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Crypto is stuck between a hack and a hard place – Washington

By Ian Silvera
12 August 2021

By Ian Silvera

A double-whammy of major scrutiny came crypto’s way this week, in what was a typically topsy-turvy series of events ultimately punctuated by one of the largest heists in the industry’s history.

The summer alternative-coin boom (tokens excluding Bitcoin and Ethereum) the forums and social media hacks had prophesied near the start of the year suddenly looked like it had some legs in it when many decentralised finance (DeFi) and other projects, most notably Ethereum (which went through its ‘London hard fork’ upgrade), began to surge at the start of the week.

The rally boosted the confidence of the crypto faithful, who endured a sell-off after Tesla’s Elon Musk casted doubt over the green credentials of Bitcoin and the Chinese government began to crackdown on cryptocurrency near the start of the year.

The joy was dulled this week as news of the Poly Network hack began to emerge. Around $600m in digital coins went missing from the DeFi network, with $260m worth of tokens being returned 24 hours after that.

For an industry that prides itself on top of the range encryption, the event no doubt casts doubt in current and potential investors’ mind. It also brings unwanted attention and scrutiny from media and regulators. It couldn’t have come at worse time with lawmakers in mind, since Washington has been considering Joe Biden’s flagship $1tn infrastructure bill.

On the face of it, the draft legislation is designed to impose stricter tax-reporting on crypto-currency brokers in a bid to raise $28bn in revenue for the US government’s Internal Revenue Service over a decade. The real fear among the industry is that the bill will be a gateway for much tougher regulation and a general crackdown on the cryptocurrency space.

These fears, away from Bitcoin indirectly helping fund bridges, roads and airports, could be well founded as SEC Chairman appointee Gary Gensler has described the crypto-currency market as “rife with fraud, scams and abuse”. His “Wild West” interpretation of the sector strikes at the core ethos of the cypherpunks, a band of computer-savvy libertarians who championed crypto in the early days.

The opportunistic capitalists who have taken crypto to the next level, meanwhile, have embraced some forms of regulation and would do well to start setting their own standards before poorly drafted laws make their businesses obsolete.  

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