June 2, 2023

Good morning and thank you for subscribing. This week, a special edition, looking at specific use cases in the industry and the policy priorities for those building them.

Special Edition - Use Cases

Overview

From recent Congressional hearings to the White House Council of Economic Advisers Economic Report, policymakers have continued to ask for examples of real world use cases for crypto. Meanwhile, crypto enthusiasts and industry continue to ask policymakers for regulatory clarity to help foster an environment conducive to innovation.

To shed more light on existing use cases and the impact of policy on innovation, Cap Hill Crypto asked Zelcore, the Stellar Development Foundation, Arch, Flowdesk, Filecoin Green, and the Crypto Council for Innovation two questions:

• Q1: What’s an example of a use case or problem that you are solving with crypto and/or blockchain technology that you would like to highlight for Members of Congress and their staffs?
• Q2: What’s a policy item that you would like to see Congress prioritize in the 118th Congress?

Here are their answers (edited only for formatting/emphasis):

Zelcore

Tim Tully, Jr., CEO

Q1 Answer:

Everyone knows the ticket resale market (concert, sporting event, entertainment). Unfortunately, it is fraught with exorbitant fees, ridiculous markups, and inconsistent ownership transitions. Working directly with ticket issuers, we use blockchain technology to create one-of-a-kind versions of the ticket to the event (NFTs) stored in the Zelcore wallet that can be used at the event or sold directly to other users at much more reasonable rates and fees. In addition, because the ownership record is tracked digitally and supported by smart contracts, the possibility exists to provide financial returns to different previous owners along the way.

Q2 Answer:

The policy I would like to see prioritized is the commodity vs. security debate and the use of non-custodial (self-custody) ecosystems to return ownership rights to the individual to make their assets cross-platform and not locked into one provider.

More on Zelcore.

Stellar Development Foundation

Lesley Chavkin, Head of Policy for Stellar Development Foundation

Q1 Answer:

Stellar Development Foundation has partnered with UNHCR, the UN Refugee Agency, on Stellar Aid Assist, a first-of-its-kind blockchain payment solution for digital cash distribution in Ukraine. Built on the Stellar network, the solution quickly, efficiently, and securely provides cash assistance with traceability and accountability. Ukrainians using the solution receive their aid instantaneously in a digital wallet. They can then convert the digital assets to cash in dollars, euros, or local currency and withdraw their funds at any global MoneyGram location, including over 4,500 MoneyGram sites in Ukraine. They can also hold their funds in USDC, a stable store of value, while traveling within the country or crossing borders without carrying cash. This new option gives refugees a stable store of value against inflation, a secure alternative to hold it unencumbered by the threats of traveling with large sums of money, and access to cash when and where they choose.

Q2 Answer:

Bipartisan stablecoin legislation continues to be Stellar Development Foundation's number one priority. As a payments-focused network, many businesses and individuals in the Stellar ecosystem rely on stablecoins because they leverage blockchain technology's speed, affordability, security, and borderless nature while removing the volatility of other cryptocurrencies. As a result, stablecoins have the potential to modernize the global payments landscape. But to do so, stablecoins must be able to live up to their name and be stable. So a legally established and enforceable stablecoin definition and consumer protections are required to build the trust necessary for this technology to be a viable payment alternative ready for mass adoption.

More on Stellar.

Arch

Dhruv Patel, Co-Founder & CEO, Himanshu Sahay, Co-Founder & CTO

Q1 Answer:

Traditional lenders often delegitimize alternative assets, as a result, individuals that own alternative assets such as cryptocurrencies and NFTs are at a disadvantage to obtain loans. We founded Arch because we believe that individuals who own alternative assets should not be discriminated against when it comes to loan services.

Over the last decade, there has been an explosion of fintech companies making it seamless for retail investors to invest in assets outside of stocks/bonds, such as crypto, startups, real estate, collectibles, art, and more. More individuals than ever now work at startups that offer employees equity as part of their compensation. As a result, there are a growing number of individuals who have a larger portion of their wealth in asset classes that are not accounted for by banks and traditional lenders, leaving many excluded from accessing debt to increase their net worth. At Arch, we make obtaining a loan against alternative assets easy so customers can take the next step in their financial journey.

Q2 Answer:

Clarity on the security vs commodity front: Not only would it be great to know which existing assets are treated as one or the other, but also it would be great to have clarity on what criteria would classify a digital asset as a security or commodity. This will help companies understand which regulatory agency they need to work with in order to interact with these assets.

We’d [also] like to see Congress prioritize crypto staking and its treatment. We’ve seen larger companies such as Kraken get penalized for offering staking rewards but it’s unclear if the problem was with staking or with the way Kraken advertised higher APRs than what the actual staking would result in. This would bring clarity to other companies that are interested in offering staking services & products to US based individuals.

More on Arch.

Flowdesk

Anne-Sophie Cissey, Head of Legal and Compliance

Q1 Answer:

Flowdesk gives regulated and compliant access to liquidity for digital asset projects and communities. This decreases asset price volatility — thereby reducing risks, building sustainable markets. Our services support independent, early-stage grassroots communities and established blockchain projects alike, promoting a more efficient economy and the spirit of free enterprise. Our work intends to establish the credibility and safety of digital assets, foster mass adoption along these principles. Hence Flowdesk’s main purpose is to set higher standards in crypto-finance step by step so that the blockchain technology and the industry can live up to its fundamental values of transparency, decentralization, and integrity.

Q2 Answer:

In the short term, the clear classification of digital assets; determining the powers of federal and state agencies and administrations; and defining standards is crucial. But to pick only one item: Congress needs to clarify which federal regulatory agency is in charge of supervising crypto and that its powers are proportionate also compared to state agencies. Otherwise, the U.S. risks powerful financial interests dominating crypto regulation instead of a fairer, equitable system.

More on Flowdesk.

Filecoin Green

Q1 Answer, Nima Ahmed, Senior Software Engineer:

We are building open-source tools for Web3 projects to quantifiably measure and mitigate emissions generated from crypto-related activity. In doing so, we are addressing critical architecture faults in the global carbon offset model using crypto, blockchain, and the decentralized web. The current offset system is unfit for purpose. It is plagued by an overburden on trust and has created an ESG ‘pay-to-play’ scenario where offsets do little to improve emissions reduction targets. Worse still, they have also been shown to cause harm. The most common concern is that we cannot verify claims and, as a release, we cannot measure impact.

To overcome this stalemate, we focus on equipping organizations with the data to back up their environmental claims. It’s really important to understand that, at its core, Web3 technology is about supercharging transparency. We are deploying this technology in a manner that allows anyone to investigate the data behind environmental claims. We’re creating the conditions to hold ourselves to a higher standard while giving people who are truly interested in protecting our natural world the ability to quantifiably prove it. The future of verifiably clean energy will be powered by the Filecoin blockchain.

Another compelling use case developed by Filecoin Green is CO2.Storage, the first Web3 data storage solution to enable transparency for comprehensive environmental attributes underlying carbon offsets. This free storage utility aims to address the inefficiencies of traditional storage solutions for all types of digital environmental assets, including carbon offsets, renewable energy credits, and more. By merging blockchain’s granular tracking functionality with the information-sharing infrastructure of Web3, CO2.storage brings transparency to the murky carbon credit industry.

Q2 Answer, Marc Johnson, Head of Climate and ESG:

My top priority would be to encourage an open dialogue and legislative action around the potential of Web3 technology. As we build the foundations of tomorrow's internet, it's crucial that we don't lose sight of the core principles this technology stands for: open-source transparency and an inclusive architecture that enables users to retain ownership of the content they create, and works for all online users.

Furthermore, as we confront the escalating crisis of climate change, AI will become an indispensable tool for mitigation and adaptation. However, there's a risk that AI could be misused for 'greenwashing', making harmful practices appear environmentally friendly. This is where the traceability and verifiability features of decentralized Web3 technologies come into play, providing a robust check against misinformation.

To harness the best of both worlds, we need a blend of AI's power and Web3's traceability. For instance, AI could be used to process data transformations in our fight against climate change, with the operations and data stored on decentralized networks like Filecoin. This combination would provide transparency and accountability, helping us ensure that our climate actions are genuinely beneficial and verifiable.

In summary, I would urge the 118th Congress to prioritize legislation that fosters the development and responsible use of AI and Web3 technologies, with a particular focus on enhancing verifiable climate actions and ensuring online transparency.

More on Filecoin Green.

Crypto Council for Innovation ("CCI")

Brett Quick, Head of Government Affairs

Q1 Answer:

​Mirror is a decentralized publishing platform that enables creators to publish, own, and permanently store their creative works on chain. With an Ethereum log in, creators can mint all published posts online, enabling more control over their creative output than traditional platforms. Creators also benefit from new, more dynamic forms of audience engagement that allow supporters to publicly display their support for creators in their wallets—creating reputation benefits or “clout” for early support or participation in key creator events.

Q2 Answer:

CCI's top priority is a comprehensive federal regulatory framework that provides clarity and transparency to web3 companies building in the United States, as well as critical protections for consumers and investors. Legislation should protect innovation in the United States, prioritize national security, and preserve the unique attributes of DeFi protocols.
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Given that the SEC has not initiated a formal rulemaking for digital assets, we are encouraged by concerted efforts in Congress and we look forward to continuing to support the committees on the details of upcoming proposals.

More on CCI.

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Thank you for reading and please enjoy your weekend.

Sincerely,

GSL

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