Weekly Staking and Farming Review : altcoin

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There has been what appears to be a regular flow of news recently concerning regulatory crackdowns and ‘unhealthy’ interest in the DeFi space. This is undoubtedly going to have an impact on the staking and farming space.

This week we intend to cover the relevant stories and provide a few possible strategies that investors can follow.

Setting the scene

Ever since the Chair of the SEC, Gensler, made his speech setting out his feelings on crypto, which included a swipe at stable coins, crypto exchanges and DeFi, there have been definite signs that platforms are being targeted or at a minimum, investigated. That speech was in early August.

Since then the Securities and Exchange Commission announced it was investigating the startup behind one of the biggest cryptocurrency exchanges, Uniswap Labs, the main developer of the world’s largest decentralized exchange, Uniswap. It is said that enforcement attorneys are seeking information about how investors use Uniswap and how it is marketed. The token price of Uniswap is down 34% since this announcement.

More recently New Jersey issued a cease and desist order for unlawful sales of “interest-earning cryptocurrency products,” forcing the network to stop offering those products in the state. According to the statement, Celsius is partly funding its crypto lending and trading operations through the sale of securities that are allegedly in violation of the New Jersey Securities Law.

Texas is filing a notice for a hearing next year to determine if it should also issue a cease and desist order against Celsius for illegally selling “cryptocurrency interest-earning accounts.”

Texas’ filing means CEL will have to show why they shouldn’t be compelled to stop offering securities to state residents. The hearing is scheduled for February 14th, 2022.

New Jersey’s decision comes after the state issued a similar order in July against BlockFi, another crypto lending platform. Acting Attorney General of New Jersey Andrew Bruck says other crypto lending companies operating in the state should take note of the trend.

Finally, Coinbase was told in no uncertain terms that if they continued with their plans to launch a lending platform the SEC would sue. Whilst Coinbase continued to deny that lending represented a regulated activity they had no choice but shelve or bin their proposals.

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What is coming next?

The problem is whilst most platforms claim to be decentralized they still have a team of developers who control the majority of the tokens and the direction of the project. It also doesn’t matter if the original developer is long gone having handed control to the community. If any regulator feels a platform breaches laws they will come after the people who set it up.

The bottom line is, DeFi projects are allowing US investors to invest with zero KYC requirements. That is an unsustainable position. Also, none of these platforms are licensed as money transmitters. It was only a matter of time before the US authorities came knocking. It is a certainty that more platforms will be targeted and enforcement action will follow.

Investor considerations

Investors should consider minimizing their exposure to platforms where the native currency is part of the rewards program. Celsius is down by around 16% and Uniswap 34% since the announcements. Also holding crypto in platforms for long periods of time is inadvisable. Avoid all certificate of deposit type investments.

We cannot hide under a rock and assume it is all going to be ok. There is a shake out coming and investors must have their eyes wide open to the potential consequences.

However it is not all pending doom and gloom. The industry as is always the case in crypto will adapt. The staking and yield farming space is not going anywhere, it is just going to have to grow up.

We are not saying pull your money out by any means, we are saying stay nimble, keep your eyes open for opportunities and understand the risks.

This may take a year to play out or possibly longer but it has started. Being forewarned is being forearmed.

To view our various free staking resources including latest table of APRs from leading platforms visit our website here

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Additional resources:

Celsius Network price, CEL chart, market cap, and info | CoinGecko

Uniswap price, UNI chart, market cap, and info | CoinGecko



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