PayPal, boasting over 430 million active users, expanded its services to include crypto trading in 2020, featuring prominent cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. Utilizing Ethereum's ERC-20 token standard, PYUSD can be exchanged for various other digital assets directly on the PayPal platform (and eventually Venmo too). The stablecoin's issuance will be managed by Paxos Trust, an entity under the regulatory supervision of the New York State Department of Financial Services (NYDFS). However, the launch of their proprietary stablecoin was delayed due to an investigation by NYDFS into Paxos (after that whole Binance stablecoin thing...). U.S. House Committee on Financial Services representative Patrick McHenry viewed this move as an indication of the potential for stablecoins to play a key role within modern payment systems, provided they operate within clear regulatory guidelines. Industry proponents and enthusiasts perceive the introduction of PayPal's stablecoin as a significant stride towards mainstream adoption of crypto / digital assets. Advocates have highlighted Ethereum's trajectory as a global settlement layer for diverse forms of value, while acknowledging concerns raised by auditors about certain design aspects of PYUSD's smart contract. Specifically because "The new PayPal USD stablecoin has an "assetProtection" role which can wipe your balance in two transactions (first `freeze`, then `wipeFrozenAddress`)." In smart contract security we call this a "centralisation attack vector." Proponents of the new stablecoin emphasized that although PayPal's stablecoin is centralized, it remains noteworthy, as Ethereum's role as a settlement layer enables various assets to coexist on the network, giving users the freedom to choose assets based on their preferences. We are still waiting to see how members of Congress and the Federal Reserve act on the PayPal news.
Coinbase's Base network has transitioned from an "open for builders only" phase to a user-ready stage, as announced on August 9. This launch has brought forth the release of various apps by Web3 development teams and a schedule of celebratory events. Originally launched as a beta version on February 23, Base aimed to attract more users to Web3 protocols with its association with Coinbase's extensive user base. While its mainnet for builders went live on July 13, the network officially opened for all users on August 9. Presently on Base, users can bridge Ether from the mainnet to Base using the official bridge, while cross-chain bridging protocol Wormhole is also available. Decentralized exchanges (DEXs) like Uniswap and Maverick Protocol are operational on Base, with a third DEX, LeetSwap, planning a future relaunch. Additionally, minting and collecting NFTs is a key feature on Base. However, despite its promising launch, there were challenges. From July 13 to August 2, the network functioned without a bridge UI, leading some users to attempt early transfers and investments, resulting in financial losses due to launch issues. It's the first week of existence for Base - we will check back on this throughout the year.
Tether achieved a legal victory recently as a USDT-related class action lawsuit was dismissed by the U.S. District Court in New York. Initiated in December 2021, plaintiffs alleged USDT backing issues, referencing statements from NYAG, CFTC, and Tether itself about its reserves. The court deemed the case lacked merit due to insufficient evidence of USDT value decline (uh, because it's a stablecoin). Tether and Bitfinex reaffirmed commitment to customer protection and services, focusing on community support. The plaintiffs' original claims lacked proof of USDT price fluctuations affecting their investments. Tether countered that the injury required showing USDT value decrease, which wasn't applicable due to USDT's stable price. Plaintiffs argued Tether's non-disclosure of reserves led to reduced USDT purchases. The plaintiffs sought monetary compensation and injunctions to reveal the true USDT reserve status, aiming to halt misrepresentation. We aren't saying that there hasn't been issues with Tether proving its reserves, it's more about Tether living to fight another day.
Bloomberg just summarized New York Attorney General Letitia James' proposed the 'Crypto Regulation, Protection, Transparency, and Oversight Act' (CRPTO Act) to regulate digital asset-related activities in New York state. The summary covers various digital asset industry participants and imposes requirements to enhance transparency, prevent conflicts of interest, and strengthen investor protections. It defines 'digital asset' broadly, expanding the scope of regulated entities beyond existing regulations. It also helped categorize participants into five types including Digital Asset Issuers, Brokers, Marketplaces, Investment Advisers, and Influencers, each with specific obligations. The Act's requirements encompass conflict avoidance, transparency through disclosures, registration statements, and financial audits, as well as anti-money laundering provisions. It also addresses issues like cross transactions and the term 'stable coin.' This regulatory device would provide New York regulators with additional tools for enforcing against digital asset firms, which face compliance challenges due to its broad implications. The proposal reflects ongoing concerns in the digital assets space, necessitating proactive compliance measures by industry players. See the summary in the link below.
A clip of Jack McDonald on the current appetite of TradFi talent migrating to the DeFi space. Watch the full episode here.
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