Unchained - Unconfirmed: Why Terraform Labs Cofounder Do Kwon Is Unfazed by US Regulators - Ep.285

Episode Date: October 29, 2021

Do Kwon, cofounder of Terraform Labs, was recently served subpoenas by the US Securities and Exchange Commission during Messari’s mainnet event, leading Kwon and Terraform to preemptively sue the SEC. On Unconfirmed, Kwon discusses: what Terraform Labs does and how it is building its DeFi ecosystem around TerraUSD ($UST) why Terraform Labs created its synthetics protocol, Mirror, and how it works what Do thinks about the SEC’s investigation into Mirror what happened to Do at Messari’s mainnet event why the SEC’s approach to crypto regulation does not impact Do very much what Do thinks about how US regulators are treating crypto companies how Do would regulate the crypto industry why he believes the current state of crypto regulation doesn’t work in a global context why he says the SEC couldn’t do anything to TerraUSD -- even if it wanted to what two characteristics are critical in building a decentralized protocol how the crypto industry could improve security in light of the $130 million Cream Finance hack   Thank you to our sponsors! Avado: ava.do  Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021  Nodle: https://bit.ly/3AXGydJ    Episode Links   Do Kwon Twitter: https://twitter.com/stablekwon    Terra Twitter: https://twitter.com/terra_money  Website: https://www.terra.money/  Terra ecosystem: https://docs.terra.money/Reference/ecosystem.html    SEC Lawsuit CoinDesk https://www.coindesk.com/business/2021/10/23/terras-do-kwon-was-served-by-sec-new-lawsuit-shows/  Terraform V SEC https://www.scribd.com/document/534537134/Terraform-v-SEC  Stephen Palley https://twitter.com/stephendpalley/status/1451709816020348933    Messari Mainnet Serving https://twitter.com/gogoSlava/status/1439972015910408195    Miscellaneous SEC charging Abra https://www.sec.gov/news/press-release/2020-153 Stablecoin market cap comparison ​​https://coinmarketcap.com/view/stablecoin/  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unconfirmed. The show that reveals how the marking names in crypto are reacting to the week's top headlines and gets the insights give on what they say on the horizon. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago, and as the senior editor at Forbes, was the first mainstream media reporter to cover cryptocurrency full-time. This is the October 29th episode of Unconfirmed. The Crypto.com app pays you up to 8.5% interest on your Bitcoin. Get $25 when you download. the crypto.com app with code Laura. The link is in the description. Tired of your exchange taking 25% of your staking profits? The Avato blockchain computer allows you to stake Ethereum and other crypto at home

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Today's guest is Doe Kwan, co-founder of Terraform Labs. Welcome, Doe. Hi, Laura. Thanks for having me. You and your company made a pretty bold move last week filing a lawsuit against the SEC, but before we get into the details on that, let's just make sure our listeners are up to speed on everything that you do in the crypto space. Can you tell us what Terraform Labs is and explain some of your crypto projects such as Terra and Mirror Protocol? So Terraform Labs, which is a company that I founded, is a core developer of Terra, which is many things. It's a layer 1 blockchain,

but it's, you know, it builds a set of products centered around the decentralized stablecoin, mainly TerraUSD. So the defensiator of TerraUSD versus some of the better known stablecoins in industry such as Teber and USDC is that it's decentralized. centralize an algorithm. So while for something like Tether, there is a dollar in bank deposits, supposedly, for every unit of stable coin that's issued. Terra uses a set of on-chain incentives to make sure that the coin can maintain price parity with the dollar.

And do you also want to describe mirror protocol? Sure. So in the early days of TARAUSD, we built a series of applications to enhance the utility of Terra stablecoins. So the idea was that we tried to break down money as a product and then thought about what are some of the key features of money that we can improve with a decentralized version of the dollar. So it turned out that with money, you can either spend it or hold it.

So we decided to build a stable coin and a set of products around it that would make TerraUSD the easiest to spend and the most attractive to hold. So on the spending component, we built a number of payment apps primarily in Asia. So we built Chai and I import in Korea and then Mnipay in Mogolia. So, you know, and these things are doing, you know, billions of dollars in transaction volume with retail buying anything from general purpose e-commerce to online food deliveries to movie theater tickets and things like that. And then we also built Mirror Protocol, which is a synthetics protocol that creates assets that follow. the price of various different assets, like, for example, equities or commodities or ETS, such that people across the world that don't have ready or easy access to some of the most

attractive markets in the world can now sort of improve their financial outcomes by now getting access to those markets. We also built the Inker Protocol, which is a way for you to get high, attractive yield on your stable points to the tune of, let's say, 19.5% per annum. and these are powered by staking yields that are coming in from multiple blockchains such as Terra, Solana, I, and Ethereum 2.0. So the SEC has been conducting an investigation into Mirror Protocol. And for the listeners who've been following things closely in the crypto space,

they're probably aware that this type of product, that Mirror Protocol features, is something that has caught the SEC's attention before, for those of you, who remember settlements or enforcement actions with companies like Abra. So for you, Doe, this kind of is what resulted in you suing the SEC. So tell us how that came about. First off, I think it's natural for regulators to want to look into things that are so new that breaks incumbent frameworks for how markets were regulated and people were doing financial transactions, right? So if you look at things like Mirror or Anchor, they are, you know,

pretty interesting in the sense that like if there was wide market acceptance of, let's say, the Anchor Protocol, like nobody would ever use Wells Fargo, right? While at the same time, it's not regulated in the way that a bank is regulated. And there's a lot of things that don't fit in nicely even compared to existing DIPI protocols. Or for Mirror Protocol, there are a lot of, you know, valid concerns for having unregulated price exposure to stock. markets, right? So I think it's natural that they're looking into things like that. And it's not just the SEC. I think it's something that many regulators across the world are going to, you know, pay attention to. And I am, you know, genuinely sincere when I say that I am happy to, you know, enter into

a dialogue and educates regulators across the world. This is not sort of our first dog and pony show. I do run large regulated payments company in Korea. So, you know, happy to do those things. But I think it's also important that like when crypto companies are working with regulators, that they do it from a position of, you know, strength and do it from a position of confidence. Yeah. And so just so listeners have the full background, what happened was the SEC served you with subpoenas just before you were supposed to go on stage.

at Masari's may not, this made their rounds on Twitter at that time, but it wasn't clear exactly who had been served with those subpoenas. And this was after your lawyers had kind of established with the SEC that the SEC did not have jurisdiction over you. So Stephen Pally, who is a lawyer in the crypto space, tweeted that your lawsuit against the SEC was the, quote, rare case of a preemptive lawsuit against a regulator making sense. And his comment was, quote, if I were negotiating with someone and they decided to serve my client publicly the same day that they were on the phone with me about the same case, I would be pretty ticked off, a really, really shitty way to treat people. That was all Stephen's comment. So this incident basically

fits into this kind of wider regulatory picture we have here in the U.S. around crypto. And, you know, I would say people in the crypto industry are particularly apprehensive about the SEC. What's your take on the SEC's approach to regulating the crypto space here in the U.S.? Well, so I think the easy way to look at it is while I am happy to cooperate and work with the SEC, it doesn't really hit me the same way that, you know, somebody that's American and like really understands and has been living with some of that reach most of their lives would feel about it. So, like, yeah, I mean, it's kind of interesting. And, you know, there are parts of this that are, you know, educational and fun.

And, you know, largely, it doesn't really impact me all that much. Oh, okay. But, I mean, just as a builder, do you find that there are modifications or adjustments or just anything, you know, that you kind of have to. think of when you're building these projects and that there is like certain risks you have to take an account because of the atmosphere here in the U.S.? So the way that I think about it is that, yes, there is some hostile overreach of regulators in the beginning. And that's because like the industry is just fundamentally transformative, right? But another way of thinking about it is that

people that run regulated fintech services or banking services get hit with subpoenas and get investigated and have to work with regulators on a daily basis. I think the problem is that even though some of these crypto companies operate from a financial perspective at the scale of Fortune 500 companies, they're really, you know, like from a human resources perspective, they're at the size of like a seed or a Series A stage startup. So when, you know, regulators approach them as if they would be talking to, let's say, the Robin Hoods of the world, then I think it has like a huge psychological impact. But the reality of it is it's just like one of those things that you have to deal with if you're trying to start a financial revolution.

So one of the interesting things that I thought about is, you know, like in crypto, the defy meme is that we're here to change the future of France. Right. And the interesting thing is the last time that they tried to change the future of France, they pulled out the guillotine. Right. And then they started executing people. And they're not doing that today, right? Like I don't think I don't think regulators are doing anything that's super crazy. All they're doing is asking questions.

And yeah, like there's going to be some hostility about it. Usually people are hostile to things that they don't understand. But it's through this process that we educate regulators, you know, find a common ground and find compromise, right? So if we're really in this and this is, if this is an actual revolution, then I think some of the costs that we have to pay are like actually not that high. It's just the price we have to play to play the game. Okay. All right. So you seem to have a pretty almost nonchalant attitude about this. But we'll discuss a little bit more about this regulatory issue in a moment. But first a quick word from the sponsors who make this show possible. There's a new cryptocurrency made for mobile that you can earn by downloading the Nodal Cash app. It's free, easy to use, and there's no hardware to buy. The Nodal Cash app allows you to earn crypto whether you're on the go, stuck in traffic, or even while you're sleeping.

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That's the powerful backing of that. Back to my conversation with Doe. So do you have an opinion on what you think would be the optimal way of regulating crypto here in the U.S.? So I think right now there seems to be a pretty heavy emphasis on some of the landmark protocols in crypto. So let's say the leading lending protocols, the leading taxes, some leading chains. But I think the initial focus needs to be on, let's say, weeding out the frauds and scams in the industry. And I feel like in order to, because it brings more publicity and it's more interesting, I think there's a bit more focus on what I consider to be fairly legitimate institutions in cryptocurrency in the crypto industry that are trying to do really amazing things. And it really slows them down and it hurts the industry overall.

You know, and I think if there was equal weight, I really think it should be the majority of the attention, but I think if there's equal weight paid to, you know, some of the scams and frosters and rug pulls in the industry, I think that would actually lead to a net positive result for everyone. But, you know, like when there's a hack that happens and, you know, like $100 million get stolen, that doesn't seem to get as much attention as like somebody launching like a novel Dex algorithm. Huh. Okay. Okay. Well, we can talk about that in a moment because of some of this week's news. But I did want to ask for this question about how U.S. regulators should, you know, apply regulations here in the U.S. Do you think that the existing regulations should be applied here or do you think that there needs to be something new? I think the problem is that the regulations are too vague, right? So I've thought about this for a while, but I, I think it's better if you have an actual legal framework that is decided by the legislative

French instead of something that regulates by enforcement and precedent. Like it is true that a lot of the security laws are quite outdated and they're based in a world where, you know, there were wild cowboys and, you know, private banks that were issuing their own notes that were supposed to replace currency. I don't think that framework applies really well in a global context where, you know, everything, all the value moves to the internet. And there's a lot of innovation that's happening. So I don't think that fits really well.

So if there was sort of like an actual law that passes Congress that says, hey, look, this is a standard for a minimal viable threshold of decentralization that you need to get to. And that can include things like having no pre-mine of the asset. So fairly distributing the asset at launch, it could be one of it. Or number two, I guess like you could even do things like not having an explicit privacy there on the coins so that you can do you can track where the assets are going and then you can do tax reporting and things like that. So yeah, I mean, not that that's necessarily a good idea,

but I feel like it's possible to come up with a minimal viable set of really clear rules to decide what qualifies as a credibly decentralized asset and what constitutes the security. And without that clarity, I think it's just very difficult for builders and regulators, get on the same page. Yeah, the privacy company made is pretty interesting, but we will instead actually talk a little bit about stable coins because TerraUSD has undergone a 10x increase in supply this year. It's now the fifth largest stable coin. It has a nearly $3 billion market cap. And as I'm sure you're well aware, stable coins have come up here in the U.S. as another target for regulators. And it does look like the SEC will likely soon have authority to regulate stable coins. If that were to happen,

how would that affect TerraUSD? Nothing. There's no underlying deposit that can be seized. There's no policy of Terraform levels that impacts TerraUSD. And I would never do anything, not that I could, that are adversarial to the interests of the TARA network. So I actually think this is something that's going to be a huge growth driver for TARUSD because not only are the centralized stable coins censorable by, you know, regulators. But a lot of the so-called decentralized stable coins are really just wrapped variants of these centralized stable coins. So most of of die is actually issued using USDC as collateral. There's a lot of fractional reserve stable coins that use, you know, some of these other stable coins as collateral itself. So it becomes

very easier by proxy to regulate most of our competitors in the space. And I think if, you know, of some of these centralized stablecoins turn into essentially fintech services, I think a lot of that capital will rotate into the largest decentralized stable coin. And today, that just happens to be TerraUSD. And so for you, it's sort of like, if you can come up with a project that is somewhat similar to Ethereum's level of decentralization that it had obtained by 2018, which was the first time we heard an SEC regulator say that Ethereum was sufficiently decentralized, then you feel that that's kind of a way of, I don't want to say, like, getting around regulation because it sounds like it's sort of intentional, but more just that it would be outside the purview of a regulator.

Is that what you think is the way to go for a defy developer? Yeah. Well, so I think the holy grail in crypto is the decentralized dollar. And like we need to get there because all the applications that we built on top of cryptocurrency, like even, NFT exchanges and DFI protocols and futures contracts, all of those things use some sort of stable coin as the quote currency. Most of the liquidity pools in DFI are denominated in stable coin. Some of it is a neat, but most of it in stablecoin. So if we have sort of a structural issue with some of those stable coins that are denominating

all of these different apps, then DFI dies. So in order to have decentralized finance, you need a decentralized money. And I think the first project to be able to crack this puzzle in the sense that it's tether, but everything is audible on-chain, nobody controls it. There's on-chain monetary policy that is credible and easy to understand. Then I think that's just going to make things better for almost everyone. And so you hinted earlier at what you think are some of the characteristics of a decentralized protocol. Do you want to maybe continue filling out what those characteristics are?

Because I'm very curious. And I was also curious why you felt that privacy could not be a feature of a decentralized protocol. But maybe, yeah, I'm just curious to hear what you think are all the characteristics necessary. Sure. So largely, when it comes to financial regulation, regulators care about two things. Right. It's number one that investors don't get harmed. Right.

So they care about things like transparency. They care about things like people not losing their money without, you know, a full understanding of the associated risks. And number two, they're worried about money laundering and tax evasion. And I feel like if there's no pre-mine to the asset in the sense that the developer doesn't have an unfair advantage when the asset is issued, then in that case, it cannot be a security. Like, if you are doing all the work in the beginning and later, you build a community or other people to build alongside you, you had no unfair information access to get your hands on the

asset, then in that case, I mean, it seems like a business. pretty good reason why you shouldn't have any responsibility if he didn't have any unfair financial gains. Of course, this is an independent discussion of whether it's appropriate for the developer to make money off of his ingenuity or labor. But I think at least if there's no pre-mine, I think it's very tough to call that a security. I think number two, why I think a privacy layer is a little bit challenging is because then it becomes very difficult to do things like tax collection, right? So then you can give, you know, privileges access to some, you know, government agencies and things like that. But then I feel like that would sort of defeat the

purpose of privacy coins in the first place. Yeah, I don't think you should do, you should engage in tax evasion. I don't think you should engage in money laundering. So some sort of a middle ground where you sacrifice some of those properties in order to have regulatory clarity seems like a pretty good idea to me. Okay. Yeah. Well, you know, obviously there are a bunch of privacy coins that have their selective viewing keys. So it wouldn't be that you would only reveal it to a regulator, but it could just be to any other entity that you'd like to reveal that information to. So going back to your earlier remarks, let's touch on another news story this week, a big one. Cream Finance was hacked with a flashloon transaction for more than $130 million on Wednesday.

And that brings the total amount of funds in DFI that have been stolen. year to over half a billion dollars and a cream finance itself has actually been hacked multiple times so i was curious you know if you feel that the regulators maybe aren't concentrating there what do you feel the industry can or should do about these security issues yeah so what's the saying fool me once full me twice no no but in all seriousness um i i think there should be a more way for people to be able to gauge security risk across various different DFI apps. And I think an important way to do that is for some of the main sort of distribution channels in crypto to offer more friendly tooling so that people can understand what the security risks are. So for example, if EtherScan, for instance, had like a static analyzer of the code which identifies what types of risks are possible, or let's say,

MetaMask when you're about to execute a transaction shows you a set of warnings of the things that can happen if you trust this contract, I think that could be something that's really helpful. So one of the delightful experiences that I found when using the phantom wallet in Solana is that right before you're about to execute a transaction, it tells you what are some of the things that can happen. It tells you that you are sending your tokens to another address. You're giving you a special set of permissions from your wallet and things like that. So that similar to how you give app permissions, like sharing location services on your iPhone,

you now have a sense of what things are possible when interacting with the Solana program. So I think if similar experiences move on to, let's say, the dominant block explorer and a lot of discovery tools like DefiPulse, for instance, that I think it becomes very easy for users to gauge different types of risk. So it's not possible for the average user to read through, smart contracts and decide which project is more secure than the other, nor is it appropriate for them to read like a random auto report, which could be significantly outdated and decide that this contract is safe. Right. So I think the only way to do this is have better analytics and tooling

that's built around some of the leading landmark players in the industry. Yeah, this reminds me of a tweet thread that Taylor Monaghan wrote. And it was kind of funny because she said, oh, you know, know, someone, I can't remember which wallet it was, but I think it actually was one on Solana. And they thought it was such an amazing experience because things were automated. And then she did a bunch of little funny jiffs and emojis. And eventually, you know, she's like, you know, wide eyes and like alarm bells going off. And she's like, no, no, no, it's not good because then just, you know, any random fisher or hacker can just take all your money out if there aren't these checks on it. So anyway, all right.

Well, this has been a super fun discussion. Thank you so much for coming out unconfirmed. Yeah, thank you so much, Laura. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. With over 10 million users, crypto.com is the easiest place to buy and sell over 90 cryptocurrencies. Grow your crypto with crypto.com earn. which pays up to 8.5% interest on your Bitcoin and 14% interest on your stable coins. When it's time to spend your crypto, nothing beats the crypto.com visa card, which pays you up to 8% back instantly and gives you 100% rebates for your Netflix, Spotify,

and Amazon Prime subscriptions. Download the crypto.com app now and get $25 by using the code Laura. The link is in the description. Thanks for tuning in to this week's newsrenew. recap. The Financial Action Task Force unveils finalized crypto guidance. On Thursday, the Financial Action Task Force, or FATF, a global anti-money laundering watchdog, published its finalized guidance for regulating the crypto industry. The draft of this guidance published last spring veered in the direction of expanding rules that traditionally apply to transactions involving financial intermediaries

to peer-to-peer transactions and even to wallets managed by individuals or so-called self-hosted wallets. Several crypto lawyers and advocate groups, such as CoinCenter and Jake Trevinsky, found that the fine lines guidance appears to be better in some respects than the draft, but otherwise is too vague. What effect this will have in practice remains to be seen, since Thursday's publication is merely guidance, not law. Member countries decide whether or not they choose to implement the FATF recommended guidelines. As a reminder, the FATF is the organization that advocates applying the travel rule to virtual asset service providers or VASPs, such as crypto exchanges and money transmitters, to collect and report information on parties participating in

transactions. Last Spring's draft guidance could have required such reporting from those facilitating or governing transfers, such as miners and validators. Now the requirement applies to persons with, quote, control of VAs or virtual assets. It also does not put such obligations on crypto protocols. It also does not put such obligations on crypto protocol developers. Most importantly, it no longer applies the travel role to transactions that occur between a business and a self-hosted wallet. For decentralized applications, VASP reporting requirements are unclear, especially for developers or anyone with, quote, control or sufficient influence in the defy arrangements. The FATF appears to believe that many heads of decentralized protocols would fall under the VASP definition. Quote, it seems quite common for defy arrangements to call

themselves decentralized when they actually include a person with control or sufficient influence, and jurisdictions should apply the VASP definition without respect to self-description, said the guidance. On Twitter, Miller White House, Levine, policy director at Defi Education Fund, wrote, quote, TLDR, it's not great. My initial read is that the FAA sees a world in which permissionless and decentralized systems are, at best, suppressed. From the guidance, it seems that the Fadof is having trouble coping with the fact that DFI eliminates those intermediaries. Mark Boyron, DYDX's general counsel, tweeted that the FATF recommendations are, quote, so bad that it makes the infrastructure bill look reasonable. Only permission to DFI is allowed. An intermediary must

be inserted to serve as a VASP. The global impact of these recommendations is an attempted kill shot at DFI. MasterCard is building out crypto payment rails. MasterCard is partnering with BACT, a crypto payments firm to enable cryptocurrency services for its partners across the U.S. Through MasterCard's crypto-as-a-service platform, any MasterCard partner, be it a merchant, bank, or fintech will soon have the ability to let consumers buy, sell, and hold digital assets through custodial wallets powered by backed. MasterCard is also integrating crypto into its loyalty program. MasterCard adding support for Web3 payment rails could lead to a significant expansion of

users interacting with cryptocurrency. According to CNBC, MasterC, MasterC has relationships with over 20,000 financial institutions and supports 2.8 billion credit cards. Shares of the recently listed backed, which announced a similar partnership with FISAV this week, jumped 234% on Monday, coinciding with the MasterCard press release. Speaking of crypto adoption, according to Bloomberg, the Houston Firefighters Relief and Retirement Fund invested $25 million in a Bitcoin and Ether, becoming one of the if not the public pension plan that has done so in the U.S. The fund holds over $4 billion in assets. On Wednesday, Bitcoin drops below $60,000. El Salvador President Naibu Keli announced that country,

quote, bought the dip to the tune of 420 BTC. Two banks signed up to become the first U.S. institutions to offer Bitcoin trading through a platform designed by Q2 Holdings and New York Digital Investment Group, or NYDIG, allowing customers to purchase, hold, and sell Bitcoin in their banking apps. And finally, according to an SEC filing, Tesla might start accepting Bitcoin as payment again, and even hinted that it could accept other cryptos as well. The SEC is not ready for a leveraged Bitcoin ETF. The second Bitcoin Futures ETF, managed by Valkyrie, listed last Friday, bringing in $80 million

during its first training day under the ticker, BTF, on NASDAQ. Since then, Valkyri filed to offer a 1.25X leveraged Bitcoin E. ETF. However, according to the Wall Street Journal on Thursday, the SEC instructed one ETF provider not to proceed with its leveraged product, indicating that it will not approve Valkyrie's leveraged Bitcoin Futures ETF. Derexion and ETF issuer also got creative with the Bitcoin Futures ETF filing. On Tuesday, the company filed its Direcione Bitcoin Strategy Bear ETF, which will maintain short exposure to Bitcoin Futures contracts on CME. quote, the fund will generally maintain its short exposure to Bitcoin futures during periods in which the value of Bitcoin is flat or declining, as well as during periods in which the value of Bitcoin is rising, the filing said.

While it remains to be seen whether the SEC approves Direcione's ETF, it appears, a third Bitcoin futures ETF is set to list. The Vanek Bitcoin Strategy ETF is, quote, ready for launch, according to Bloomberg's Eric Balchunis, who expects the fund to start trading Friday when this podcast publishes. Belltunis also noted that a glut of Bitcoin ETFs filed for registration. He tweeted, quote, there's still 40 plus Bitcoin ETFs in registration. We'll probably hit 50 by Thanksgiving. Cream Finance is third exploit in less than a year. Cream Finance, a defy money market and lending service, lost $130 million worth of crypto tokens on Wednesday, making it the third worst defy hack in history, according to Rect.

Peckshield, Inc., initially identified. the exploit as a flashloan attack. Based on EtherScan records, it appears the hacker interacted with 69 different tokens and paid only 9.16Eth to pull off the heist. Mooda Gupta, a blockchain security researcher, posited that the hacker was two people, most likely DeFi devs, working from a shared account. Notably, this is not the first time Cream Finance has suffered a flashloan attack. The DFI protocol was additionally exploited for $37.5 million in February and $18.8 million in August. Based on data from the block, this brings the total amount of funds stolen from DFI protocols to over $500 million. FDIC chair thinks banks could one day hold crypto assets.

Jelena McWilliams, chair of the Federal Deposit Insurance Corporation, believes that regulators should be looking into how U.S. banks might hold digital assets for themselves and their clients. The FDIC chair spoke at Money 2020 in Las Vegas on Monday, where she explained her regulatory approach to crypto assets. McWilliam said that her job, quote, is to provide clear rules of the road to let crypto innovation flourish in the U.S., just like it did with the Internet. According to her speech, the FDIC plans to issue a series of policy statements on how existing rules and policies apply to crypto assets in the coming months.

McWilliam says the FDIC is working with the Federal Reserve and the Office of the controller of currency in a, quote, crypto sprint to best coordinate policies for banks in the crypto space. The FDIC chair stated that crypto assets belong on bank balance sheets, as reported by Reuters. Quote, at some point in time, we're going to tackle how and under what circumstances banks can hold them on their balance sheets, said McWilliams. Cryptot trading tanked Robin Hood's Q3. On Tuesday, Robin Hood, the popular trading platform, revealed its Q3 earnings report, which showed that cryptocurrency, revenue dipped almost $200 million compared to the second quarter.

According to the report, crypto revenue fell to $51 million, marking a 78% collapse from its $233 million in Q2. The lack of crypto revenue left its mark on Robin Hood's total revenue, which hit only $365 million in Q3 after topping $550 million in Q2. The CFTC is looking into a decentralized prediction market. According to Bloomberg, this Commodity Futures Exchange Commission, or CFTC is investigating Polymarket, a prediction market-based DAP that allows users to predict outcomes of future events. Bloomberg reports the regulator is, quote, investigating whether polymarket is letting customers improperly trade swaps or binary options and if it should be registered

with the agency. As of now, the DAP has not been accused of wrongdoing. Quote, polymarket is firmly committed to complying with applicable laws and regulations and to providing information and regulators that will assist them with any inquiry. A Polygon spokeswoman told Bloomberg. Speaking of the CFTC, it appears that acting chair, Rostin Benham, is making moves to add crypto to the CFTC's purview. On Wednesday, Benham asked to become the primary cop on the crypto regulatory B during an appearance before the Senate Agriculture Committee. Benham added, quote, market transactions that are taking place right now are a huge part of the risk that digital assets pose. He went on to request a more robust, quote, regularistory structure for both securities and commodities.

Benham's words come during the same week that SEC chair Gary Gensler, who has been lobbying for more regulatory control over crypto, took aim at defy. Quote, there's a lot of lending going on, there's a lot of trading going on, and without protections, I fear that it's going to end poorly, said Gensler. In the past, he has said that most of the crypto assets he's seen are securities, which furthers the turf war between the CFTC and the SEC. See. Time for fun bits. Holy Shib. One man's meme is another man's billions. Sheba Ino, which trades under the ticker Shib, shot into the top 10 coins by market capitalization this week, at one point flipping its memetic forefather Dogecoin. According to data from Coin Gecko,

the meme token is up roughly 150% on the week with the market cap of $40 billion, which is markedly larger than Deutsche Bank at $27 billion. With the rise of Shib comes massive, wealth, especially for one investor, who might have pulled off the greatest individual trade of all time, as tweeted by Morning Brew. Someone somewhere believed in ship last August and bought roughly $8,000 worth of tokens. Fast forward to today, those tokens are now worth $5.7 billion. Good for a 71,249,000% return in just over a year. All right, thanks for tuning in. To learn more about Doe and Terraform Labs, be sure to check out the links in the show notes. Unconfirmed is produced by me, Laura Shin, without from Anthony Yoon, Mark Murdoch, and Daniel Ness. Thanks for listening.