Latest in crypto: A new legislation bill and decentralized finance startups

Cryptocurrencies have navigated some seriously troublesome waters recently due to the issues associated with both plummeting values and increasing pressure from central authorities. While many believe this is meant to destroy the market under the guise of helping it progress, others lean towards the perspective that this will ultimately benefit decentralized finance, helping forge a newer, more resilient virtual environment for cyber finance.

Ethereum, the largest altcoin and the second largest cryptocurrency by market cap is one of the digital assets most investors look towards during times such as these as a means of gauging how the marketplace will develop in the future. Both internal and external factors have a role in how the larger market develops, meaning that investors have to be mainly when prices fluctuate. The situation could change anytime, and learning how to take advantage of these shifts is essential.

Here are some of the most important things going on in the virtual asset market at the moment.

New legislative bill

The current year will go down in crypto history as one that has brought in more regulatory pressures than any other before it. While discussions about implementing laws within the blockchain have existed in the past, many deemed it largely unfeasible, as the decentralized space wouldn’t lend itself well to conventional legislation.

However, lawmakers have decided that if cryptocurrencies are to enter the traditional financial market, they have to do so in a particular way. As a result, authorities have increasingly begun discussing the possibility of a new regulatory framework. So far, however, nothing concrete has come to pass. Some proposals have been abandoned, such as the one that was set to add extra taxes for crypto miners to make up for the power-intensive, energy-demanding process.

In the context of the debt ceiling, however, legislators deemed the movement not to be as necessary, and the motion was placed on hold for the time being. However, lawmakers have remained adamant about enforcing legislation in the crypto space, and it might be that their wishes will have a realized outcome sooner rather than later.

The proposed bill is set to establish a regulatory framework that would delegate the jurisdiction of the transactions between the CFTC and the Sec, depending on whether the coins and tokens fall under the umbrella of commodities or securities. Investors, users, and every crypto company owner have praised the movement as the best to come out of Congress so far.

Decentralized finance

Decentralized applications and financial services are two of the most important innovations to have come from the Ethereum blockchain. Some have long regarded them as the new step in fiscal development. While replacing traditional procedures is unlikely, at least for the foreseeable future, many remain convinced that digital innovations will soon become more commonplace in banking, changing the way it works and making it more innovative.

However, the platforms that hold decentralized procedures had to deal with controversies themselves. Recently, a DeFi startup faced a lawsuit questioning its legality under the New York law framework. The case was started by former congressional staffer Joe Kent in 2021. Allegedly, the platform had violated gambling laws, scammed consumers, and evaded state financial regulations.

The company released a non-fungible token pool as a result, as a means to collect funds in order to conclude the case. Within just a couple of hours, after the collection went live, the startup had raised nearly $140,000. So far, the issue has been dismissed, yet it’s important to remember that the decentralized finance space is also experiencing increasing pushes for regulations due to the current climate.

Legal troubles

2022 brought an influx of concerns for the cryptocurrency market due to the involvement of many notable exchanges in illegal activities. This brought several platforms tumbling down, causing considerable capital losses for investors. And while some may have believed that those cases have been resolved, recent developments clearly indicate otherwise.

Recently, it was announced that Do Kwon, the South Korean creator of the cryptocurrency Luna, will likely be liable to serve time in prison in both his native country and the United States. Most recently, the disgraced CEO had been apprehended in Montenegro, where he is currently serving house bail. A decision about his extradition is still pending.

Korean authorities have said that returning Kwon to South Korea would be the best option to bring justice and closure to the victims and recover the damages. Lawmakers have also claimed that Korean prosecutors, who have carried out the larger part of the investigation since Terra collapsed, have access to significantly more information and evidence than American authorities, which would give them a distinct advantage.

South Korean authorities have also already located several of Kwon’s co-conspirators, meaning new aspects will soon be added to the investigation. However, it is still likely that Do Kwon will still have to face trial in both countries. Prosecutors expect his sentence to be one of the longest ever handed in South Korean history, while his cold wallet, which allegedly contains 10,000 crypto coins, hasn’t yet been tracked.

The case caused powerful ripples in South Korea and the global crypto community last year as the most prominent financial securities fraud case in the East Asian nation. It directly impacted the overall market, causing it to become less trustworthy in the eyes of the general public.

Low trading volume

Centralized exchanges have dealt with the lowest trading volume levels over the past four years amid regulatory pressures. According to recent data, the combined derivatives and spot trading volumes have fallen by nearly 16% since May, making it the second consecutive month recording plummeting figures. All this is important to note since it means that the numbers aren’t affected by the current news, in which major crypto platforms were targeted by increasing scrutiny from lawmakers.

While the crypto space continues evolving, it has yet to overcome its previous challenges completely. It is yet unknown when things will change exactly, but many believe it is only a matter of time before the tides turn.

 

Image Credit: Photo by Ambrose Prince on Unsplash