The United States commodities regulator is set to take a close look at the decentralized finance space at an upcoming meeting of its tech committee, where it has also invited crypto industry executives to present.
The Commodities Futures Trading Commission (CFTC) announced on March 1 that the agenda for the March 22 meeting of its Technology Advisory Committee will include a panel on “exploring issues in decentralized finance.”
Other panels will explore responsible Artificial Intelligence (AI) development and possible threats arising from AI along with cybersecurity threats to financial markets.
CFTC commissioner Christy Goldsmith Romero said in a statement the panel has an opportunity “to look past labels and examine the issues presented by DeFi thoughtfully and holistically,” adding:
“A discussion about DeFi, including cyber vulnerabilities, indicators of ‘decentralization,’ digital identity and unhosted wallets, will contribute to ongoing policy discussions in Washington, D.C. and beyond the beltway.”
The panel will include presentations that provide an overview of the DeFi ecosystem and will discuss decentralization issues, digital identity, noncustodial crypto wallets and exploits.
Executives from crypto companies including crypto custody platform Fireblocks, security company Trail Of Bits, venture capital firm Terranet Ventures and blockchain intelligence firms TRM Labs and Metrika are slated to present during the meeting.
The meeting agenda will also include a session that considers a subcommittee on crypto and blockchain technology in another move to help cement its bid to win regulatory jurisdiction over crypto.
Last month, the CFTC’s Global Markets Advisory Committee discussed digital asset markets at its inaugural meeting.
Commissioner Caroline Pham, who oversaw the Feb. 13 meeting, said that crypto markets are “truly borderless” and urged policymakers to “understand what is happening” so the policy approach by the U.S. “does not leave Americans behind and playing catch-up.”
The CFTC has been edging for regulatory control of the burgeoning crypto sector from the Securities and Exchange Commission, with CFTC commissioners urging Congress to give the regulator oversight overcrypto.
CFTC chairman Rostin Behnam has similarly attempted to justify why the regulator should have authority over the space, saying the commission was “well positioned” to address regulatory shortfalls.
Australia’s central bank is set to launch a “live pilot” of a central bank digital currency “in the coming months,” according to a joint statement from the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre, an Australian financial research institute.
The RBA said on March 2 that it was collaborating with the DFCRC on a research project to “explore potential use cases and economic benefits of a central bank digital currency (CBDC) in Australia.”
The RBA said the initial stage of the research project involves the selection of several financial industry participants to demonstrate potential use cases of the CBDC.
The pilot project will commence on Mar. 31 and finish on May. 31, with a final report on the findings, including an assessment of the various use cases developed, set to be published on Jun. 30.
Use cases being piloted include offline payments, tax automation and a CBDC for “trusted Web3 commerce,” with participants of the trial ranging from banks — such as Commonwealth Bank and Australia and New Zealand (ANZ) bank — to payment providers such as Mastercard.
Brad Jones, assistant governor for financial systems at the RBA, said, “The pilot and broader research study that will be conducted in parallel will serve two ends – it will contribute to hands-on learning by industry, and it will add to policymakers’ understanding of how a CBDC could potentially benefit the Australian financial system and economy.”
David Lavecky, the co-founder and CEO of blockchain firm CANVAS — one of the firms selected as a trial participant — told Cointelegraph they were selected to explore the potential benefits of using a CBDC in the context of tokenized foreign exchange (FX) transactions.
Lavecky notes that FX and remittance markets are “enormous,” with trillions of dollars traded daily. “And the surprising part is that it moves on very legacy rails at this slow speed."
He sees CBDCs and digital currencies as having the potential to move currency much quicker and cheaper than these legacy systems, as well as allowing these markets to operate outside of normal business hours.
“For example, when you’re sending money to New Zealand from Australia, the cut-off was like 1 or 2 pm. So a lot of that friction and capability gets put away when you start moving into digital currencies and CBDCs.”
While many people object to CBDCs from a privacy standpoint, Lavecky notes that this issue would be one of the factors considered, but highlighted that this project was much more focused on examining potential use cases and deciding if the issuance of a CBDC is worthwhile.
“There’s been no decision made about whether a CBDC would be issued and what technology it would use; this is very much just research around capabilities and what’s possible really. So understanding that privacy is a concern, that’s something there can be solutions put forward to, as part of the pilot.”
Eli Ben-Sasson, co-founder and President of blockchain scaling technology firm StarkWare, which provides with its zero knowledge (zk) rollup engine StarkEx, sees the pilot program as "an important step in the journey" to incorporate blockchain into traditional finance, adding:
“What we very much need is a set of use cases that show people new digital currencies aren’t empty hype, but rather can do stuff we all need in our normal lives. The question is how to best do this."
Coinbase CEO Brian Armstrong has attempted to quell speculation that his exchange’s staking products should be classified as securities — upping the ante in the ongoing debate around crypto regulations with the United States Securities and Exchange Commission.
In a televised interview with Bloomberg on March 1, Armstrong said, “Our staking product is not a security,” referring to cryptocurrencies that can be staked directly on the exchange to generate yields. He continued:
“Customers never turn their assets to Coinbase, for instance. And we really just are providing a service that passes through those coins to help them participate in staking, which is a decentralized protocol.”
Armstrong’s explanation mirrors the guidance provided by Coinbase’s chief legal officer, Paul Grewal, who told shareholders last month that the exchange’s staking products fundamentally differ from the yield products the SEC is targeting. Grewal was referring specifically to the SEC’s recent enforcement action against rival exchange Kraken, which settled with the securities regulator for allegedly failing to register its staking-as-a-service program. As part of its settlement, Kraken agreed to pay $30 million in disgorgement, prejudgment interest and civil penalties.
After settling with Kraken, the SEC has turned its attention to Coinbase’s staking products. Specifically, the regulator is investigating whether Coinbase’s staking products meet the legal definition of a security under the U.S. Securities Act.
Coinbase has been hemorrhaging money during the crypto winter, posting a $557 million loss in the fourth quarter. Revenues plummeted 75% year-over-year as trading volumes dried up.
After falling 86% in 2022, Coinbase’s share price has rebounded sharply this year. The stock is currently trading around $64, having gained over 90% in 2023.
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