Jan, Autor bei DeFiChain Community Blog

Cake DeFi in Germany – Current status of the BaFin investigations

+++ Update: On 28.07.2023 BaFin withdraws the advisory notice – press release by Bake +++

According to the official press release , BaFin has been investigating since January 7th, 2022 pursuant to Section 37 (4) of the German Banking Act (KWG) against Singapore-based Cake Pte. Ltd. The reason for this is that under German law it does not have a license to conduct banking business or provide financial services. BaFin assumes that Cake DeFi is conducting unauthorized banking transactions in Germany on the website www.cakedefi.com, for which a license is required in Germany. Except for a warning message for users, no far-reaching restrictions have arisen at this point in time. Lending and liquidity mining services can be used as before. However, since 14.04. No more referral rewards for German users in 2022. A “ban” on Cake DeFi would likely have far-reaching consequences for the DeFiChain ecosystem, as Cake DeFi is a central gateway to the DeFiChain for many users.

Meldung zur BaFin-Ermittlung gegen CakeDeFi — Report on BaFin’s investigation into Cake Pte. ltd

How does Cake DeFi react?

As a first reaction, the CEO and founder Dr. Julian Hosp a short statement on Youtube and another long live stream to make it clear that all services are available as usual and there are no risks for investments. Furthermore, the German language was removed from the website on February 9th, 2022, as was the case with Binance, Crypto.com or Kraken, for example, and reference was made to the company’s headquarters in Singapore via Twitter.

It should also be mentioned that Cake DeFi could only report to the investigation after the announcement by BaFin, as Cake DeFi had not received any official communication from BaFin in advance. Instead, only an anonymous support ticket was received by Cake DeFi, where one could not directly assume an official communication on the part of BaFin.

Twitter message from Cake DeFi on BaFin communications

In the next step, Hosp also announced in a mailing list on March 7th, 2022 that Cake DeFi is in the process of applying for a crypto license for the EU area. This license is similar to the Payment Services Act already in use in Singapore, which allows cryptocurrencies to be offered as a means of payment. The current EU decrees of the Markets in Crypto Assets (MiCA), which are expected to come into effect in summer 2024, will make it possible to use this license throughout the EU. Furthermore, Hosp claims to proactively take care of such a crypto license in order to continue to give German and European customers security and transparency of the platform.

Twitter-Meldung von CakeDeFi — Cake DeFi Twitter message on the BaFin investigation

Will Cake DeFi be banned in Germany?

Nobody can anticipate the exact test results, but we can draw conclusions about this procedure from known procedures (cf. e.g. Binance & Kraken).

From my individual point of view, it is rather unlikely that the BaFin investigations will have far-reaching consequences. The existing precedents (cf. Binance, Crypto.com) only led to changes in the offer but not to a ban on use for German users. I also like the proactive communication of the Cake DeFi team around Julian Hosp. Questions about the status of the investigation are (as far as possible) open and in different formats, e.g. on Twitter Spaces, discussed intensively. Even with provocative questions, the Cake DeFi team remains calm and communicates clearly. Furthermore, the application for the crypto license for the EU should be positively emphasized. The team is thus signaling that it is proactively approaching the supervisory authorities and state institutions. The aim is constructive communication and support and not destructive behavior. But enough of my assessment

How does the market react?

As a convinced market economist, you know that the free market usually prices information in very quickly and, in particular, that risks are taken into account in pricing. After the BaFin report became known, the DFI price fell by a few percentage points and was quoted at a low of around USD 2.44 or around 0.00006 BTC per DFI. Despite the report, the price rose sharply in the three months that followed. The current price (as of April 30th, 2022) is around 4.34 US dollars or around 0.0011 BTC per DFI. In my view, this is another indication that the market and investors are relaxed about the BaFin review. Whats your opinion? Write to us in the comments or on Telegram!

How does Staking work with DeFiChain?

What is Staking?

“Proof of Stake” refers to a method or process that is used to establish consensus, validate transactions, and create new tokens. For this purpose, compared to the well-known proof-of-work blockchains (Bitcoin and Ethereum), the computing power of the validators is not used to perform transactions. Instead, validator nodes are created by depositing a set amount of coins or tokens depending on the blockchain. The owner of the node then becomes the validator and can check and confirm transactions that have been made.

As a positive incentive, validators receive a share of the incurred (transcation) fees as a reward for performing successful validations. However, for added security, validators are also penalized for incorrect behavior by a partial withdrawal of their cryptocurrencies. This misbehavior already includes, for example, an interrupted connection to the network. Therefore, as an individual, it is somewhat challenging to become a Validator on your own, as a stable and secure infrastructure is necessary. In addition, depending on the blockchain network, it is necessary to deposit a (relatively) high minimum amount and to guarantee long blocking periods. That is why staking is often done in delegated in large pools (Delegated PoS). Participants can already deposit smaller quantities in these pools so that the minimum amount and the required infrastructure can be guaranteed. Participants will then receive a pro-rated reward from the Rewards for the entire pool. On stakingrewards you get an overview of the biggest proof-of-stake blockchains with the average rewards and the percentage of coins that are already staked.

Staking at DeFiChain

DeFiChain also uses the proof-of-stake mechanism. To operate a masternode, a validator must first provision and lock 20,000 DFIs (priced at approximately $2.60 per DFI). Such a masternode is then responsible for validating transactions. In the future, however, it is planned to steadily lower the minimum number via community votes in order to be able to provide a higher decentralization and number of masternodes. To simplify the operation of masternodes, DefiChain offers a step-by-step guide for the desktop version.

A special feature of DeFiChain is a close connection to Bitcoin’s blockchain. Every 60 validated blocks (about 30 minutes), DeFiChain’s blockchain is entered into the Bitcoin blockchain using Merkle Root. The respective validator of this operation receives an additional reward for this. According to stakingrewards, a total of approximately 30% of all DFI is allocated to staking, which is currently worth $466 million. Furthermore, 91,000 users are involved in staking.

How can I stake my DFI at DeFiChain?

We have checked the market for you, for us currently three options make the most sense (without sorting). 1. set up your own master node. 2. use of the service of CakeDeFi. 3. staking via dfx.swiss. Due to the current price of DFI, it is sometimes difficult for private individuals to create such a masternode and participate in staking. Therefore, there is an option to have the staking done by others who receive a fee for setting up and running the masternode.

Staking services for amounts under 20,000 DFI

An alternative solution is to participate in the network via a pool of CakeDeFi. Here the possibility is offered to be able to participate also already with small amounts starting from 1 DFI in the Staking. In the so-called Freezer of CakeDeFi, DFI can be created for staking at different terms of 1,3,6,12,24,36,60 and 120 months. The higher the maturity, the higher the average return. For the investment over 1 month, the return is about 40% per year, and for a long-term deposit of 60 or 120 months, it increases to 63% and 92%, respectively. According to CakeDeFi’s own statistics, a total of approximately 48 million DFIs are currently deployed for staking, more than half of which are for the full 120-month term.

Another provider is dfx.swiss, which also offers a staking service. On a positive note, they offer these services not only for residential customers but also for business customers! Furthermore, they offer the possibility to invest directly with EUR, CHF or USD into the Staking, without the need to invest in a first step e.g. in a second step. DFI to buy. This can offer advantages, especially with regard to tax.

Staking services for contributions of 20,000 DFI or more

Another interesting option is offered by mydeficha.in. If you have 20,000 DFI (or more), mydefichain supports you to run a fullnode. Especially for people who are less intensively concerned with technical details, this has advantages! For example, one must not set up your own Linux server and worry about permanent availability (stability, internet connection, etc.). In addition, mydeficha.in offers support via the Telegram channel as well as via email.

Do you know of any other providers that we should include in our overview? Then feel free to send us a message or join the DeFiChain Telegram community. We look forward to seeing you!