Cybrid Weekly DeFi Digest - June 24th

Market: Hot Take

The overall mood of the market seems far brighter compared with last week's dramatic dips, although generally, tones are tending towards the flatter end. Are these signals that we are recovering from the bottom or is this the infamous "dead cat bounce"?

Total Market Cap continues to hover around the USD$1 trillion mark, indicating some ongoing investor hesitancy perhaps in the face of broader economic woes. Sam Bankman-Fried's bailing out of major DeFi protocols is no doubt helping create confidence in what could otherwise be an extremely messy situation. A shift in dominance away from BTC towards ETH, albeit by a small margin, also suggests cause for some cautious optimism.

News of the Week

The Ontario Securities Commission Initiated a Crypto-Crackdown

On Wednesday, Canada's OSC confirmed in a public statement that it has taken provincial action against two unregistered foreign crypto platforms, Bybit and KuCoin, respectively.

British Virgin Islands-incorporated ByBit has been met with a fine of nearly USD$2.5m with an additional CAD$10,000 to cover the OSC's investigation costs. Due to its commitment to engaging with the Commission and a legally-enforceable agreement to bring its operations under compliance, ByBit will be allowed to continue operating within Ontario, albeit under certain restrictions.

By contrast, Singapore-based KuKoin has been permanently banned from conducting business within the Province. It too had to pay for the OSC's investigation costs, to the tune of nearly CAD$100k and was fined a further CAD$2m.

Sam Bankman-Fried Bailing Out CryptoFTX co-founder and CEO, Sam Bankman-Fried (SBF), announced a USD$250m cash injection for crypto lending platform, BlockFi, this Tuesday. Earlier this month, BlockFi reported that it was letting go of 20% of its staff. The news followed sharp declines in the price of Bitcoin and revelations that the lender had been devalued from USD$5bn last year to USD$1bn in its current down round.

This bailout is SBF's second within as many weeks. It comes hot on the heels of the USD$500m+ loan that his crypto trading firm, Alameda Ventures, made to beleaguered US-based crypto exchange, Voyager Digital. Voyager was thought to be on the brink of bankruptcy after declaring a possible default on a loan worth USD$655m to troubled hedge fund, Three Arrows Capital (3AC).

Solend and the WhaleSolana's largest lending platform, Solend, passed its first governance proposal last Sunday. The outcome of the vote was overwhelmingly in favor of taking control of the account of an unidentified whale in light of potential risks to the protocol. With the price of SOL dipping close to the USD$22.30 liquidation mark last week, concerns mounted around the possible incurring of bad debt given the current illiquid state of the market.

The whale was found to be holding USD$207.3m worth of SOL, worth approximately one-quarter of the Total Value Locked (TVL) on the protocol. A backlash to the proposal ensued over its betrayal of decentralized values. A follow-up governance proposal was launched shortly after to undo the first vote, which also passed. To spread risk, a deal was struck on Tuesday between Solend and rival platform, Mango Markets. Under the deal, USD$25m worth of USDC debt was transferred over to Mango.

Tether to Launch £GBP StablecoinThe 1:1 "GBPT" stablecoin is due to debut on the Ethereum network next month. Following on USDT, EURT (Euro-pegged), CNHT (Chinese Yuan-pegged) and, more recently, the Mexican Peso-pegged MXNT, GBPT will be Tether's fifth offering to the stablecoin ecosystem. Only last week, Circle Internet Financial, the issuer of USDC, announced that it would be launching the "EUROC", a fully reserve-backed stablecoin pegged to the Euro.

1confirmation Launches USD$100m NFT MarketplaceThe Venture Capital firm, which receives backing from Peter Thiel, Mark Cuban and Marc Andreessen, is taking advantage of the bear market to position itself within the NFT ecosystem. CEO, Nick Tomaino, made the announcement on Wednesday. The fund contemplates a ten-year horizon and will begin with a focus on the areas of photography, gaming, music and art.

1confirmation has invested in some of Web3 and DeFi's major players over the years, including Ethereum, Opensea, Coinbase and Polkadot.

Celcius Confounds Short-SellersCould DeFi be seeing its first Game Stop moment? This is the question on analysts' lips as retail investors rush in to put pressure on short-sellers. Celcius' native token, CEL, reached a 218% peak on Tuesday. The movement of "Celsians", which is coordinating under the hashtag #CelShortSqueeze on Twitter, aims to have CEL removed from SBF's FTX exchange.

Meanwhile, the lending platform, which paused customer withdrawals last week, has said that it will continue to "work around the clock" to stabilize liquidity and its operations.

Crypto 101 - Two more acronyms: DLT & CBDC

With all the excitement of blockchain, it’s hard to forget about one of the technologies underpinning all of it, distributed ledger technology (DLT). Since the introduction of DLT with Bitcoin in 2009, we’ve seen all sorts of blockchain based ideas implemented and built upon it with one of the most popular, stablecoins, often grabbing (good and bad) media attention.

Part of that attention includes what a more regulated use of DLT (and blockchain) might be when governments get involved. Well to start, each country would likely issue their own digital currency and, just like their physical currency of today, would be issued as legal tender through its central bank… a Central Bank Digital Currency (CBDC)!

This currency may or may not be represented in the form of a coin or token in the broader blockchain world, but ultimately would be tracked by a distributed ledger. With legal tender status and the value guarantee of the issuing government, the country’s financial institutions, businesses and citizens are able to interact with confidence.

How many countries are actively using them? At the moment, there is only one country (Naira) who has issued a CBDC (eNaira); the eNaira is using the Hyperledger Foundations Fabric ledger software for implementation. Many other countries are in a pilot or research phase for usage and you can check the status of your country here!

Aside from the many economic advantages that can occur within an issuing country’s borders, there is also potential global benefit as shown by Phase 4 of Canada’s Project Jasper, which included a partnership with the Monetary Authority of Singapore (Project Ubin), and the Bank of England to experiment with using DLT to make cross-border payments faster and less expensive.

If you haven't done so yet, head over to the Cybrid blog to check out our latest articles!

• Why a Crypto Bear Market is the Time for Fintechs to Build: While the “crypto winter” is officially upon us, now is not the time to abandon crypto but rather to build in prep for the next bull run.

• Making your card “top of wallet” for your customers: Why you should add crypto rewards to your card program. This piece explores why you might want to rethink your standard cashback offerings in favor of a far more exciting - yet accessible - alternative.

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