Daily Crypto, Finance and Tech News Summary – June 20, 2023

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Australia’s Crypto Regulations Falling Behind: Risking Competitiveness in Emerging Markets

Australia’s crypto regulations risk lagging behind emerging markets, according to the chair of the Australian Digital Financial Standards Advisory Council (ADFSAC), Loretta Joseph. Joseph emphasized the need for the Australian government to accelerate the development of crypto regulations to avoid falling behind other countries. While Australia has been conducting consultations and planning a licensing framework, Joseph highlighted the slow pace of regulatory development compared to countries like Bermuda, Mauritius, and Nigeria. She called for Australia to update or adopt new laws to foster innovation and keep up with the evolving crypto ecosystem.

ADFSAC aims to bring together industry, academia, policymakers, and government to facilitate dialogue and contribute to effective legislation. Joseph stressed the importance of involving all stakeholders in shaping crypto policy. The institute will also focus on educating stakeholders about crypto by providing hands-on experiences to understand its ease of use. Joseph suggested that Australia should align its policy direction with global standard setters like IOSCO, FATF, and FSB. She believes that G7 and G20 countries will soon enforce crypto rules, and companies seeking regulatory clarity will prefer jurisdictions with clear legal frameworks.

According to the “Most Crypto-Friendly Jurisdictions in 2023” list, Australia needs to take steps to enhance its regulatory environment to remain competitive. The top 10 crypto-friendly jurisdictions in 2023 include El Salvador, Hong Kong, Singapore, Portugal, Estonia, Switzerland, UAE, Malta, Luxembourg, and Bermuda. These jurisdictions have been recognized for their favorable crypto policies and supportive regulatory frameworks. Joseph warned that companies seeking low regulatory hurdles won’t survive in the future and emphasized the importance of legal clarity for businesses. As the crypto industry continues to evolve, Australia faces the challenge of keeping up with regulatory developments to foster innovation and provide a favorable environment for crypto businesses.

The establishment of ADFSAC reflects the growing recognition of the need for effective crypto regulation and collaborative efforts among stakeholders to shape the future of the industry. It is crucial for Australia to proactively update its regulatory framework to attract crypto businesses, align with global standards, and ensure its position in the rapidly evolving crypto landscape. Read more here.

Ethereum Survives AWS Outage, Raises Centralization Concerns

Ethereum, the popular blockchain platform, emerged unscathed during a recent three-hour outage of Amazon Web Services (AWS), the world’s largest cloud hosting provider. While Ethereum continued to function normally, researchers warn that the platform’s reliance on centralized infrastructure could pose risks in the future. With many Ethereum validators relying on cloud hosting services, concerns arise about potential disruptions if similar incidents occur in other regions. Lido, the leading liquid staking provider with over 35% of staked Ethereum, could be particularly vulnerable.

The outage primarily affected the “US-EAST-1” region of AWS, impacting the websites and systems of various traditional businesses. However, it highlighted the centralized points of failure within the Ethereum network and its staking ecosystem. Experts urge Ethereum stakers to consider solo staking or alternative providers to mitigate risks. Vitalik Buterin, Ethereum’s co-founder, emphasized the importance of preventing any single staking pool from controlling more than 15% of staked Ether.

Infrastructure providers like Infura, a centralized Ethereum node provider, also face scrutiny as possible points of failure. Infura plans to develop a decentralized version of its service to address concerns. The recent outage disrupted several web3 decentralized applications (dApps) and services, including popular platforms like Phantom, Illuvium, and Manifold.

While Ethereum’s resilience is commendable, incidents like the AWS outage serve as a reminder of the centralization risks in the network’s infrastructure. Ongoing efforts to enhance decentralization and diversify infrastructure providers will be crucial for ensuring the long-term stability and security of Ethereum and other blockchain platforms. Read more here.

Splitchain: A Different Approach to Blockchain, Aiming for Truer Decentralization and Resilience

Unlike conventional blockchains, Splitchain introduces a technically advanced approach that eliminates the drawbacks of centralized infrastructure.

Splitchain’s network architecture further reduces the odds that no single point of failure can disrupt the entire system. This approach enhances the network’s resilience, making it more resistant to outages and minimizing interrupted operations.

With Splitchain, the power is increasingly in the hands of the users, as the project continues to decentralize. It aims to shift power to individuals and eliminate the reliance on a single governing entity. Combined with lower, commodity system requirements, Splitchain is able to operate in more places, at lower cost. This should enhance network resilience and encourage an ecosystem where users have greater control over their data and transactions.

As the crypto industry faces increasing concerns about centralization and scalability with solutions grafted onto traditional blockchains, Splitchain appears to be emerging as a well-timed solution. Its unique protocol architecture offers a more efficient and resilient alternative that can support a wide range of applications, from financial transactions to decentralized applications (“dApps”) and beyond.

Legal Doctrine Challenges SEC Chairman’s Crypto Crackdown

The SEC’s quest to regulate the cryptosphere could hit a roadblock in the form of the “major questions doctrine”, as pointed out by ex-SEC advisor J.W. Verret. The doctrine essentially holds that regulatory bodies, such as the SEC, require explicit approval from Congress for significant regulatory decisions – those bearing national, economic, or political weight. This principle calls into question the traditionally broad discretion granted to such agencies, and could significantly impact the SEC’s maneuvers in the crypto industry, especially regarding digital assets on decentralized blockchains.

In a recent podcast, Verret likened the doctrine’s potential impact to that of the Howey Test – a regulatory test used to determine if a financial instrument is considered a security. However, the major questions doctrine’s relevance in this context will likely remain theoretical until it’s brought to the fore in the impending lawsuits involving crypto trading platforms, Coinbase and Binance.US.

Verret, who has personally traded on Coinbase and been an early participant in the crypto wave, expresses support for the platform despite the SEC’s scrutiny. His commentary underscores a notable shift in the landscape of legal disputes, potentially challenging the SEC’s authority over crypto regulations.

As the crypto space continues to evolve, the major questions doctrine introduces a new layer of complexity. It emphasizes the necessity for explicit congressional approval, spotlighting the ongoing tug-of-war between regulators and crypto enterprises and underscoring the importance of legislative input in shaping the future of crypto regulation. Read more here.

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