Several crypto companies and decentralized finance (DeFi) platforms have gone bust this year—owing to a dip in demand for cryptocurrencies (from peak levels) and mounting regulatory hurdles. The list also includes Binance, which has seen its revenue nosedive by 70% year-to-date.
Token of depreciation
At a time when the world’s biggest crypto exchange is facing tanking revenue, what chance does a DeFi lending project such as Yield Protocol have of surviving? At its peak in April 2022, Yield Protocol boasted a market value of more than $22 million. Since then, those numbers have shrunk to about $2 million.
In the wake of slowing demand and regulatory challenges, Yield Protocol has announced it will terminate operations by the end of this year. In a blog post on Medium, the project said it will end all borrowing and lending on the protocol once its December 2023 series attains maturity on Dec. 29.
“We felt this decision was necessary because there is currently not sustainable demand for fixed-rate borrowing on Yield Protocol. Additionally, the current regulatory environment in the U.S., combined with increasing regulatory requirements in Europe and the U.K., make it challenging for us to continue to support the Yield Protocol.”
Yield Protocol
Crypto’s regulatory woes
Yield Protocol’s decision to wind down operations reflects a broader trend of crypto regulation tightening across the world. Just days ago, Binance said it was pulling out of the Russian market due to compliance concerns. In August, Dutch crypto exchange Txbit ended operations, citing regulatory uncertainty and unfavorable market conditions.
Deceptive practices by certain DeFi platforms have also created a trust deficit in the Web3 industry. In September, a procession of DeFi platforms came under the scanner of the U.S. Commodities Futures Trading Commission for illegal derivatives trading. Meanwhile, the U.S. Securities and Exchange Commission is planning to bring more charges against crypto firms and DeFi projects that it believes are violating securities law.
And the U.S. is not the only country to clamp down on the DeFi sector. In April, the French central bank stressed the need for a new regulatory framework for DeFi, citing its disintermediated nature. Meanwhile, the U.K.’s Financial Conduct Authority is taking strict action against centralized exchanges and DeFi projects that don’t comply with the law.