Will SEC Crypto Staking Crackdown Affect DeFi?
This year, the decentralized finance (DeFi) market got off to a solid start. Last week’s bullish breakout in the crypto market helped DeFi regain its total value of $50 billion (TVL) on Thursday. Meanwhile, DeFi platforms have recently faced significant regulatory challenges.
On February 9, US regulator the Securities and Exchange Commission (SEC) accused Kraken of violating the country’s securities laws. In response, the crypto exchange agreed to shut down its betting service and pay $30 million in fines to settle the case, the agency reported Thursday.
According to Lido, head of business development at The DAO, the sudden crackdown on crypto efforts by the US securities regulator could have unintended consequences for DeFi. On February 13, Jacob Blish said in a Bloomberg report, “The biggest risk I personally see as a US-based person is if they come down and say you can no longer interact with these kinds of protocols.”
Despite the US government’s tighter regulatory approach to digital assets, the crypto market was bullish last week. The DeFi market regained $50 billion in TVL due to a price surge from Bitcoin and other altcoins. On Thursday, TVL earned nearly $51.1 billion, $8.78 billion held by Lido.
Last week, the Financial Stability Board (FSB) released a report on financial stability risks on DeFi platforms. According to the report, DeFi is quite similar to traditional finance in terms of its features or the risks it is exposed to. The FSB said that DeFi’s unique characteristics can be triggered by these flaws such as “Operational fragility, liquidity and maturity mismatches, leverage and interconnection.
At StarkWare Sessions 2023, founder and CEO of Aave and ETHLend, Stani Kulechov, pointed to the big issues in the DeFi space. Kulechov pointed out that one of the biggest challenges in the crypto ecosystem is “less support in decentralized stablecoins compared to centralized ones.”
Platypus Finance, a decentralized finance (DeFi) application, was affected by flash loans on February 16, according to CertiK tweets, a smart contract security firm. According to the tweet, the hacker used flash loans that resulted in a loss of $8.5 million. At the moment, all operations on the platform are paused.
Earlier Friday, the Platypus community confirmed that the attacker targeted a loophole in the USP solvency verification process. “They used a flash loan to exploit a logical flaw in the USP solvency control mechanism in the contract that contained the collateral,” Platypus tweeted.
Disclaimer
The views and opinions expressed by the author, or any person mentioned in this article, are for informational purposes only and do not establish financial, investment or other entities. Investing in or trading crypto assets comes with a risk of financial loss.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while graduating. A keen observer of detail, he shares his passion for writing alongside being a developer. His backend knowledge of blockchain helps him bring a unique perspective to his writing
