INTRODUCTION:
The SEC has been busy filing lawsuits against significant crypto exchanges in an effort to highlight the need for regulatory reform for crypto, as regulation in the crypto ecosystem is still a significant consideration for investors. Such actions, in the opinion of CEO CZ of Binance, a target of the SEC, will weaken CeFi and give a significant boost to DeFi. NPR correspondent David Gura details the arguments CZ made at the most recent X Spaces event in the article that follows.
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Binance CEO Changpeng Zhao believes decentralized finance (DeFi) can outshine centralized finance (CeFi) during the upcoming bull run.
On September 1, the crypto boss hosted a live X Spaces event, during which he expressed his belief that DeFi has the potential to surpass CeFi in terms of trading volumes.
“I think the more decentralized the industry becomes, the better,” Zhao said, suggesting that it may not be long before DeFi overtakes CeFi trading volumes, as it currently stands at around 5% to 10% of CeFi volumes.
“DeFi is the future; the volume is somewhere between 5% to 10% of CeFi volumes, which is not small right […] the next bull run may very well make DeFi bigger than CeFi.“
The prediction aligns with recent developments in the cryptocurrency market.
Following legal actions by the United States Securities and Exchange Commission (SEC) against major centralized exchanges Coinbase and Binance, the trading volume of the top three decentralized exchanges (DEXs) increased by 444% in 48 hours.
The current 24-hour trading volume on DEXs stands at $722,776,226.
Zhao also commented on the recent dismissal of a class-action lawsuit against decentralized protocol Uniswap.
He described it as a positive and logical decision, emphasizing the importance of regulatory clarity.
As reported, on August 30, the judge presiding over the case said he found no grounds to proceed with the lawsuit against Uniswap.
The verdict arrived after an extended legal process leading back to April 2021 that scrutinized the specifics of Uniswap’s operations and their alignment with financial regulations.
Developers Cannot be Held Reliable for Misuse of DeFi Projects
During the X Spaces session, a user mentioned a judge’s decision stating that developers cannot be held liable for the misuse of DeFi platforms.
Zhao echoed this sentiment, stating that the protection of developers is a positive development for the industry. He emphasized that writing code is a form of free speech and should be protected.
“Developers writing code, that code is free speech. So the development is really good,” CZ stated.
Recent data indicates a shift in investment patterns, with venture capitalists reallocating funds from CeFi projects to invest in the growing DeFi sector.
A March report from CoinGecko highlighted that digital asset investment firms invested $2.7 billion in DeFi projects in 2022, marking a 190% increase compared to 2021.
In contrast, investments in CeFi projects decreased by 73% to $4.3 billion during the same period.
The report suggests that DeFi is emerging as the new high-growth area in the crypto industry, while CeFi may have reached a saturation point.
Meanwhile, Binance has recently told users to convert their Binance USD (BUSD) tokens to other stablecoins before February 2024.
The exchange encouraged users to trade or convert their BUSD balances for First Digital USD (FDUSD) — a stablecoin launched in June by the Hong Kong-based trust company First Digital Group which had its debut listing on Binance.
It is worth noting that the market cap of BUSD has taken a hard hit following the regulatory clampdown.
Since the start of the year, BUSD’s market cap has plummeted by over 80%, dropping from $16.13 billion on February 9 to its current value of $3.1 billion.
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