MakerDAO, the community organization governing the eponymous protocol, voted on Thursday in favor of purchasing an additional $1.28 billion in U.S. government bonds as the DeFi giant looks to diversify the assets backing its $5 billion dai (DAI) stablecoin through alternative yield-generating strategies. There was unanimous support for “Project Andromeda,” a plan to open a new treasury vault managed by crypto asset manager Blocktower Capital – a surprise to some given Maker’s expansion into “real-world assets” (RWA) has sparked debate. Asset manager Monetalis Clysdale oversees a separate vault holding ~$1 billion in government and corporate bonds for Maker. Meanwhile, DeFi protocol Synthetix approved a plan to hasten the shutdown of its “v1” perpetuals market “in the least intrusive manner” as customers shift to the upgraded Version 2. Elsewhere, a proposal to add fees on Uniswap affecting liquidity providers was voted down Thursday. Finally, new research found at least $54 million was stolen through DeFi scams and hacks in May. That is down more than 50% from the $101.5 million lost in April, security firm De.Fi claims.
Demand and Risk
The U.S. Commodity Futures Trading Commission (CFTC) included crypto in a list of “technological innovations” that potentially pose challenges for financial firms as the agency works on overhauling its risk management standards. “Integration of digital assets with banks and brokers, and the risks that could be posed, could continue to evolve,” Commissioner Christy Goldsmith Romero said, calling out crypto custody in particular for posing risks. The CFTC is inviting public comments on its proposal. Elsewhere, Coinbase Derivatives Exchange will offer bitcoin (BTC) and ether (ETH) futures for institutional clients starting June 5. Coinbase said Thursday it created these products to cater to increased institutional demand following the launch of BTC and ETH derivatives last year. Finally, crypto exchange Huobi expects to receive its Hong Kong trading license within a year, advisor Justin Sun said. The exchange recently moved its headquarters from Singapore to Hong Kong after the city published a regulatory framework, which some suspect could turn it into a virtual asset “hub.”
Scaling Crypto
The market capitalization of USDT, the U.S. dollar-denominated stablecoin, has set an all-time high of $83.2 billion. This follows a gangbuster first quarter for Tether that set the firm on track to erase losses incurred following the implosion of blockchain project Terra more than a year ago. Elsewhere, Taurus, a DeFi-focused service provider that raised $65 million in a round led by Credit Suisse and Deutsche Bank, expanded onto Polygon. Last but not least, a 24-year-old self-taught Bitcoin developer has proposed a new Bitcoin “layer 2” called Ark to address a supposed problem with the Lightning Network. To receive funds on Lightning, users must first “fund a channel,” effectively meaning you need to pledge money to be able to receive money, a process Burak Keceli (who pranked Lightning last year) said “simply should not exist.” Ark started as a Lightning wallet and expanded its offerings – though it still requires users to run Bitcoin and Lightning nodes.
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Users of Apple’s new Apple Savings service, launched in April in partnership with Goldman Sachs, are reporting severe delays in withdrawing or moving their deposits. Customers have struggled for weeks to retrieve amounts as high as $100,000 stranded in Apple Savings accounts, according to the Wall Street Journal.
The explanation for the delays is reasonable – at least, by the bizarre standards of the traditional finance system. In most cases the frozen funds were under “security review” – that is, Goldman is making sure its depositors aren’t engaged in criminal money laundering.
The absurdity of this is layered and nuanced, like a souffle of clumsy, anti-customer banking practices. One trigger for such a bank security review, you see, is making a large deposit into a new account. But Apple has been heavily marketing the above-average interest rate on its savings service (4.15%), so it shouldn’t be a surprise people are depositing large amounts – which is also kind of what normal people do with a savings account already? And the savings service was only launched a few weeks ago, so all of the accounts are new.
In other words, if you followed Apple’s marketing cues and opened a big new savings account managed by Goldman, the default assumption baked into the system appears to be that you are a money launderer whose funds must be frozen immediately and indefinitely.
This becomes even more of a dystopian nightmare when you look at the specific people targeted by Goldman’s hamfisted anti-money laundering effort.
One victim who spoke to the Journal was Antonio Sanchez, a Grammy-winning musician who has collaborated with Dave Matthews and Trent Reznor. This is a person who a quick Google search and phone call could easily have determined is unlikely to be a money launderer. But instead Sanchez, like the other customers profiled, wound up fighting through a Kafkaesque customer service maze for weeks, trying to pry loose a frozen $100,000 intended for a down payment on a house – a true nightmare scenario.
And if you’re not a Grammy winner? Well, that’s certainly not going to improve how you’re treated.
Goldman Sachs is not a retail-focused bank, and has struggled acutely with its efforts to serve smaller depositors. But the incident also tracks a larger shift in traditional banking away from any kind of meaningful customer service, towards an increasingly automated, disinterested and even hostile approach to its piddling retail depositors.
What makes this anti-customer bias truly toxic, though, is that it’s combined with an utterly opaque anti-money laundering regime that seems to have uncontested effective control over every bank deposit in the United States. Make one wrong move – something that looks even vaguely suspicious to a mute algorithm or an underpaid data analyst – and suddenly your property is “under review,” until they say otherwise.
That suspicious activity apparently now includes “opening a bank account” and “depositing money in it.”
So ask yourself this. When your bank doesn’t care who you are, and has the power to freeze your funds any time, without explanation, for an indefinite period … is that money really yours at all?
Since the collapse of large crypto projects like FTX and BlockFi, investors have been cautious about parking their funds with centralized exchanges, which, some believe, are susceptible to collapse in ways that might leave their customers empty-handed.
To access services like staking rewards, centralized exchanges often require customers to “lock up” their tokens in accounts that can’t be accessed for a period of time, or might be used by an exchange for other purposes. So when panic strikes or there’s a bank run, as in the case of FTX, customer funds can be lost altogether. With the collapse of these firms, investors learned that when their funds are delegated to a third party, it no longer fully belongs to them. As the expression goes, “not your keys, not your crypto.”
