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‘DeFi may lead to a paradigm shift’ says Federal Reserve Bank paper

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‘DeFi may lead to a paradigm shift’ says Federal Reserve Bank paper



A paper published by the Federal Reserve Bank of St Louis has delved into the expansion of decentralized finance and Ethereum’s role in it.

The research, penned by Dr. Fabian Schär and published on May 2, has taken a deep dive into the world of DeFi, hinting that if security concerns and risks can be addressed, it may lead to huge changes in the financial industry.

“DeFi uses smart contracts to create protocols that replicate existing financial services in a more open, interoperable, and transparent way,” Dr. Fabian Schär wrote, also hailing its efficiency, accessibility, and composability.

“DeFi may lead to a paradigm shift in the financial industry and potentially contribute toward a more robust, open, and transparent financial infrastructure.”

DeFi growth over the past year has been monumental, with a 700% increase in the total value locked across the ecosystem. At the time of writing, that figure stands at an all-time high of around $134 billion across different blockchain according to DefiLlama.

Dr. Schär explained that the backbone of the entire DeFi ecosystem is smart contracts, the majority of which run on Ethereum. The report lists a number of popular DeFi related tokens but points out that the vast majority of tokens are issued on the Ethereum network.

ETH is also used as collateral for a vast number of DeFi protocols and 10.5 million ETH, or 9% of the entire supply, is locked up according to Defipulse.

Schär, a professor of Distributed Ledger Technology at the University of Basel in Switzerland, stated that Ethereum has unleashed a wave of innovation built on blockchain technology.

He added that the growth of digital assets such as ETH, and the potential for DeFi, means the sector is destined for bigger things:

“The spectacular growth of these assets alongside some truly innovative protocols suggests that DeFi may become relevant in a much broader context and has sparked interest among policymakers, researchers, and financial institutions.”

According to the ConsenSys Q1 DeFi report, the number of Ethereum addresses interacting with DeFi protocols is at an all-time high of 1.75 million, following a growth of 10X since the beginning of 2020.

The research adds to the bullish momentum for Ethereum which has seen it outperform Bitcoin this year and propel the asset to an all-time high of just over $3,500 on May 4.



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Japanese Assembly Members Seek to Make Tokyo a ‘Cryptocurrency Trading Center’ – Economics Bitcoin News

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Japanese Assembly Members Seek to Make Tokyo a ‘Cryptocurrency Trading Center’ – Economics Bitcoin News


Japan is steadily becoming an area of interest for the cryptocurrency industry, and a politician in the capital city is looking to strengthen the trend. A member of the Tokyo Metropolitan Assembly wants to transform the Japanese capital into a “trading center” for cryptos.

Blockchain as a ‘Growth Strategy’ to Create Industry Hub

Yuu Ito, the third term assembly member in question, commented about the possibility of bolstering the city’s financial sector by increasing its involvement with the digital asset business.

The statement comes after his recent support of economic plans unveiled by Yuriko Koike, governor of Tokyo. Ito also pointed out challenges Tokyo faces in order to compete with other major financial hubs, like London, Macau, and Hong Kong. He believes high rates in bitcoin (BTC) tax might have deterred investors and companies from being active in Japan, and that significant action is necessary to advance the industry domestically.

Nobuko Irie, a fellow Tokyo Metropolitan Assembly member, commented in a similar vein:

The country is printing deficit-financing bonds in the wake of the corona. Even in Tokyo, we must create new financial resources by setting technology that can generate wealth like blockchain as a growth strategy.

Guaranteeing a Healthy Taxation Environment for Bitcoin

She praised how bitcoin adoption has been skyrocketing globally, but raised concerns on how politicians are handling the matter. Here she urgently describes necessary action for Tokyo to become a cryptocurrency trading center:

Politicians should now tackle the issues of monetary policy and taxation around bitcoin. If you do it in the nation, you will lose the sense of speed, so create a special zone in Tokyo to use it tax-free in the city. I think it is the role of politicians to identify issues and clear them systematically while running.

Irie also highlighted the coronavirus as an opportunity to accelerate policy adaptations adoption while creating a healthy environment to develop a crypto trading hub in Tokyo:

When we have to turn the economy around, we need to create a mechanism that prevents money from staying. For that purpose, virtual currency and blockchain can be used. Based on the fact that I learned this time, I think it is necessary to accelerate.

What are your thoughts on the plans proposed by the Tokyo assembly members? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons





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Ether balances on centralized exchanges fall to lowest level since June 2019

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Ether balances on centralized exchanges fall to lowest level since June 2019


According to analysis from on-chain analytics provider Glassnode, the sum of Ethereum on exchanges has fallen to its lowest level for almost two years.

Glassnode estimates that just 13.3 million Ether is currently held on centralized exchanges, the lowest it has been since June 2019. As such, centralized platforms hold roughly $52.4 billion worth of ETH or 11.5% of Ethereum’s entire supply.

The number of Ether on centralized exchanges has fallen 30% in 9 months since peaking at 19 million ETH during September 2020.

A low balance of ETH on exchanges is typically understood to be bullish for the markets as it drives a reduction in supply relative to demand on popular trading platforms. Dwindling exchange balances suggest long-term investors are moving their assets into secure storage or locking their funds up to earn yields through decentralized finance protocols or staking.

In its Monday “Week on Chain” report, the data provider also noted that there has been some reduction in exposure to Bitcoin in favour of Ethereum.

Glassnode correlated the spending behavior of reasonably old Bitcoin unspent transaction outputs of between 6 months and 3 years, finding evidence that long-term investors could have been recently flipping into ETH:

“Whilst this is only an empirical observation (correlation <> causation), the distinct increase in these older BTC being spent back into circulation after a prolonged period of holding makes a compelling case.”

Bitcoin Spent Outputs vs ETH price: Glassnode

The report added that on-chain activity has increased significantly over the past four weeks for Ethereum amid Ether’s recent bullish price action. The total number of smart contract calls, Uniswap transactions, and daily transactions, have all seen notable upticks since the beginning of the year.

Daily transactions hit an all-time high of 1.63 million this week, representing a 22.5% increase over December 2017’s previous peak.

At the time of writing, Ethereum prices were trading at just below $3,900 — cooling from their recent all-time high of $4,220 on May 10.