Yesterday in Crypto - Issue #10

Read time: ~7 minutes

Here’s what you missed yesterday, 7/27/23

The U.S. House Financial Services Committee has approved two significant pieces of legislation that could provide much-needed regulatory clarity for the cryptocurrency industry. The bills, namely the Financial Innovation and Technology for the 21st Century Act and the Blockchain Regulatory Certainty Act, aim to establish clear rules for crypto firms, including the jurisdictional differences between the U.S. securities and commodities regulators.

The Financial Innovation and Technology for the 21st Century Act, which received approval in a 35-15 vote, outlines the process for crypto firms to register with either the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC). It also includes a process for firms to certify with the SEC that their projects are adequately decentralized, allowing them to register digital assets as digital commodities with the CFTC.

On the other hand, the bipartisan Blockchain Regulatory Certainty Act, sponsored by Republican Congressman Tom Emmer and Democratic Congressman Darren Soto, aims to set out guidelines for "blockchain developers and service providers" such as miners, multisignature service providers, and decentralized finance platforms. This bill is seen as a significant win for the U.S. as it removes hurdles and requirements for these entities, affirming that if they don't custody customer funds, they are not considered money transmitters.

Despite the progress, some lawmakers refused to support another proposed piece of legislation, the Digital Assets Market Structure bill. Critics, including Democratic Representative Maxine Waters, argued that the bill too closely heeds the calls of the crypto industry and ignores regulatory guidance from the SEC. However, the passing of the two approved bills marks a significant step towards providing a clear regulatory framework for the crypto industry in the U.S.

MakerDAO is a decentralized organization that operates on the Ethereum blockchain. It's best known for creating DAI, a type of cryptocurrency known as a stablecoin. Unlike Bitcoin or Ethereum, whose values can fluctuate wildly, DAI is designed to maintain a stable value, pegged 1:1 with the U.S. dollar. This makes DAI a useful tool in the world of digital finance, where it can be used for transactions without worrying about sudden changes in value.

Recently, MakerDAO has been making headlines with its strategic financial moves. The organization has purchased an additional $700 million in U.S. Treasury bonds, bringing its total holdings in these low-risk assets to a whopping $1.2 billion. This is part of MakerDAO's strategy to back the value of DAI with "real-world assets" - in this case, U.S. government debt.

This move came after an incident where DAI's value briefly dropped below its $1 peg, falling to $0.89. This was due to the failure of Silicon Valley Bank, which had a knock-on effect on several major stablecoins, including DAI. In response, MakerDAO decided to diversify its backing assets, moving away from relying solely on USDC (another stablecoin) and towards a more varied portfolio that includes U.S. Treasury bonds.

The purchase of these bonds was carried out by Monetalis Clydesdale Vault, a digital asset manager, on behalf of MakerDAO. Allan Pedersen, CEO of Monetalis Group, has praised this move, stating that increasing MakerDAO's exposure to real-world assets provides a "strong, reliable, and flexible solution" that will generate more revenue for the protocol.

As of now, DAI's value has returned to its $1 peg, demonstrating the effectiveness of MakerDAO's strategy. By diversifying its collateral with U.S. Treasury bonds, MakerDAO is ensuring the stability of DAI, even in the face of a volatile crypto market.

Blockchain is a revolutionary technology - the one behind cryptocurrency. It’s efficiency and productivity software, and it has the potential to change the world by revolutionizing the way we store and send data.Grasping this concept is critical to understanding the future of money. Here’s blockchain in language anyone can understand:

Imagine you and your friends are playing a game of trading cards. Every time you trade a card, you write down who traded what card to whom on a piece of paper. This piece of paper is like a "block" in the blockchain, recording all the transactions (or trades) that happened.

Now, let's say you have a lot of these pieces of paper because you and your friends trade cards often. To keep track of everything, you decide to staple each new piece of paper to the one before it. This way, you can always look back and see the history of all the trades. This stapled-together chain of papers is like the "blockchain."

But what if someone tries to cheat? What if they try to change what's written on one of the pieces of paper to say they traded a common card for a super rare one? This is where blockchain's security comes in. In our game, every time a trade is made, not just one, but all of your friends write down the trade on their own piece of paper. Each person has a stack of stapled papers (each person has a copy of the blockchain) So, if someone tries to cheat, their piece of paper won't match everyone else's, and the cheat is caught.

In the real world, these friends are called "nodes" in the blockchain network. They all keep a copy of the blockchain and check new blocks (or trades) against their own copy to make sure everything is correct. This way, the blockchain keeps everyone honest and makes sure all transactions are fair and accurate.

Pretty cool, huh?

That’s all for today. We’ll see you on on Monday with a recap of this weekend’s crypto news.

“Anything that can conceive of as a supply chain, blockchain can vastly improve its efficiency- it doesn’t matter if its people, numbers, data, money.“

Ginni Rometty - Former CEO, IBM