ESMA, responsible for rulemaking under the bloc’s landmark new crypto law MiCA, is worried about new forms of market manipulation when there’s no central counterparty

The European Securities and Markets Authority (ESMA) warned of “serious risks” of investors being harmed by decentralized finance (DeFi) in a Wednesday report despite the innovative technology being in its infancy.

ESMA, an EU agency that is due to set rules under the bloc’s landmark Markets in Crypto Assets Regulation (MiCA), promised to look further into the nascent market, which has posed a puzzle for policymakers who are used to pinning regulatory obligations on centralized entities like banks or securities exchanges.

“Although investors’ exposure to DeFi remains small overall, there are serious risks to investor protection, due to the highly speculative nature of many DeFi arrangements, important operational and security vulnerabilities, and the lack of a clearly identified responsible party,” said the report prepared by the Paris-based agency, promising annual reports on the sector.

While in principle, DeFi – which uses smart contracts to automatically execute loans or other financial services – poses less of a risk of counterparties defaulting, the report notes heightened volatility in crypto markets and anonymity that enables dubious behavior like wash trading, in which sale volumes are inflated to manipulate markets.

ESMA last week proposed a swathe of new rules for crypto asset service providers under MiCA, such as the environmental disclosures that will need to be included in issuers’ white papers. A further report on Wednesday highlighted the potentially innovative nature of the smart contracts used in DeFi, noting they can range from financially-motivated Ponzi schemes to operational memory management.

ESMA is not the only regulator wondering how to deal with DeFi projects, and the International Organization of Securities Commissions recently proposed to treat them on a par with conventional finance. In response to a consultation from the French financial regulator, AMF, the lobby group EU Crypto Initiative has recently argued that DeFi needs a tailored approach – with programmers not held legally liable merely because they realize their code could be misused.

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PancakeSwap V3 will offer new features such as improved liquidity provisioning, competitive trading fees, trading incentives and enhancement for yield farming tools.

PancakeSwap, a leading multichain decentralized exchange (DEX), will launch its version 3 (V3) in the first week of April, developers told CoinDesk on Monday.

PancakeSwap, like other DEXs, relies on smart contracts to allow users to swap cryptocurrencies without intermediaries, earning revenues on each swap and distributing a cut of those revenues to liquidity providers in the form of rewards.

V3 will be available only on BNB Smart Chain (BSC), which is known for its fast and low-cost transactions. PancakeSwap is currently deployed over BSC, Aptos and Ethereum networks.

The upgrade adds features such as improved liquidity provisioning, competitive trading fees, trading incentives and yield farming tools.

Such products are expected to attract more capital, increase protocol revenue, and ultimately bolster PancakeSwap’s value proposition among investors.

The DEX holds over $2.4 billion in locked tokens as of Monday. It has processed $438 billion in trading volume since its April 2021 launch, making it among the most widely used DeFi protocols. Its native cake (CAKE) tokens have a market capitalization of $670 million.

PancakeSwap burned $27 million cake tokens in a planned event in European morning hours on Monday. Burns refers to the permanent deletion of tokens from the total supply, which may contribute to price rises in the future as demand increases.

The 7 million burned tokens were generated from fees earned from PancakeSwap’s trading, lottery, NFT marketplace and prediction markets, the company said in a tweet.

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Flash loan exploit drained protocol of over $9 million in assets and knocked Platypus USD (USP) off its peg.

Two people alleged of being behind an attack on the decentralized finance (DeFi) protocol Platypus have been arrested, according to a tweet by France’s police department.

Of the $9 million in stolen assets, Platypus said it has recovered 2.4 million USDC and 687,000 BUSD, it has also worked with Tether to freeze 1.5 million USDT. French police seized approximately $220,000 worth of crypto as part of the arrest. USDC, USDT and BUSD are all stablecoins that are designed to reflect the price of fiat currencies like the U.S. dollar.

USP, a Platypus USD-backed stablecoin, is currently trading at $0.32 according to CoinGecko.

Platypus is a stablecoin-centric automated market maker (AMM) on the Avalanche blockchain. According to DeFiLlama, Platypus has $39.2 million in total value locked (TVL). The protocol’s TVL is down significantly from a March 2022 high of $1.2 billion.

In a tweet, the protocol’s team thanked Binance and ZachXBT for their assistance in tracing the identity of the attacker.

The type of attack used against Platypus involved a flash loan and is similar to the structure of attack used against Mango Markets late last year. Flash loans aren’t inherently a bad thing, they were initially developed as used as a tool for traders looking for arbitrage opportunities.

This particular attack used a logic error within USP’s smart contracts, which continually checks for solvency. As CoinDesk previously reported, the attacker used borrowed crypto from Aave to supply liquidity to a trading pool on Platypus. The smart contracts then issued a liquidity provider token, LP-USDC, and placed it into a staking contract on the protocol. They then borrowed USP stablecoins against their LP positions and withdrew everything to Aave to repay the flash loan.

On February 24, Platypus announced it intends to replay a minimum of 63% of funds to users after it managed to recover a part of the $9 million drained from the protocol last week.

French police aren’t naming the suspects or announcing the charges.

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Clearpool also opened the onboarding and whitelisting process for institutional borrowers and lenders to its Prime platform.

Decentralized finance (DeFi) protocol Clearpool will deploy its institutional credit platform Prime exclusively on Ethereum scaling tool Polygon network, the protocol told CoinDesk in a statement.

“We have been working closely with the Polygon team since we launched the permissionless protocol on Polygon in June,” Rob Alcorn, CEO and co-founder of Clearpool, said in an email. “We have a strong relationship and continue to work together to deliver institutional DeFi products.”

Clearpool Prime will act as an institutional-grade capital marketplace, where borrowers can create credit pools, and liquidity providers can invest to earn yield. The platform is set to start operating in the first quarter of this year, CoinDesk reported earlier.

“Expect to see a wide range of borrower profiles: from traditional trading firms to various types of crypto-native players,” Jakob Kronbichler, Clearpool’s co-founder and chief operating officer, said in a statement. “Prime is also attractive to fintechs that provide lending solutions in the TradFi (traditional finance) world, such as loans in emerging markets.”

On Monday, the protocol also opened the onboarding and whitelisting process for institutional borrowers and lenders, who must endure know-your-customer (KYC) checks to be fully compliant, according to the protocol’s press release.

Clearpool’s move to build on Polygon is significant because borrowing and lending activity on competitor protocols like Maple and TrueFi mostly happened on Ethereum’s network.

Polygon is a sidechain for Ethereum that offers cheaper, faster transactions by batching transfers on its proprietary proof-of-stake blockchain while relying on Ethereum’s network for security. It has secured notable partnerships recently with Instagram and Starbucks.

Clearpool Prime’s launch highlights a growing trend of decentralized lending protocols catering to institutional capital with TradFi-compatible products after last year’s crypto implosion wiped out most of its businesses. Clearpool’s loan book has plummeted below $10 million from $108 million since November, data by DefiLlama shows.

Colin Butler, Polygon’s global head of institutional capital, predicted that 2023 will be a pivotal year for institutional decentralized finance on this week’s CoinDesk’s Money Reimagined podcast.

MATIC, Polygon’s native token, has been among the best performers of the top 10 cryptocurrencies this year, gaining some 68% since Jan. 1, CoinDesk data shows.

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The upgrades include permissionless trading and improved user protections amid to widens accessibility of DeFi among retail investors, according to Singapore-based SynFutures.

SynFutures, a decentralized exchange on the Polygon network, said its new V2 upgrade will allow for permissionless listing of futures trading pairs.

The Singapore-based company, backed by the crypto investment firms Polychain and Dragonfly, says the new upgrade could meet growing interest among retail traders in decentralized finance, or DeFi. The trend accelerated after the collapse of Sam Bankman-Fried’s FTX exchange and Three Arrows Capital added a “sense of urgency to the need for transparency and retail user protections,” SynFutures said in a press release.

With the upgrade, ”traders can permissionlessly list any futures trading pairs, leading to a wider array of choices,” according to the company.

SynFutures said its V2 upgrade has also introduced the Synthetic Automated Market Maker (sAMM) technology, which allows liquidity providers to supply just one asset of a trading pair like a stablecoin, as opposed to an equal amount of both tokens, as is common with most AMMs.

Other upgraded features include improving the user interface with a one-click design and strengthening risk-management features, according to SynFutures.

SynFutures is the largest DEX for crypto derivatives on Polygon, with $1.4 billion in monthly trading volume, according to the company. In June 2021 the company announced that it raised $14 million in a Series A funding round led by Polychain, bringing the total funding to date to $15.5 million.

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Months after Porter Finance was shuttered due to lack of demand, three of the four team members say they still feel that the potential for on-chain bond issuances is massive.

Three of the four people behind now-defunct decentralized finance (DeFi) bonds tool Porter Finance relaunched the project on Monday, months after Porter was shut due to a lack of demand from borrowers.

Rebranded as Arbor Finance, the protocol is designed to allow decentralized autonomous organizations (DAOs) raise money by borrowing against their native tokens with no liquidations and at fixed interest rates through tokenized DeFi bonds.

Selling bonds to raise money is an attractive alternative to selling tokens and gives DAOs another way of funding growth, the developers said in an email to CoinDesk. The bond buyers receive high fixed yields in exchange for lending to these DAOs.

“We expect lenders to earn 10-20% APY on bonds issued through Arbor,” co-founder Russell Bookland said in an email.

Bonds allow DAOs to borrow funds at fixed interest rates without the fear of liquidation by using their native tokens, which make up the majority of their treasuries. Borrowers using collateralized debt positions on other protocols must maintain a particular collateral ratio or risk being liquidated.

Porter Finance shut in July after founder Jordan Meyer cited a lack of demand amid a market-wide price decline and overall waning sentiment about the long-term growth of cryptocurrencies. At the time, Porter said it was “not confident” there would be large inflows of lending demand for the fixed-income DeFi products it offered. This was primarily due to the competitiveness of rates offered in traditional finance and the lack of institutional fixed-income DeFi adoption over the previous year.

Other core team members say there’s still a market for its product, especially as market sentiment improves.

“Three out of the four team members at Porter still feel that the potential for on-chain bond issuances is a massive market,” Bookland said. “The potential for high APY for lenders and non-dilutive funding for DAOs is far too big of an opportunity to ignore. We, therefore, decided to build Arbor Finance with a fork of Porter’s code.”

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The South Korea-based crypto investment firm failed to make a payment on a $3.4 million loan to TrueFi, a decentralized lending protocol.

South Korean blockchain investment firm Blockwater Technologies defaulted on a loan from TrueFi, a decentralized lending protocol, TrueFi said in a statement Sunday.

According to the statement, TrueFi issued a “notice of default” to Blockwater on Oct. 6 after it failed payment on a $3.4 million loan in Binance USD (BUSD) stablecoin.

Blockwater’s default seems to be the latest example of the crypto industry’s insolvency crisis. This year’s dramatic downturn of crypto markets, exacerbated by the implosion of the Terra blockchain, has led to the bankruptcy of multiple high-profile crypto firms, such as hedge fund Three Arrows Capital (3AC), crypto lender Celsius Network, digital asset broker Voyager Digital and crypto-mining data center operator Compute North.

Blockwater’s default on its debt came after TrueFi and Blockwater restructured the loan and extended the payment period in August. Blockwater managed to repay $654,000 of its outstanding debt after the restructuring efforts, but eventually missed payment. The remaining debt amounts to almost $3 million.

TrueFi determined that “a potential court-supervised administrative proceeding would lead to a better outcome for stakeholders given the complexity around the sudden insolvency,” according to the lending protocol’s statement.

“While we always prefer to pursue an out-of-court solution with distressed borrowers, in some instances an administrative proceeding is the best option in preserving value for stakeholders,” Roshan Daria, head of lending at ArchBlock, which manages relationships between lenders and borrowers on the TrueFi protocol, told CoinDesk.

TrueFi remained in “active discussion” with Blockwater, and said that Blockwater’s insolvency does not affect the protocol’s other lending pools, per the statement.

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Ribbon said it expects trading volumes to reach over $100 million a day within the first six months.

SINGAPORE – Decentralized finance (DeFi) protocol Ribbon Finance, known for its on-chain structured products, said it is launching an options exchange to boost demand for its services among savvy crypto traders.

Announced at Token 2049 in Singapore, Aevo will allow users to initially trade ether (ETH) options, with plans to launch options for bitcoin (BTC) and other tokens in the coming months.

Ribbon founder Julian Koh said he expected the options exchange to see over $100 million in daily trading volume in the next few months, adding that the Ethereum ecosystem had “gained momentum” after the Merge event earlier this month.

“With the majority of TVL in our platform coming from the Ethereum ecosystem, we have always regarded it as our home ground, and have strategically launched Aevo while the Ethereum network continues to build momentum after the Merge,” Koh told CoinDesk, using an acronym for total value locked, or the amount of crypto tied up in DeFi projects.

Ribbon locked over $75 million worth of various cryptocurrencies as of Wednesday. At its peak, in May, It held over $300 million, though the value of assets held on its platform fell as the broader market declined.

Ribbon is known in crypto circles for its Decentralized Option Vaults (DOV) product, which allows users to generate yield through different strategies that involve financial instruments such as options, derivatives and other fixed-rate crypto products.

The DOV for USD Coin (USDC) on Ribbon pays some 25% in annual yields to users, compared with rates of less than 4% on lending protocols like Aave or Compound.

Crypto options trading has been a rare bright spot in the bear market, building momentum even as crypto prices have plunged, as previously reported. Some $10 billion worth of options products has been traded so far in September, data show.

Earlier this year, fund manager Darius Sit of QCP Capital called options trading the next growth driver in the crypto sector, explaining at the time that such products were much more familiar to institutional investors and that they were much more likely to use options rather than niche DeFi products to trade cryptocurrencies.

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The company is seeking legal counsel to help it navigate crypto, NFT and DeFi regulations as it expands its Web3 strategy.

The Walt Disney Company posted a job listing on Friday for a principal counsel specializing in non-fungible tokens (NFT) and decentralized finance (DeFi), hinting at its broader Web3 expansion across the Disney ecosystem.

The full-time position, which operates within the legal department of the Walt Disney Company, calls for an experienced corporate attorney to “work on transactions involving emerging technologies, including NFTs, blockchain, metaverse and decentralized finance.” The position would provide guidance on “global NFT products” across the company’s business branches, including Disney Media and Disney Parks, Experiences and Products, and ensure compliance with U.S. and international laws and regulations. Specifically, the position would “evaluate securities law issues in connection with the promotion and sale of NFTs.”

The listing also mentions vetting NFT projects, blockchain networks, third-party marketplaces and cloud providers, as well as providing legal guidance on digital currency and blockchain technology. The hire would collaborate with other legal and business teams, including product, engineering, tech and IP, and would “partner with business teams as they plan new global emerging technology projects, typically on an accelerated and aggressive timeline.”

Disney has in recent months accelerated its hiring of Web3-focused executives to integrate crypto elements into its many business branches. In February, it appointed media and tech strategist Mike White as senior vice president of next-generation storytelling and consumer experiences to lead its metaverse strategy. In a memo to staff obtained by Variety, CEO Bob Chapek wrote that White would be responsible for blending experiences in the “physical and digital worlds,” and called the metaverse “the next great storytelling frontier.”

On an earnings call around the same time, Chapek outlined the next five years for the company, saying that Disney considered its Web3 ambitions to be “less of a passive type experience where you just have playback” and “more of an interactive lean forward, actively engaged type of experience.”

In June, the company brought on former Apple gaming executive Mark Bozon as its vice president of next-generation storytelling, with Variety reporting that he would be responsible for executing plans across business areas like “gaming, film, TV, toys, parks and more.” Disney was quoted as saying that its metaverse strategy would span digital, physical and virtual experiences.

In July, Disney announced that its Accelerator program would be focused this year on “building the future of immersive experiences” including augmented reality, NFTs and artificial intelligence characters. Companies added to the Accelerator program this year include layer 2 blockchain network Polygon, Web3 social app FlickPlay, storytelling platform Lockerverse and more.

The pattern throughout is language stressing a merge of in-person and digital experiences, with blockchain at its core. The company has already begun toying around in Web3 by releasing NFTs, forming a long-term partnership with digital collectibles marketplace VeVe to offer a collection of “Golden Moments” featuring iconic characters across its Pixar, Marvel, Star Wars and classic Disney brands.

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The move comes as DeFi platforms such as Curve and Aave race to craft their own stablecoins to attract users and boost growth.

Decentralized finance (DeFi) platform Coin98 has rolled out its own dollar-pegged, decentralized stablecoin aiming to become a way to move value across different chains, Coin98 announced on Monday in a statement.

The move comes as the race among DeFi protocols to craft their own native stablecoins is heating up in an attempt to attract users and boost liquidity on the platforms. DeFi heavy-weights Curve and Aave are reportedly working on their own stablecoin projects.

Stablecoins are a subset of cryptocurrencies that maintain their price stable to another asset, usually pegged to the U.S. dollar. They serve as an important bridge between government-issued (fiat) currencies and crypto assets, and have seen tremendous growth in the last few years, now making up $152 billion of the $1 trillion crypto asset class.

Coin98 Dollar, also called CUSD, started trading Monday on three blockchains, namely Ethereum, BNB Smart Chain and Solana. “In the long run, CUSD will gradually expand into other DeFi ecosystems in the multi-chain world,” according to a Coin98 post.

CUSD is a fully collateralized stablecoin that supports its value through Circle USDC and Binance USD held in a Coin98 reserve. Users can mint and redeem CUSD at a 1:1 ratio by depositing USDC or BUSD. At the initial phase, the CUSD’s supply will be capped at $50 million.

The stablecoin’s smart contract code has been audited by security firms Inspex, PeckShield and SlowMist, according to a blog post.

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