Bloomberg and Galaxy Digital Launches DeFi Index; SEC Chair Gary Gensler says DeFi is “A Bit of A Misnomer”

Bloomberg and Galaxy Digital have collaborated to launch the Bloomberg Galaxy DeFi Index (ticker: DEFI).

The benchmark owned and administered by Bloomberg Index Services Limited and co-branded with Galaxy will measure the performance of the largest decentralized finance (DeFi) protocol by market value.

“Decentralized finance is growing as the next major investment theme within crypto,” said Alan Campbell, Head of Product Management for Bloomberg's Multi-Asset Index business.

“As liquidity and institutional custody solutions continue to grow, DeFi has become an increasingly compelling option for institutional investors, and we'll continue working with Galaxy to expand our crypto index offering.”

The benchmark will consist of DeFi blue chips, including Aave (AAVE) making up 18% of the Index, Maker (MKR) 12.7%, Compound (COMP) 10%, Yearn.Finance (YFI) 5.4%, Synthetix (SNX) 5.0%, SushiSwap (SUSHI) 4.3%, 0x 2.8%, and UMA (UMA) 1.8%.

The index will mainly consist of Uniswap (UNI), having a weightage of 40%. The popular DEX is currently having another governance issue with a proposal for “Community-Enabled Analytics” that would have analytics firm Flipside Crypto managing $25 million worth of UNI tokens.

Dune Analytics opposed the proposal arguing that “grants should go to community members, not service providers,” while others argued that the issue is such a proposal would have passed without notice to the community.

Along with the index launch, the fund manager is now also offering Galaxy DeFi Index Fund, a passively managed fund tracking the performance of DeFi.

Meanwhile, US Securities and Exchange Commission (SEC) Chair Gary Gensler said these peer-to-peer networks are not immune from oversight this week. Some DeFi projects have features that make them look like the type of entities the SEC oversees, he added.

Calling DeFi “a bit of a misnomer,” Gensler said in an interview with WSJ, “These platforms facilitate something that might be decentralized in some aspects but highly centralized in other aspects.”

Gensler said projects that reward participants with digital tokens or similar incentives could cross a line into something that should be regulated no matter how “decentralized” they are.

“There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees.”

“There’s some incentive structure for those promoters and sponsors in the middle of this.”

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