Resilience of Cryptocurrency: Forging Ahead Despite Regulatory Pressure and Embracing Technological Evolution

Introduction

Recent developments across cryptocurrency regulation, technology, and economics highlight the rapidly evolving landscape of decentralized finance. On the regulatory front, authorities are taking divergent actions - accusing some players while exploring centralized digital currencies. Technologically, innovations by competitors aim to address Ethereum's scaling and usability challenges. Economically, institutional adoption advances despite lingering volatility triggered by market events. This confluence of regulatory scrutiny, competitive pressure, and economic turmoil underscores both persisting growing pains and forward momentum for cryptocurrencies.

Global Regulatory Stance

SEC lawsuit against Binance: The SEC accuses Binance Holdings Limited (BHL) and its affiliates BAM Trading Services Inc. (BAM) and its executives of violating the securities laws, because they offered digital asset trading services in the U.S. without registering or obtaining an exemption. SEC asks the court to order BAM to provide documents and information related to the custody, control, and availability of its customer assets, to ensure BAM complies with a previous consent order. The SEC also seeks to depose BAM’s CEO, CFO, and other witnesses, to obtain more information about BAM’s operations and BHL’s influence. BAM argues that it has fulfilled its discovery obligations, and provided sufficient evidence to prove its exclusive control of its customer assets. BAM also objects to the SEC’s depositions of its executives and other witnesses, claiming they are unnecessary, irrelevant, and burdensome. BAM asks the court to deny SEC’s motion, and issue a protective order, limiting the scope of discovery.
US Financial Services Committee prevent the central bank from issuing a US CBDC: The US Financial Services Committee is advancing legislation to prevent the central bank from issuing a US central bank digital currency (CBDC) without congressional approval. Two bills related to the digital dollar will be finalized on September 20. One of the bills is the Digital Dollar Pilot Prevention Act, which aims to prohibit the Federal Reserve from launching pilot programs to test CBDC. The bill was introduced by Representative Alex X. Mooney in May. The second bill is an amendment to the Federal Reserve Act, which forbids the Federal Reserve from providing CBDC or any other digital assets with similar names or titles to individuals, and prohibits the use of CBDC for monetary policy and other purposes.
The first “Virtual Asset Special Law” in Taiwan has been proposed: Legislator Jiang Yongchang announced today that he will propose a draft of the “Virtual Asset Special Law” in this session. He hopes to stimulate a comprehensive discussion among the industry, government, and academia with this draft, and urge the administrative department to propose a counter-proposal. Jiang explained that the global market value of virtual assets has exceeded one trillion US dollars, showing that they have a certain market scale. He also cited the FTX incident, in which Taiwan suffered the seventh largest loss in the world, estimated at more than 60 billion New Taiwan dollars, indicating the potential of Taiwan’s virtual asset market. Besides, Jiang said that the special law has three main goals: “to strengthen the supervision of virtual asset service providers”, “to reduce the compliance costs of virtual asset service providers”, and “to establish the order of the virtual asset market” and protect the rights and interests of virtual asset customers.
Busan announced to establish a digital asset exchange exchange based on blockchain technology: The exchange will allow the tokenization and trading of various valuable assets, such as commodities, precious metals, intellectual property rights, carbon credits, and token securities. The exchange will operate under a decentralized governance system, where different functions such as custody, listing evaluation, and market surveillance are separated and checked by independent entities. The exchange will also use blockchain technology to record transactions, enhance security, reduce costs, and create synergy with other blockchain projects in Busan. The city of Busan has a vision of becoming a global leader in blockchain technology by 2026, and a future export and growth industry for Korea. The city will support the establishment of a private fund and an alliance of blockchain companies to foster the development of the blockchain industry. The city will also seek to upgrade its regulatory sandbox status to a global innovation zone.

Technology Advancement in the Competitors of ETH

Messaging App Telegram Gives Endorsement to TON Project: The messaging app Telegram has announced its support for the TON network, a blockchain project that started as an internal initiative but was later taken over by the community. Telegram will integrate TON’s Web3 wallet into its app, giving access to 800 million users. The news boosted the value of Toncoin (TON), the native token of the TON network, which rose 6.5% in 30 minutes and 13% in 24 hours. Toncoin is the 11th largest cryptocurrency by market cap, with around $6.6 billion. Despite the endorsement, Telegram and TON will operate as independent entities, with Telegram focusing on its messenger platform and TON on its Web3 infrastructure. Telegram had to abandon its original blockchain project in 2020 due to legal issues with the SEC.

Technology Advancement

Proposed ERC-7512 aims to verify security audits on-chain: Ethereum developers are working on a new ERC-7512 standard that allows users to verify the audit information of smart contracts directly on the chain, instead of relying on the audit reports provided by the teams off-chain. Previously, hacker attacks have caused nearly $1 billion in losses this year. ERC-7512 creates a standard for presenting audit reports on the chain and enable more comprehensive audit checks by trusted parties, and users and DApps can easily verify their audit results. The developers hope that the standard can be adopted and used to create on-chain reputation systems, insurance products and solutions for DApps. Currently, most of the security audits and verifications of smart contracts are done by the teams providing PDF files and storing them on GitHub. However, we cannot verify the authenticity of the process on the chain.

Economic Outlook and Trends

Laser Digital launches Bitcoin fund for institutional investors: Laser Digital is a digital assets subsidiary of Nomura, a global investment bank. The fund offers long-only exposure to Bitcoin with low fees and high security. The fund is registered in the Cayman Islands and uses Komainu, a regulated custody solution, to store the assets. Laser Digital is led by Sebastian Guglietta, former Nomura and Brevan Howard executives, with experience in systematic investment strategies and digital asset management. Laser Digital is backed by Nomura and operates from Switzerland with offices in London and Dubai. Laser Digital plans to offer more digital adoption investment solutions in the future.
Citi to Become First Digital Custodian on BondbloX Bond Exchange: Citi Securities Services has become the first digital custodian participant of BondbloX Bond Exchange (BBX), a platform that uses blockchain technology to fractionalize and trade bonds electronically. Benefits for Citi’s clients and BBX participants: The partnership allows Citi’s clients to join BBX and trade bonds (both fractional and full-sized) with immediate settlement and custody services provided by Citi. It also gives them wider access to the global bond market and more diversification opportunities. Citi has developed a proprietary digital custody technology that enables it to connect to permissioned blockchain networks and provide consolidated custody services for clients investing in digital assets. Citi continues to invest in the future of digital financial market infrastructure and innovation.
Optimism announces new $26 million airdrop to over 31,000 addresses: The third OP airdrop by Optimism, a Layer 2 network on Ethereum that uses optimistic-rollup technology to scale decentralized applications. The airdrop distributed 19.4 million OP tokens ($26 million) to 31,870 addresses that participated in the governance of Optimism Collective, a DAO that manages the network. The rewards were based on the amount and duration of OP tokens delegated by the users, as well as their involvement in on-chain proposals. The rewards were capped at 10,000 OP tokens per address. The airdrop was aimed at increasing user engagement and loyalty on the network. Optimism has reserved 570 million OP tokens for future distributions.

Summary

Regulators are putting pressure on cryptocurrencies, as seen by the SEC's accusations against Binance and the US Financial Services Committee's stance against a CBDC. However, the crypto space continues to advance technologically, with innovations like Telegram's endorsement of TON, ERC-7512 to improve Ethereum's security, and more. While regulators attempt to rein in cryptocurrencies, the core technology perseveres, as developers introduce improvements and new solutions. Cryptocurrencies are displaying resilience amid regulatory uncertainty by embracing technological progress and enhancements to strengthen networks. Despite some clampdowns, crypto continues evolving both technologically and in adoption.