Sun. AM-PM Seeds of Wisdom RV/GCR Update(s) 9-1-24

(Note: If you’re looking for more news regarding cryptocurrency, please visit our website Bitcoin Commando. All crypto news will be posted there. ~ Dinar Chronicles)

Seeds of Wisdom

“SAME RISKS, SAME RULES”: THE SEC’S SELECTIVE APPROACH TO CRYPTO REGULATION

When it comes to cryptocurrency regulation, the SEC views most cryptocurrencies as securities, favoring the concept of ‘same risks, same rules’.

But is it possible it’s not being consistent itself?

The same rules aren’t being followed when it involves the custody of crypto-assets.

The notorious SEC accounting bulletin SAB 121 changes the accounting rules around the custody of crypto-assets, requiring those assets to be disclosed on the balance sheets of listed firms.

That contravenes global accounting norms and has prevented banks from providing cryptocurrency custody. The SEC tries to argue that crypto-assets have elevated cyber risks.

A new heavyweight paper on crypto regulation points out that cyber risks are not new and are well covered by existing regulations. So using the principle of “same risks, same rules”, no additional cyber regulation is necessary for crypto-assets.

Yesterday Steven Schwarcz, Distinguished Professor at Duke University School of Law, published a paper on regulating financial innovation, with a focus on crypto-assets and DeFi.

We’d note that the paper does not directly mention SAB 121, so it is Ledger Insights that’s highlighting the inconsistency. However, the Professor’s cyber risks observation directly follows his discussion of the controversial application of ‘same risks, same rules’ to crypto.

A thought provoking paper on crypto regulation

Most regulations focus on the minutiae, whereas Professor Schwarcz reviews the high level models that can be used in regulating fintech innovation. ‘Same risks, same rules’ is one of six models he explores.

While some may disagree with various suggestions, regulatory clarity is necessary for new industries to flourish.

The Professor selected the salient aspects of the six models to outli The Professor selected the salient aspects of the six models to outline a recommended framework to address fintech innovation in gen ne a recommended framework to address fintech innovation in general. He then applies it to the crypto sector.

Sandboxes, smart contract audits (not just code)

A first step is to provide regulatory sandboxes. The Professor has a pragmatic view, recognizing that sandbox tests with a few customers won’t highlight all the potential risks.

There’s a need for fintech firms to self monitor their risks. However, that’s not likely to be sufficient, so there should be a system of third party expert monitoring.

In the crypto sector, smart contract audits are already widely used to identify bugs and qualify as a type of third party monitoring. But that only addresses one specific risk. A broader range of risks need exploring – risks to the firm and their customers, to other market participants and the public.

Plus, the automated nature of smart contracts can trigger a vicious cycle. We’ve already witnessed multiple crypto crashes and the impact on crypto lending. The liquidation of collateral leads to price declines, sparking a cascade of additional liquidations.

Stopping a crash

In traditional finance (TradFi) these sorts of issues exist in high frequency trading, where suspending trading helps to address the risk. However, the Professor recognizes that would be tricky to enforce in the crypto sector.

Hence, he recommends that businesses identify their counterparties and disclose the risks to them. If a third party monitor finds the firm’s smart contract usage creates significant risk, then “Regulators should have the power to suspend a business’s right to enter into new smart contracts.”

In other words, if you can’t stop a crash by suspending trading, then try to prevent it from happening in the first place. Although both are desirable.

One can imagine that the suggestion would cause the crypto sector to be up in arms, but it has merit, provided it’s not overused and one appropriately defines ‘significant risk’. TradFi has standard approaches to risk management which can be tweaked and ported to the crypto world. The more responsible players already do this.

For example, we’re aware of at least one exchange that saw the Terra Luna collapse unfolding early on, because they had systems in place. Hence, they protected their clients, although arguably their reaction exacerbated the downward spiral.

DeFi regulation

The Professor’s approach to DeFi resembles discussions already taking place about how to identify responsible people, with holders of governance tokens being one avenue.

An alternative option is to require DeFi platforms to be “provided by centrally registered and well capitalized entities.” At the same time, he acknowledges that could nullify DeFi benefits (low costs), so suggests consulting the DeFi industry before taking steps in this direction.

Regarding crypto-assets, he observes that some have proposed the financial equivalent of the FDA. In other words, all fintech innovations would need approval in advance.

He dismisses this as an innovation killer. He wrote that this “reverses the presumption, at least in the context of new financial products, that private-sector freedom of contract produces beneficial societal outcomes”.

In the case of financial stability risks, the Professor notes that fintechs are generally too small to create stability risks. These sorts of risks come from the actions of systemically important institutions. Hence, to address this particular risk, there should be limits on them rather than fintechs.

Surprisingly, he doesn’t mention that this is the approach taken by the Basel Committee for Banking Supervision.

Given the gravitas of this paper, who knows, perhaps he was the one that suggested banks have a maximum crypto exposure of 1% of Tier 1 capital.

@ Newshounds News™

Source: Ledger Insights, SAB 121   

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Iraq’s Central Bank’s Major US Visit | Seeds of Wisdom Team Youtube

@ Newshounds News™ 

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RUSSIA IS ABOUT TO TRY USING CRYPTO TO GET AROUND SANCTIONS

Experts doubt it will work, given the traceability of blockchains and the risk of even tougher sanctions for Russia.

▪️Russia will start its trial of cross-border payments using crypto next week.
▪️Recent statements from senior Russian leaders suggest the law’s purpose is to use crypto to counter sanctions.
▪️The law hands power to Russia’s central bank to oversee an “experimental” regime.

Russia will begin trialing cross-border crypto payments next week in an effort to circumvent international sanctions – but this effort may not work, several policy and legal experts told CoinDesk.

Legislation passed at the end of July and swiftly signed into law by President V************n does not lift an existing ban on using cryptocurrencies as legal tender for regular payments within Russia, but instead allows cross-border payments with crypto.

How the law will allow such payments remains unclear because the legislation doesn’t specify rules for such transactions. Instead it hands power to Russia’s central bank to oversee an “experimental” regime, experts said.

Russia’s economy has been hit hard by a suite of sanctions imposed by the U.S. and other nations following its invasion of Ukraine.

Since Russia’s invasion of Ukraine in Feb. 2022, it’s faced 16,500 sanctions from the U.S., U.K., European Union, Australia, Canada and Japan.

“The passing of these bills by the Russian government signals a continuation of Russia’s evolving strategy to circumvent Western sanctions,” blockchain analytics firm Chainalysis’ director of investigations, Valerie Kennedy, told CoinDesk.

The EU said about half of Russia’s total foreign currency reserves, worth 300 billion euros ($332 billion), including 70% of the assets of the Russian banking system, were frozen. Select Russian banks were disconnected by the interbank messaging system, the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

“It has been difficult for Russia to avoid the U.S. dollar and euro via the SWIFT system, which has created increasing risk of secondary sanctions,” she added. Secondary sanctions are penalties designed to prevent any third party from trading with a sanctioned nation.

What the law says

Some details have emerged in the days leading up to the Sept. 1 implementation of the law.

CoinDesk viewed a copy of the law using google translate. It said “during the circulation of digital currency in the Russian federation … special regulation may be established … by the experimental legal regime program.” That regime is still in the works. Before finalizing it, the central bank will consider proposals and suggestions from domestic stakeholders.

“Some players, including us, have already come with our own proposals,” said Anti Danilevski, founder and CEO of Kick Ecosystem, a one stop shop for crypto, who has been closely engaging with regulators.

“The central bank will decide if it fits with their view. They are moving very fast, so it won’t take much time.”

Bloomberg reported that Russia is planning to use the National Payment Card System, for swapping between rubles and cryptocurrencies when testing payments.

The system was chosen because it already features infrastructure for functions like interbank settlement and is fully regulated by the central bank. If the trials are successful, Russia may allow the Moscow Exchange and the St. Petersburg Currency Exchange to set up crypto platforms next year, the report added.

Ivan Chuprunov, an associate professor at the Research Centre of Private Law in Moscow, said the regime’s “exact parameters are not clear” because none have been published yet but the “central bank will likely publish some guidance in the coming weeks.”

The law also appears to let the central bank change how it oversees these trials at any time.

The legislation said that the provisions may “exclude or change” parts of the Federal Law in relation to transactions with “digital currency made in the implementation of foreign trade activities through an authorized organization.”

The regime is “more a flexible one” because it’s “just the central bank who will be approving it,” said Chuprunov. “Whether they will have just one exchange, what currencies would be traded, how participants would get trading access, is still a big unknown.”

Nor does the law clearly specify what rules now apply to crypto entities or businesses wanting to deal in crypto, because the central bank will determine which companies will participate in the experiment.

While the law doesn’t specify what its exact purpose is, recent statements from senior Russian leaders pointed toward using crypto to counter sanctions.

On July 17, 2024, in an economic affairs meeting, P***n said Russia should not “miss the moment” and should promptly set up a “legal framework” for crypto, which is “increasingly used in the world as a means of payment in international settlements.”

Then, one of the authors of the bill said Russia views cryptocurrencies “primarily as a tool for circumventing sanctions,” followed by its central bank Governor Elvira Nabiullina saying that’s why we “softened our stance” on crypto at an event in Moscow recently.

@ Newshounds News™

Source: CoinDesk

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Source: Dinar Recaps

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ARE XRP AND XLM CORRELATED? RIPPLE CTO SHARES INSIGHTS

XRP and Stellar (XLM) are two cryptocurrencies that have been constantly compared in terms of price growth and development. Both digital assets are committed to facilitating cross-border transactions. In continuance to a discussion revolving around XRP that initiated in March, the Ripple CTO, David Schwartz has shared some interesting insights into the correlation between XRP and Stellar (XLM).

Insights From Schwartz’s

In an X post, Schwartz openly acknowledged that he had no idea what were the factors that drive XRP’s price. It might be surprising to see that such a statement is made by one of the key architects of XRP Ledger, but regardless, it is worth noting that this might highlight various market factors that might be influencing the XRP price action.

He further went on to notice a crucial point stating-

“The only real objective data point I have is that XRP tracks the price and market cap of XLM incredibly well over all time frames.”  This observation might imply that despite the complexities influencing the price action, XRP and XLM share a closely connected path.

Exploring Their Origins And Price Influence

XRP and XLM share identical origins, as XLM was created by Jed McCaleb, a co-founder of Ripple who later split to start Stellar. Both the tokens are intended to facilitate cross-border payments, although they cater to different markets and use cases.

The correlation emphasized by Schwartz could mean that market forces affecting one of these tokens often influence the other. However, the exact reasons for this correlation remain speculative, as Schwartz himself has cited the lack of clarity on the precise drivers behind XRP’s price.

CTO’s Previous Hints To The Correlation

Schwartz had previously also shared a chart displaying a strong correlation in the price movements and patterns between XRP and XLM tokens and had explained the distinct reasons behind XRP and XLM’s unique price movements.

The Ripple CTO had admitted even back then that he lacked an accurate explanation for the price correlations, however, he provided two major factors that could be influencing the price trends.

The Two Factors That Could Be At Play

Schwartz revealed that comparable market forces that regulate various cryptocurrencies also control XRP and XLM. He stated that most investors and crypto enthusiasts often place XRP and XLM within the same category due to the cryptocurrencies’ historical connection.

Therefore a significant number of people simultaneously engage in buying and selling XRP and XLM causing the cryptocurrencies to have similar price movements

XRP and XLM have gained significant attention, and often viewed as the leading contenders for cross-border payments and mainstream adoption. While they tend to display similar price tracks, there still needs to be some clarity on the correlation between the two.

@ Newshounds News™

Source: Coinpedia

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REPORT: BLOCKCHAIN IS POISED TO OVERHAUL GLOBAL PAYMENT SYSTEMS

According to a Binance report, blockchain technology is set to transform the global payments landscape by addressing inefficiencies in traditional financial systems.

The Binance research report highlights that while current payment methods, such as Visa and Mastercard, offer the convenience of near-instantaneous payment authorization, actual settlement times often lag, sometimes by several days.

This delay is especially pronounced in cross-border transactions, where communication between banks in different countries can extend settlement times.

In contrast, blockchain-based payments offer near-instant settlement. The report cites a 2021 pilot conducted by Visa and Crypto.com in Australia, where the use of USDC (USDC) and the Ethereum (ETH) blockchain allowed cross-border transactions to be settled in a fraction of the time traditionally required.

@ Newshounds News™

Source: Crypto News

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KEY EVENTS IN SEPTEMBER 2024 IMPACT THE CRYPTOCURRENCY SECTOR IN BRIEF

▪️September 2024 will be critical for the cryptocurrency sector.
▪️Key events include Korea Blockchain Week and US economic data releases.
▪️Political and economic developments could significantly impact the crypto market.

September 2024 will be a highly active and critical period for the cryptocurrency sector. The events occurring during this time could shape both the developments in the sector and the future of the market. Wu Blockchain has provided a list of important events, and we will take a closer look at the details.

▪️Korea Blockchain Week Starts on September 1
▪️US Non-Farm Payroll Data for August to be Released on September 6
▪️Trump and Harris to Meet on September 10
▪️US Inflation Data to be Released on September 11
▪️Token2049 Global Conference and Fed Interest Rate Decision on September 18
▪️Former Binance CEO Changpeng Zhao to be Released on September 29

Korea Blockchain Week Starts on September 1

First, the Korea Blockchain Week starting on September 1 stands out as a major event where significant figures in the sector will gather.

US Non-Farm Payroll Data for August to be Released on September 6

The US Non-Farm Payroll Data for August, which is of great importance for the US economy, will be released on September 6.

Changes in employment are expected to provide clues about the overall state of the US economy. A potential decline in the data could cause fluctuations in the cryptocurrency market, as negative economic signals may increase interest in risky assets.

Trump and Harris to Meet on September 10

The first presidential debate between Trump and Kamala Harris, scheduled for September 10, is highly anticipated.

The focus on economic issues in the debate will attract the attention of the cryptocurrency community. Political developments in the US are closely related to the crypto market, making this debate highly significant.

US Inflation Data to be Released on September 11

Inflation data has always been critical for cryptocurrency investors. The US Consumer Price Index (CPI) data for August, to be released on September 11, will provide important insights into the direction of inflation.

Since cryptocurrencies are known to be seen as a hedge during high inflation periods, this data could create significant market activity.

Token2049 Global Conference and Fed Interest Rate Decision on September 18

The Token2049 Global Conference, starting on September 18, is another major event where significant figures in the sector will gather. Announcements made during the conference, especially new partnerships and projects, could cause significant fluctuations in the cryptocurrency market.

On the same day, the Federal Reserve FOMC meeting will determine decisions regarding interest rates. Interest rate cuts generally increase interest in risky assets like cryptocurrencies. the-cryptocurrency-sector/#trump-and-harris-to-meet-on-september-10Additionally, the final decision in the case against Trump concerning a*********s of irregularities in job records will also be made on the same day.

@ Newshounds News™

Source: Coin-Turk

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Source: Dinar Recaps

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