SEC’s staking crackdown has uncertain consequences for DeFi: Finance Redefined

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you significant developments over the last week.

The United States Securities and Exchange Commission’s (SEC) crackdown on crypto-staking services could lead to uncertain consequences for the DeFi ecosystem.

Cybercriminals used various methods to siphon funds through hacks and exploits in 2022, amounting to over $2.8 billion in losses. The second week of February saw the Platypus protocol exploited, leading to losses of $8.5 million. In another exploit-related update, the hacker behind Mango Markets wants to keep disputed funds paid as a bug bounty.

The Financial Stability Board (FSB) stated that despite providing many novel services, DeFi does not differ substantially from traditional finance in its functions,

The DeFi market saw a new bullish wave thanks to a price rally by Bitcoin (BTC) and other altcoins. The recent price rally helped the DeFi market regain its $50 billion total value locked.

SEC’s crypto staking crackdown has uncertain consequences for DeFi: Lido Finance

A crackdown by the U.S. securities regulator on crypto staking could have unintended consequences for decentralized finance, according to the head of business development at Lido DAO.

Jacob Blish told Bloomberg in a Feb. 13 report that the most significant risk would be if the SEC eventually concluded that no U.S. citizen could interact with crypto staking services, including protocols.

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DeFi exploits and access control hacks cost crypto investors billions in 2022: Report

Cybercriminals used a variety of novel ways to carry out hacks and exploits in 2022, with over $2.8 billion of cryptocurrency stolen.

According to a report from CoinGecko, which used data from DeFiYield’s REKT database, hackers used diverse methods to steal crypto in 2022. These methods include bypassing verification processes, market manipulation, ‘crowd looting,’ and smart contract and bridge exploits.

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BIS-funded regulator to probe DeFi entry points like stablecoins

The Financial Stability Board — the financial regulator funded by the Bank for International Settlements — is pushing international regulations for decentralized finance.

On Feb. 16, the FSB issued a report on the financial stability risks of DeFi, highlighting major vulnerabilities, transmission channels and the evolution of DeFi. Despite providing many “novel” services, DeFi “does not differ substantially” from traditional finance (TradFi) in its functions, the authority said in the report. The FSB argued that by trying to replicate some parts of TradFi, DeFi increases potential vulnerabilities due to the use of novel technologies, the high degree of ecosystem interlinkages and the lack of regulation or compliance.

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DeFi protocol Platypus suffers $8.5M flash loan attack, suspect identified

A potential suspect has been identified in the $8.5 million attack on the decentralized finance protocol Platypus.

Blockchain security firm CertiK first reported the flash loan attack on the Avalanche-based stable swap platform through a tweet on Feb.16, alongside the alleged attacker’s contract address.

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Mango Markets exploiter seeks to keep disputed funds paid as ‘bug bounty’

The alleged exploiter of the decentralized finance protocol Mango Markets, Avraham Eisenberg, is seeking to keep his share of crypto gained from his so-called “highly profitable trading strategy.”

On Feb. 15, attorneys for Eisenberg filed a motion in a New York District Court objecting to a lawsuit from Mango asking for $47 million in damages plus interest starting from the time of Eisenberg’s October 2022 attack, which drained around $117 million from the protocol.

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DeFi market overview

Analytical data reveals that DeFi’s total market value hit $50 billion this past week. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a bullish week, with most of the tokens trading in green with double-digit gains.

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education in this dynamically advancing space.