasted on Twitter as a sign of cowardice. But maybe it was just caution. Our modern financial system is threaded together delicately. No one quite knows what happens when we start pulling it apart, even if the exigencies of war require it.— Owen Thomas (email | twitter)
Gary Gensler has been talking about taking on the crypto industry since he started last April. Now he’s getting down to business. The SEC is taking on the crypto industry in a way that could have far-reaching implications, particularly for DeFi, by expanding the agency’s regulatory authority over decentralized trading systems. The potential mechanism is a rule quietly proposed in January that would expand the definition of an “exchange” to include “communication protocol systems.”
This could be the SEC’s big move on crypto. The industry is taking notice.
DeFi players should take note. This change in definition could mean regulating not just centralized crypto entities but even decentralized finance protocols, according to Losurdo.
It’s unclear how this would practically work. The SEC has enough trouble going after centralized crypto companies.
The SEC is already trying to get more of the crypto world under its purview. So far it’s a mixed bag.
It’s not clear what will happen with this particular rule change: Look at the SEC’s climate rule morass for how easy it is for rule-making to get bogged down in lobbying and technical detail. But getting a rule passed is one thing. Figuring out how to enforce it against DeFi will make that look easy.— Tomio Geron (email | twitter)
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On Protocol: Europe’s holdout governments gave way on banning some — not all — Russian banks from SWIFT. The U.S. and its Western allies will also work to freeze the assets of Russia’s central bank, the White House, the European Commission and others jointly announced Saturday.
Betterment rolled out a student loan management product. The robo-investing software company said the new tool allows users to monitor and make additional payments to their student loans.
Also on Protocol: Ukraine changed its mind about accepting cryptocurrencies, announcing wallet addresses to take bitcoin, ether and other tokens on its official government Twitter account. Previously, a nongovernmental organization was the best way to funnel crypto assistance.
A federal grand jury indicted BitConnect founder Satish Kumbhani, the DOJ said Friday. Kumbhani was charged with defrauding investors of $2.4 billion through a crypto lending product that officials said “operated as a Ponzi scheme.” The exchange shut down in 2018 after receiving cease-and-desist orders from state regulators.
The European Parliament is delaying a vote on crypto regulation. A directive originally scheduled for a vote Monday drew criticism for language that could be taken as a “de facto bitcoin ban,” an official said.
Coinbase CEO Brian Armstrong is philosophical about the ups and downs of the market. “A few months ago there were people I saw lamenting, like, ‘I wish I bought crypto sooner or COIN stock sooner,’ and they didn't think they would ever get a chance to buy something at these prices again. Then by some stroke of luck, when that opportunity does arise, they feel pessimistic or something,” he said on the company’s earnings call last week.
SEC Commissioner Hester Peirce gave a broad-ranging interview to Barron’s that illuminated some of the principles behind the digital asset-friendly views that have led some to call her “Crypto Mom.” “You have to be careful not to regulate software code, because there are First Amendment considerations around trying to stop people from coding,” she said about regulating DeFi
Tuesday’s a busy day for earnings, with SoFi (SOFI), Shift4 (FOUR) and Bottomline Technologies (EPAY) reporting. Look for SoFi’s update on its national bank charter and more signals on the state of ecommerce.
Also Tuesday: The Federal Reserve’s Data and Connectivity Symposium. Kavita Jain, a deputy associate director who leads innovation policy at the Fed, is hosting the online event.
The Bank Automation Summit takes place Tuesday and Wednesday in Charlotte, North Carolina.
Payoneer (PAYO) reports earnings Thursday, and Cipher Mining (CIFR), a U.S. bitcoin miner, reports earnings Friday.
The Federal Reserve Bank of San Francisco hosts the Fintech: Innovation, Inclusion and Risks Conference Friday and Saturday. Figure co-founder June Ou will deliver the opening keynote.
The future of the digital economy is in our hands. That’s why NovoPayment partners with fintechs to turn their visions into reality. NovoPayment’s API-based platform delivers digital banking, payment, and card solutions that adapt, scale, and evolve alongside your company. Our modular approach empowers you to innovate your way.
Thanks for reading — see you tomorrow!